------------------------------------------------------------------------------


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                     FOR THE QUARTER ENDED November 30, 1998

                                       OR

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 0-22720

                              CYCLO3PSS CORPORATION
           (Name of Small Business Issuer as specified in its charter)

             Delaware                                    87-0455642     
          -------------                                --------------
  (State or other jurisdiction of                     (I.R.S. Employer
   Incorporation or organization)                      Identification No.)


         3646 West 2100 South
        Salt Lake City, Utah                              84120-1202  
     --------------------------                        ----------------
 (Address of principal executive offices)                 (Zip Code)


            Issuer's telephone number, including area code: (801) 972-9090

      Securities registered pursuant to Section 12(b) of the Exchange Act: None

     Securities  registered pursuant to Section 12(g) of the Exchange Act: $.001
Par Value Common Stock

       Check  whether the Issuer (1) has filed all reports  required to be filed
by Section 13 or 15(d) of the  Exchange  Act during the  preceding 12 months (or
for such shorter  period that the registrant was required to file such reports),
and (2) has been subject to such filing  requirements  for the past 90 days. Yes
x/ No .

Common Stock  outstanding  at January 14, 1999 - 18,580,582  shares of $.001 par
value Common Stock.


                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

-------------------------------------------------------------------------------



<PAGE>


                                   FORM 10-QSB

                       Financial Statements and Schedules
                              Cyclo3pss Corporation

                For Three and Nine Months Ended November 30, 1998

     The following financial  statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:


                               PART I - FINANCIAL INFORMATION

                                                                   Page of
                                                                 Form 10-QSB
   Item 1. Financial  Statements

           Condensed Consolidated Balance Sheets.......................3
           Condensed Consolidated Statements of Operations.............5
           Condensed Consolidated Statements of Cash Flows.............7
           Notes to Condensed Consolidated Financial Statements........8

   Item 2. Management's Discussion and Analysis or
           Plan of Operations.........................................12


                            PART II - OTHER INFORMATION

   Item 1. Legal Proceedings .........................................17

      Item 2Changes in Securities.....................................17

      Item 3Defaults Upon Senior Securities...........................17

      Item 4Submission of Matters to a Vote of Security Holders.......17

      Item 5Other Information.........................................17

      Item 6Exhibits and Reports on 8-K...............................17








                                      - 2 -

<PAGE>






   CYCLO3PSS CORPORATION
   Condensed Consolidated Balance Sheets
   ----------------------------------------------------------------------------
   (UNAUDITED)





                                                    November 30   February 28
                                                        1998          1998
                                                   ----------------------------
  Assets

   Current assets:

      Cash                                            $121,803      $573,161
      Accounts receivable                               48,341       113,090
      Inventories                                      153,530       152,026
      Prepaid expenses                                  40,957        75,526
  Total current assets                                 364,631       913,803

  Property and equipment, net                          185,690       236,780

  Other assets:
      Goodwill, net                                         --       311,887
      Acquired patents, net                            283,784       368,941
      Developed patents and other, net                  52,800       128,730
                                                   ----------------------------
                                                      $886,905    $1,960,141
                                                   ============================







                                      - 3 -

<PAGE>




   CYCLO3PSS CORPORATION
   Condensed Consolidated Balance Sheets (continued)
   (UNAUDITED)
   -------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                November 30  February 28
                                                                   1998         1998
                                                             ----------------------------
<S>                                                             <C>            <C>

   Liabilities and stockholders' equity

  Current liabilities:
      Accounts payable                                           $153,764      $668,834
      Accrued liabilities                                          78,815       112,789
      Current portion of capital lease obligations                 10,514        24,663
                                                              ----------------------------
  Total current liabilities                                       243,093       806,286

   Long-term portion of capital lease obligations                   9,735        13,278

  Commitments and contingencies

   Stockholders' equity:
    Preferred stock:
      Preferred stock issuable in series: par value $.01,
          4,500,000 authorized:
          Series "A" convertible preferred stock; 356,638
            shares authorized; 356,638 shares issued and
            outstanding                                               356          356
          Series "B" convertible preferred stock; 30,000
            shares authorized; 1,390 shares and 1,932 shares
            issued and outstanding, respectively                       13           19
          Series "C" convertible preferred stock; 1,000
           shares authorized; none issued and outstanding              --           --
      Class "A" preferred stock, par value $.01; 500,000         
        shares authorized; none issued or outstanding                  --           --
      Common stock, par value $.001; 55,000,000 shares
       authorized; 18,580,582 shares and 15,145,868 shares
       issued and outstanding, respectively                        18,580        15,146
      Additional paid-in capital                               17,791,478    16,034,785
      Accumulated deficit                                     (16,599,805)  (14,408,184)
      Less treasury stock, 264,000 common shares at cost         (501,545)     (501,545)
      Subscription receivable                                     (75,000)         --
                                                             ----------------------------
      Total stockholders' equity                                   634,077     1,140,577
                                                             ----------------------------
                                                                  $886,905    $1,960,141
                                                             ============================

</TABLE>

   See accompanying notes to condensed consolidated financial statements.



                                      - 4 -

<PAGE>






   CLO3PSS CORPORATION
   Condensed Consolidated Statements of Operations
  -----------------------------------------------------------------------------
   (UNAUDITED)





                                                    For the three months ended
                                                           November 30,
                                                        1998           1997
                                                 ------------------------------

   Net revenues                                      $70,589       $561,474

   Costs and expenses:
      Cost of sales                                   83,254        505,465
      Research and development                         3,135         51,895
      Selling and marketing                               --         77,658
      General and administrative                     282,153        566,960
      Impairment of intangible assets                273,951             --
      Depreciation and amortization                   94,648        116,467
                                                 -----------------------------
                Total expenses                       737,141      1,318,445

  Loss from operations                              (666,552)      (756,969)
  Interest income                                         54         19,775
  Interest expense                                      (713)        (8,567)
                                                 -----------------------------
  Net loss                                          (667,211)      (745,761)
   Preferred stock dividends                         (88,534)       (38,534)
                                                 =============================
   Net loss applicable to common stock             $(755,745)     $(784,295)

   Net loss per common share                      $     (.04) $        (.06)
                                                 =============================
    Weighted average number of common shares
     issued and outstanding                       18,025,784     14,335,587
                                                 =============================







   See accompanying notes to condensed consolidated financial statements.





                                      - 5 -

<PAGE>




   CLO3PSS CORPORATION
   Condensed Consolidated Statements of Operations
   ----------------------------------------------------------------------------
   (UNAUDITED)





                                                    For the nine months ended
                                                           November 30,
                                                        1998           1997
                                                 -------------- --------------

   Net revenues                                      $659,254     $1,113,093

   Costs and expenses:
      Cost of sales                                   543,951        928,839
      Research and development                        209,673        203,918
      Selling and marketing                           203,650        241,932
      General and administrative                    1,317,851      1,224,828
      Impairment of intangible assets                 273,951             --
      Depreciation and amortization                   302,569        333,626
                                                  ----------------------------
                Total expenses                      2,851,645      2,933,143

  Loss from operations                             (2,192,391)    (1,820,050)
  Interest income                                       3,983         43,266
  Interest expense                                     (3,213)      (109,625)
                                                 -----------------------------
  Net loss                                         (2,191,621)    (1,886,409)
   Preferred stock dividends                         (166,450)      (116,450)
                                                 -----------------------------
   Net loss applicable to common stock            $(2,358,071)   $(2,002,859)
                                                 =============================

   Net loss per common share                       $     (.14)   $      (.15)
                                                 =============================
    Weighted average number of common shares
     issued and outstanding                        16,753,956     13,491,875
                                                 =============================













   See accompanying notes to condensed consolidated financial statements.




                                      - 6 -

<PAGE>





   CYCLO3PSS CORPORATION
   Condensed Consolidated Statements of Cash Flow
   (UNAUDITED)
------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                         For the nine months ended
                                                                                 November 30,
                                                                            1998            1997
                                                                     --------------------------------
<S>                                                                   <C>               <C>

  Cash flows from operating activities:
      Net loss                                                         $(2,191,621)     $(1,886,409)
      Adjustments to reconcile net loss to net 
          cash used in operating activities:
     Depreciation and amortization                                         302,569          333,626
            Impairment of intangible assets                                273,951               --
     Accrued interest on convertible debt issuance                              --          105,833
     Issuance of warrant with convertible debt                                  --           27,380
             Common stock issued for services                                   --          168,000
             Changes in assets and liabilities:
       Decrease/ (Increase) in accounts receivable                          64,749         (363,207)
       Increase in inventories                                              (1,504)         (98,075)
       Decrease in prepaid expense                                          34,569           55,952
       (Decrease)/Increase in accounts payable and 
          accrued liabilities                                             (549,044)         338,473
                                                                     ---------------------------------
  Net cash used in operating activities                                 (2,066,331)      (1,318,427)
                                                                     ---------------------------------
  Cash flows from investing activities:
      Purchase of property and equipment                                   (41,445)         (29,840)
      Addition to developed patents and other                              (11,011)              --
                                                                     ---------------------------------
  Net cash used in investing activities                                    (52,456)         (29,840)
                                                                     ---------------------------------
  Cash flows from financing activities:
      Proceeds from issuance of common stock                             1,500,821        1,065,000
      Proceeds from issuance of preferred stock                            172,500               --
      Proceeds from exercise of stock options                               11,800               --
      Principal payments under capital lease obligations                   (17,692)         (18,770)
                                                                     ---------------------------------
  Net cash provided by financing activities                              1,667,429        1,046,230
                                                                     ---------------------------------

  Net decrease in cash                                                    (451,358)        (302,037)

  Cash at beginning of period                                              573,161        1,275,636
                                                                     ---------------------------------

  Cash at the end of period                                               $121,803         $973,599
                                                                     =================================
  Supplemental schedule of non-cash financing activities
   Conversion of long term debt obligations to common stock                     --       $1,156,000
   Conversion of interest due on long term obligations to 
     common stock                                                               --         $257,563
   Conversion of preferred to common stock                                 247,500               --

</TABLE>


  See  accompanying  notes  to  condensed   consolidated financial statements.








                                             - 7 -

<PAGE>





                  CYCLO3PSS CORPORATION
   Notes to Condensed Consolidated Financial Statements (Unaudited)
------------------------------------------------------------------------------


   1.  Summary of Significant Accounting Policies


   Financial Statements

     The accompanying interim condensed  consolidated  financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information  and with the  instructions  to Form  10-QSB and
Regulation  S-B. The balance sheet at February 28, 1998 represents the Company's
audited consolidated balance sheet at that date.

     In the  opinion of  management,  the  accompanying  condensed  consolidated
financial  statements  contain all normal  recurring  adjustments  necessary  to
present fairly the financial position of Cyclo3pss Corporation ("Company") as of
November 30, 1998,  and the results of its operations and its cash flows for the
interim  periods  ended  November 30, 1998 and November 30, 1997.  The operating
results for the interim  periods are not  necessarily  indicative of the results
for a full year. These financial  statements  should be read in conjunction with
the  Company's  audited  consolidated  financial  statements  and notes  thereto
included  in the  Company's  Annual  Report to  Stockholders  for the year ended
February 28, 1998.


   Organization

     The  Corporation  was formed in Delaware in 1927. In 1990, the  Corporation
was reorganized as Cyclo3pss Medical Systems,  Inc. In 1995, the Company changed
its name to  Cyclo3pss  Corporation.  The  Company is  primarily  engaged in the
design,  manufacture,  assembly,  sales and  installation  of ozone  application
technologies  and  processes.  The Company's  principal  technology  provides an
alternative  to address  food  safety  concerns  and  laundry  disinfection  and
efficiency.  Cyclo3pss also markets sorting and counting  systems to the laundry
industry and manufactures and sells specialty chemicals.


   Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and its wholly-owned  subsidiaries.  All intercompany  balances and transactions
have been eliminated.


   Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.



                                    - 8 -

<PAGE>





   CYCLO3PSS CORPORATION
   Notes to Condensed Consolidated Financial Statements (Unaudited)
------------------------------------------------------------------------------


   1.  Summary of Significant Accounting Policies (continued)


   Net Loss per Common Share

     Net loss per common share is calculated  after deduction of preferred stock
dividends  divided  by the  weighted  average  number of shares of common  stock
issued and  outstanding  during the period.  Loss per common share for preferred
stock  dividends  was  immaterial  (less than one cent per  share).  The Company
excluded  1,139,375 options and 1,296,140 warrants issued for the three and nine
months ended November 30, 1998 and 465,000 options and 2,000,000 warrants issued
for the three and nine months ended November 30, 1997 from the weighted  average
shares outstanding computation as their effect would be anti-dilutive.


   New Accounting Standard

     As  of  January  1,  1998,  the  Company  adopted  Statement  of  Financial
Accounting Standards ("SFAS") No. 130, "Reporting  Comprehensive  Income".  SFAS
No.130  establishes  new rules for the  reporting  and display of  comprehensive
income and its  components;  however,  the  adoption  of this  statement  has no
material impact on the Company's net income (loss) or stockholders' equity.

     For the three and nine  months  ended  November  30,  1998 and 1997,  total
comprehensive  loss  calculated  in  accordance  to SFAS No.  130,  amounted  to
$755,745 and $2,358,071, and $784,295 and $2,002,859, respectively.

     SFAS No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information",  establishes  standards  for reporting  financial and  descriptive
information  about its  reportable  operating  segments.  SFAS No.  131  changes
current  practice  under SFAS No. 14,  "Financial  Reporting  for  Segments of a
Business  Enterprise",  by establishing a new framework on which to base segment
reporting  (referred to as the  management  approach) and also requires  interim
reporting of segment information. The Company has elected to apply the Statement
to its interim financial statements in the year ending February 28, 1999.


   2.  Basis of Presentation

     The accompanying  financial statements have been prepared assuming that the
Company will continue as a going concern,  which contemplates the realization of
assets and  satisfaction  of liabilities  in the normal course of business.  The
Company  has  sustained  significant  net  losses  which  have  resulted  in  an
accumulated deficit at November 30 and February 28, 1998, and periodic cash flow
difficulties,  all of which raise  substantial doubt of the Company's ability to
continue as a going concern.





                                    - 9 -

<PAGE>





   CYCLO3PSS CORPORATION
   Notes to Condensed Consolidated Financial Statements (Unaudited)
------------------------------------------------------------------------------



   2.  Basis of Presentation (continued)

     The net loss for the nine months ended November 30, 1998 was $2,191,621 and
$2,928,197 for the year ended February 28, 1998. To date, the Company has funded
its  operations  through  the  issuances  of common  and  preferred  stock.  The
Company's ability to accomplish its business strategy and to ultimately  achieve
profitable  operations  is  dependent  upon  its  ability  to  raise  additional
financing.

     The Company  believes that these conditions have resulted from the inherent
risks associated with small technology  companies.  Such risks include,  but are
not  limited  to, the  ability to (a)  generate  sales of its  product at levels
sufficient  to cover its costs and provide a return for  investors,  (b) attract
additional  capital  in  order  to  finance  growth,  (c)  further  develop  and
successfully market commercial products and (d) successfully  compete with other
technology  companies  having  financial,  production  and  marketing  resources
significantly greater than those of the Company.

     The Company is attempting  to improve these  conditions by way of financial
assistance through collaborative partnering agreements,  issuances of additional
equity, debt arrangements, and product sales.


   3. Contingencies

     The Company is involved in certain legal actions and claims  arising in the
ordinary  course  of  business.  Management  believes,  based on advice of legal
counsel,  that such  litigation  and claims  will be resolved  without  material
effect on the Company's consolidated  financial position,  results of operations
or cash flows.  These matters are described in the Company's Form 10-KSB for the
year ended February 28, 1998.


   4. Impairment of Long-Lived Assets

     The Company has adopted  Statement  of Financial  Standard  (SFAS) No. 121,
Accounting  for the  Impairment  of  Long-Lived  Assets to be  disposed  of. The
standard  requires the Company to review  long-lived and  intangible  assets for
impairment whenever events or circumstances  indicate that the carrying value of
an asset may not be  recoverable.  For the quarter ended  November 30, 1998, the
Company  recorded a goodwill write down of $140,522.  This write down eliminates
all remaining goodwill of the Company.  For the quarter ended November 30, 1998,
the Company also  recorded an acquired  patent write down of $53,473 to $283,784
and a developed patent write down of $79,956 to $52,800. These long lived assets
were determined to have been impaired because of the current financial condition
of the  Company  and the  Company's  inability  to  generate  sufficient  future
operating income related to those technologies  without substantial sales volume
increases which are uncertain.  Moreover,  anticipated  future cash flows of the
Company  indicate  that the  recoverability  of these  assets is not  reasonably
assured during the remaining amortization period.



                                    - 10 -

<PAGE>





   CYCLO3PSS CORPORATION
   Notes to Condensed Consolidated Financial Statements (Unaudited)
------------------------------------------------------------------------------

   5. Segment Information

     During the three and nine  months  ended  November  30,  1998,  the Company
operated in three principal industries;  development, marketing and installation
of Eco-Pure  Food Safety  Systems for food  decontamination  in both aqueous and
gaseous forms ("food safety products");  the manufacture,  sale and installation
of ozone washing and laundry  sorting and counting  systems for  commercial  and
institutional  laundries ("textile  products");  and the manufacture and sale of
specialty chemicals ("biochemical products").

     Operating loss is total revenue less operating expenses, excluding interest
expense and general  corporate  expenses.  Corporate assets consist primarily of
cash, property, and equipment.

                                        For three months      For nine months
                                             Ended                  Ended
                                        November 30, 1998     November 30, 1998
                                        -----------------     -----------------
   Net revenues
      Food safety products                $   8,872             $    283,308
      Textile products                       43,995                  173,910
      Biochemical products                   17,722                  202,036
                                          ----------              ----------
      Total consolidated revenue          $  70,589             $    659,254
                                          ==========              ==========
   Operating loss
      Food Safety products                $ (34,485)             $  (120,561)
      Textile products                     (244,517)                (917,665)
      Biochemical products                  (87,756)                 (43,161)
                                          ----------              -----------
      Total operating loss                 (366,758)              (1,081,387)

      Corporate expenses                   (299,794)              (1,111,004)
      Interest income                            54                    3,983
      Interest expense                         (713)                  (3,213)
                                          -----------            -----------
      Consolidated net loss               $(667,211)             $(2,191,621)
                                          ===========            ============


                                        November 30, 1998     February 28, 1998
                                        -----------------     -----------------
   Identifiable assets
      Food Safety products                $  34,344             $      --
      Textile products                      530,558                1,100,191
      Biochemical products                  151,008                  373,434

               General corporate assets     170,995                  486,516
                                          ----------             ------------
      Total consolidated assets           $ 886,905             $  1,960,141
                                          ==========             ============




                                    - 11 -

<PAGE>




                                 PART I - ITEM 2
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                               OR PLAN OF OPERATION

   General

     Cyclopss Corporation is primarily engaged in ozone application technologies
and processes.  The Company's  main product lines offer an alternative  for food
safety,   particularly  microbial  reductions  on  meat,  poultry,   fruits  and
vegetables.  Additional products offered by the Company enable  manufacturers to
eliminate  microbial build up in and on food processing  equipment,  while other
ozone-related  products  marketed by the Company to commercial and institutional
laundry  markets  enable users to reduce  costs  associated  with labor,  water,
energy,  chemicals,  and  wastewater  disposal.  The  Company  also  markets  an
automated sorting and counting system for commercial laundries.  Other non-ozone
based products offered by the Company include more than 350 specialty  chemicals
and compounds.

     The Company  has  developed  but not  marketed  two  medical  sterilization
products to date.  Due to the demand for  alternative  disinfection  systems for
food safety and cost saving equipment for the commercial  laundry  markets,  the
Company shifted its focus from medical  sterilization,  to more immediate target
markets -- food, laundry and chemical compounds.

     The Company's ability to accomplish its business strategy and to ultimately
achieve profitable  operations is dependent upon its ability to raise additional
financing.  The  Company,  under its present plan of  operations,  does not have
sufficient  liquidity  and capital  resources to continue in  operation  through
February 28, 1999.

   Results of Operations

     The Company's revenues were $659,254 for the nine months ended November 30,
1998 compared to  $1,113,093  for the nine months ended  November 30, 1997.  The
revenues for the three months ended  November 30, 1998 were $70,589  compared to
$561,474 for the three months ended  November 30, 1997.  Three of the  Company's
wholly owned subsidiaries  currently contribute to the Company's gross revenues,
Eco-Pure Food Safety Systems, Inc. (EPFS),  Cyclopss Laundry Systems, Inc. (CLS)
and Cyclopss  Biochemical  Corporation (CBC). This large decline in revenues was
largely due to the Company's  concentration  of efforts in acquiring  additional
funding.  The  Company  expects  revenue to  increase  during the last  quarter,
compared to the third quarter of the current fiscal year.

     Research and development  expenses  slightly  increased to $209,673 for the
nine months  ended  November  30, 1998 from  $203,918  for the nine months ended
November 30, 1997. Research and development  expenses for the three months ended
November 30, 1998 were $3,135, a significant decrease from $51,895 for the three
months  ended  November  30, 1997.  This  decrease was the result of  Management
decision to downsize and the Company's  need to conserve cash.  Once  additional
funding is  obtained,  the  Company  believes  it is  necessary  and  intends to
increase  its  research  and  development  efforts  in  order  to  complete  the
development process of food processing systems and to comply with USDA protocols
to validate  these  systems.  Completion of systems and protocols will depend on
the Company's ability to obtain additional funding.


                                    - 12 -

<PAGE>





     Selling and  marketing  expenses  decreased to $203,650 for the nine months
ended  November 30, 1998 from  $241,932  for the nine months ended  November 30,
1997.  Selling and  marketing  expenses for the three months ended  November 30,
1998 were -$0-,  compared to $77,658 for the three  months  ended  November  30,
1997.  As part of the  Company's  downsizing  plan to help  conserve  cash,  all
marketing  personnel  have been  placed on a  commission  basis and the  Company
canceled all advertising in trade  publications  and eliminated  other marketing
efforts.

     General and  administrative  expenses  increased slightly to $1,317,851 for
the nine months  ended  November  30, 1998 from  $1,224,828  for the nine months
ended  November  30,  1997,  due  to  an  increase  in  management   employment,
shareholder  relations  and legal fees  during the first six months of the year.
General and administrative  expense for the three months ended November 30, 1998
were $282,153,  a significant  decrease from $566,960 for the three months ended
November  30,  1997.  During the three  months  which ended  November  30, 1998,
Management  took  steps  to  reduce  general  and  administrative  costs to help
conserve  cash,  by reducing  overheard  and  eliminating  several  nonessential
positions.

     In order to comply with  Statement  of Financial  Standard  (SFAS) No. 121,
Accounting  for the  Impairment  of  Long-Lived  Assets to be  disposed  of, the
Company  reviewed  long-lived and intangible  assets for impairment and recorded
$273,951 for impairment of intangible assets for the three and nine months ended
November 30, 1998.

     Interest  expense  declined to $713 for the three months ended November 30,
1998  compared  to $8,567  for the three  months  ended  November  30,  1997 and
interest  expense also declined to $3,213 for the nine months ended November 30,
1998 compared to $109,625 for the nine months ended November 30, 1997 due to the
conversion of long-term debt to common stock.

     The Company  believes  that three of its  divisions,  namely  Eco-Pure Food
Safety Systems,  Inc., Cyclopss Laundry Systems, Inc., and Cyclopss Biochemical,
Inc. will be  contributors to the Company's  future revenue stream.  In order to
achieve sales growth acceptable to management,  the Company will primarily focus
on these three areas of the Company.


   Liquidity and Capital Resources

     As of November  30,  1998,  the Company had  insufficient  funds on hand to
continue its  operations  for the entire  fiscal year ending  February 28, 1999.
Under the  direction  of the Board of  Directors,  in  August  1998 the  Company
eliminated several nonessential  positions,  reducing the number of employees by
roughly half and overhead by 50%. Also, on September 1, 1998  chairman/CEO  Gary
Bratcher  resigned to help the Company  conserve cash and reduce  overhead.  The
Company is attempting to raise additional  capital through private placements of
preferred and/or common stocks.  However,  the Company under its present plan of
operations, does not have sufficient liquidity and capital resources to continue
in operation through February 28, 1999.

     On October 2, 1998,  the Company was  de-listed  from the Nasdaq  Small-Cap
Market, since it did not meet the new quantitative  maintenance requirements for
continued listing on the Nasdaq Stock Market. Because the Company has funded its
operations through the sale of its securities, the failure




                                    - 13 -

<PAGE>




to be listed on Nasdaq will likely have an adverse effect on the ability of
the Company to raise additional capital.

     Cash used in operating  activities was $2,066,331 for the nine months ended
November 30, 1998 compared to $1,318,427  for the nine months ended November 30,
1997. The Company's use of cash has been more aggressive in the first six months
of 1998, as the Company  experienced  significant general and administrative and
marketing expenses associated with the development and promotion of its Eco-Pure
Food Safety Systems.  However, In August of 1998 Management took steps to reduce
these costs to help  conserve  cash and reduce the overall cash burn rate of the
Company.

     Cash  expenditures for property and equipment and other assets were $52,456
for the nine months  ended  November  30, 1998  compared to $29,840 for the nine
months  ended  November 30,  1997.  This  increase was the result of the Company
increasing  purchases of research  equipment,  patent fees and certain leasehold
improvements.

     During the period of March 9, 1998 to June 15, 1998, the Company authorized
and offered its restricted common shares to accredited  investors in an offering
made pursuant to a Board Resolution on February 27, 1998 through First Financial
Investment  Securities Inc.  Subscribers  purchased  1,395,140 of such shares in
this offering with net proceeds of $1,500,821.  These shares were sold for $1.25
each and each share  carries a warrant.  This  redeemable  warrant  entitles the
holder to purchase one share of common  stock at a price of $3.75 per share.  On
September  10,  1998 the Board of  Directors  authorized  issuance of Series "C"
convertible  preferred  stock with a $.01 par value and a stated value of $1,000
per share.  These shares are convertible into common shares at 70% to 90% of the
average stock price with a conversion price of no lower than $.18 per share. The
shares  provide for payment of  cumulative  dividends at 10%  annually,  paid in
stock.  The  offering  was opened on October 1,  1998.  The  Company  has raised
$172,500 as of the date of this  filing in this  offering.  The 247.5  shares of
Series "C"  convertible  preferred stock issued were  subsequently  converted to
1,375,000  restricted  common shares.  In connection  with the conversion of the
preferred shares,  the Company recorded  preferred  dividends of $50,000.  These
offerings  resulted in an increase in net cash provided by financing  activities
for the nine  months  ended  November  30, 1998 to  $1,667,429  compared to cash
provided  by  financing  activities  of  $1,046,230  for the nine  months  ended
November 30, 1997.

     Total assets  decreased to $886,905 for the nine months ended  November 30,
1998 from  $1,960,141 for the year ended February 28, 1998, due to a decrease in
the Company's cash position and a decrease in accounts  receivable from $113,090
at February  28, 1998 to $48,341 at November  30, 1998 and  $273,951  impairment
write down of intangible assets on November 30, 1998.

     Total current  liabilities  decreased to $243,093 at November 30, 1998 from
$806,286 at February 28, 1998,  due mainly to a decrease of $515,070 in accounts
payable and reflects the efforts of  management to reduce the debt burden of the
Company and pay down existing  obligations.  Long- term liabilities decreased to
$9,735 for the three  months  ended  November 30, 1998 from $13,278 for the year
ended February 28, 1998. This decrease was due to  reclassification of long term
lease obligations to current obligations.






                                    - 14 -

<PAGE>





   Year 2000 Issue

     The year 2000 issue refers to some computer system's inability to recognize
the date  field as the  year  2000.  As a  result  of these  shortcomings,  some
computers may be unable to process  year-date  data  accurately  beyond the year
1999.  The  Company  has  assessed  the  potential  impact of this  issue on its
business and  operations  as being minor.  The Company does not believe the year
2000 issue will have a material effect on the Company's internal  accounting and
information   systems,   most  of  which  consists  of  relatively   inexpensive
off-the-shelf software packages.

     The  Company  has  taken  steps  to write a new  software  for the VAC soil
counting  system  it  provides,  to be year 2000  compatible.  The  software  is
scheduled to be completed by March of 1999. None of the Company's other products
are impacted by the Year 2000 issue.  The Company's  primary  vendors consist of
service professionals who are not expected to be materially impacted by the year
2000  issue.  The  Company  does  have   relationships  with  various  financial
institutions, which could be materially impacted by this problem.


   Plan of Operation

     The Company's  Plan of Operation is subject to  availability  of additional
capital,  of which there can be no  assurance.  As stated  elsewhere in the Form
10-QSB,  the Company continues to operate at a significant loss and continues to
have insufficient capital for its operations.


   Food Safety Systems

     In June of 1997,  ozone was granted the status as "generally  recognized as
safe" or "GRAS",  allowing  food  processors  to use ozone in the  processing of
certain food items. This, together with a period of increased scrutiny over food
safety   issues,   created  a  groundswell  of  demand  for   alternative   food
decontamination  technologies.  One  Cyclo3pss  designed  food safety  system is
already in the process of being installed for a major food company.  The Company
believes this sale will result in further opportunities with this and other food
related companies.

     One major challenge that the Company faces is that of educating government,
industry  and  the  end  consumer  about  the  benefits  of  ozone.  Ozone  is a
naturally-occurring  phenomenon that is usually  associated  with  photochemical
smog or an eroding level of protection  in our  atmosphere.  It is the Company's
intent  to  provide  this  education  and show  the  beneficial  side of  ozone:
decontamination  without  residual  chemicals.  For  industry,  ozone  is a cost
competitive and  environmentally-friendly  answer to microbial  decontamination.
For the consumer,  ozone kills harmful  microorganisms quickly and leaves behind
no chemical residue.










                                    - 15 -

<PAGE>




   Laundry Systems

     The Company  will  continue to market its ozone  laundry  washing  systems,
Eco-Wash.  The Company will also continue to upgrade existing customers' sorting
and  counting  system,  (VAC Soil  Counting  System)  with recent  technological
changes.  The Company  believes  the  products  developed  and  marketed by this
subsidiary will enjoy increased market potential in coming years due to:

   *   Increasingly competitive laundry markets will create a need for cost 
       reduction and increased productivity;
   *   Further environmental restrictions will be placed on discharge water 
       quality and reduced chemical contamination;
   *   There is increased  emphasis on sanitation and  disinfection in the 
       laundry industry;  and *  Concerns  are  increasing  regarding  
       environmental issues associated with the laundry industry.


   Specialty Chemicals

     Joint efforts will continue with Foster Miller,  Inc., to market  Biochem's
monomer to the aerospace  industry.  Current sales  activities will be evaluated
and alternatives sought to improve profit margins.


     The focus for the fiscal year 2000 will be sales in the three  target areas
and to the extend the Company can obtain the necessary capital and financing, it
will apply the resources necessary to accomplish this. The Company anticipates a
spending level of approximately  $500,000 on research and development activities
required  to  continue  with  product  validation  and food  trials.  Sales  and
marketing  activities  will be budgeted  at  $500,000 to allow for sales  staff,
advertising and trade shows.  General and  administrative  expenses should be in
the $1,000,000 range for the year.

     The Company had 11 full time employees as of November 30, 1998. The Company
anticipates  additional  employees  will be  required in  engineering  and sales
during the next twelve  months.  This  addition will be determined by the market
demand for food  safety and  textile  systems and  specialty  chemicals  and the
Company's ability to obtain additional funding.

     The information set forth herein as to anticipated research and development
costs,  equipment  purchases  and increase in employees  are  management's  best
estimates based upon current plans.  Actual  expenditures may be greater or less
than such estimates depending on many factors including,  but not limited to the
availability  of new  technologies,  the  completion  or lack of  completion  of
certain  strategic  alliances,  and the timing and successful  completion of the
Company's stated requirement to acquire additional operating and growth capital,
industry initiatives, success of the Company's research and development efforts,
and other factors.

     From  time  to  time,  the  Company  publishes  forward-looking  statements
relating  to  such  matters  as  anticipated  financial  performance,   business
prospects,  technological  developments,  new products, research and development
activities and similar matters. The Private Securities  Litigation Reform Act of
1995  provides a safe harbor for such forward  looking  statements.  In order to
comply with the terms of the safe  harbor,  the Company  notes that a variety of
factors  could  cause the  Company's  actual  results and  experience  to differ
materially from the anticipated  results or other expectations  expressed in the
Company's forward looking statements.


                                    - 16 -

<PAGE>





     The risks and  uncertainties  that may affect the operations,  performance,
development and results of the Company's  business include,  but are not limited
to, the following:

   1.  Market acceptance of the Company's products;
   2.  Obtaining  sufficient  additional operating capital in the form of debt 
       or equity; 
   3.  The existence of an orderly market in the Company's securities; 
   4.  Increased sales of the various products of the Company;  
   5.  Continued success in the  Company's  research and  development  
       activities;  and 6.  Successful completion of strategic alliances.



   PART II - OTHER INFORMATION

      Item 1.     Legal Proceedings.None.

      Item 2.     Changes in Securities.  None.

      Item 3.     Defaults Upon Senior SecuritieNone.

      Item 4.     Submission of Matters to a Vote of Security HoldNone.

      Item 5.     Other Information.None.

      Item 6.     Exhibits and Reports on Form 8None.























                                    - 17 -

<PAGE>




                                   SIGNATURES

      In accordance  with the  requirements  of the  Securities  Exchange Act of
   1934,  as  amended,  the  Registrant  caused  this report to be signed on its
   behalf by the undersigned, thereunto duly authorized.



                                   CYCLO3PSS CORPORATION


   Date: January 14, 1999          By /s/ William R. Stoddard       
                                   ------------------------------
                                        William R. Stoddard
                                        Chief Executive Officer
                                        Principal Executive Officer



   Date: January 14, 1999          By /s/ Mondis Nkoy                   
                                   -------------------------------
                                        Mondis Nkoy
                                        Controller, Corporate Secretary
                                        Principal Financial Officer



                                    - 18 -