CONFORMED
----------------------------------------------------------------------------

                       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, 1996

                                          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, U  h                                  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 14th, 1997- 12,423,524  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, 1996

       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
           Consolidated Balance Sheets -November 30, 1996 and February 29, 1996
           Consolidated Statements of Operations -- ...................3
              for the three and nine months ended November 30, 1996 and 1995
           Consolidated Statements of Cash Flow -- ....................5
              for the nine months ended November 30, 1996 and 1995.....7
           Notes to Consolidated Financial Statements..................8

   Item 2. Management's Discussion and Analysis of
           Financial Condition and Results of Operations..............12

                            PART II - OTHER INFORMATION

   Item 1. Legal Proceedings .........................................16

      Item 2    Changes in Securities.................................16

      Item 3    Defaults Upon Senior Securities.......................16

      Item 4    Submission of Matters to a Vote of Security Holders...16

      Item 5    Other Information.....................................16

      Item 6(a) Exhibits..............................................16

      Item 6(b) Reports on Form 8-K...................................16

      Item 6(c) Reports on Form S-8...................................16



                                      - 2 -

<PAGE>





   CYCLO3PSS CORPORATION
   Consolidated Balance Sheets
------------------------------------------------------------------------------



                                               November 30,        February 29,
                                                   1996                1996
                                                 ---------------------------
                                                  (Unaudited)

   Assets

   Current assets:

     Cash and cash equivalents                    $568,313         $252,113
     Marketable securities                       1,306,815           ---
     Accounts receivable, less allowance for
      doubtful accounts of $40,000 at 
      November 30, 1996 and February 29, 1996       76,622           77,130
     Inventories, net                              257,465          408,889
     Prepaid expenses                               60,191           37,474
                                               ___________       __________
       Total current assets                      2,269,406          775,606

   Property and equipment, net                     450,629          570,237

   Other assets:

     Goodwill, net                                 597,496          768,862
     Acquired patents, net                         421,750          453,456
     Developed patents and other, net              110,236          110,457
                                               -----------      -----------
                                                $3,849,517       $2,678,618
                                               ===========      ===========












   See accompanying notes to consolidated financial statements



                                      - 3 -

<PAGE>






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

<TABLE>
<CAPTION>
                                                                 November 30,    February 29,
                                                                     1996           1996
                                                                _____________________________
                                                                   (Unaudited)

                                                                    <S>            <C>


   Liabilities and Stockholders' Equity

   Current liabilities:
      Accounts payable                                                78,987       162,414
      Accrued liabilities                                            101,437       120,122
      Deferred revenue                                               262,749       142,749
      Current portion of capital lease obligations                     6,549        16,351
                                                                  ________________________
             Total current liabilities                               449,722       441,636

   Long-term debt obligations                                      1,348,930       889,663

   Long-term portion of capital lease obligation                      62,975        54,626

   Commitments and contingencies
 
   Stockholders' equity:
     Series "A" preferred stock, par value $.01; 4,500,000
       shares authorized; 35,638 shares issued and outstanding         356             356
    Series "B" preferred stock, par value $.01;
       30,000 shares authorized; 3,170 issued and outstanding           21             ---
     Class "A: preferred stock, par value $.01; 500,000
       shares authorized; none issued and outstanding
     Common stock, par value $.001; 55,000,000 shares                  ---             ---
       authorized; 12,681,196 shares issued at November 30,
       1996, 10,169,932 shares issued at February 29, 1996            12,390        10,170
   Additional paid-in capital                                     13,131,854    10,305,955
   Accumulated deficit                                           (10,655,186)   (8,522,243)
   Less treasury stock, 264,000 common shares at cost               (501,545)     (501,545)
   Total stockholders' equity                                  ----------------------------
                                                                   1,987,890     1,292,693
                                                               ----------------------------
                                                                  $3,849,517     2,678,618
                                                               ============================
</TABLE>


   See accompanying notes to consolidated financial statements


                                      - 4 -

<PAGE>




   CYCLO3PSS CORPORATION
   Consolidated Statements of Operations
   (UNAUDITED)
------------------------------------------------------------------------------



                                             For the three months ended

                                             November 30,   November 30,
                                                1996            1995

   Net revenues                               $ 48,101        $109,474


   Costs and expenses:
      Cost of sales                             47,524          52,703
      Research and development                 236,850         214,301
      Selling and marketing                     50,631         132,775
      General and administrative               330,330         495,917
      Depreciation and amortization            115,845         124,676
      Total expenses                       ------------------------------
                                               781,180         967,669


   Loss from operations                       (733,079)       (910,898)



   Interest income                              18,540           5,079
   Interest expense                            (95,993)          -----
                                           -----------------------------


   Net loss                                  $(810,532       $(905,819)

   Net loss per common share                      (.07)          $(.09)
                                           ============================
   Weighted average number of common shares
      outstanding                           12,243,607      10,164,866
                                           ============================





   See accompanying notes to consolidated financial statements





                                      - 5 -

<PAGE>




   CYCLO3PSS CORPORATION
   Consolidated Statements of Operations
   (UNAUDITED)
------------------------------------------------------------------------------


                                                 For the nine months ended

                                                November 30,     November 30,
                                                    1996             1995

   Net revenues                                   $264,080         $382,122


   Costs and expenses:
      Cost of sales                                213,329          163,468
      Research and development                     637,798          648,933
      Selling and marketing                        135,034          378,475
      General and administrative                   901,514        1,477,450
      Depreciation and amortization                350,217          322,837
                                               -------------------------------
      Total expenses                             2,237,892        2,827,695
                                               -------------------------------


   Loss from operations                         (1,973,812)      (2,609,041)



   Interest income                                  30,154           24,101
   Interest expense                               (189,285)            
                                               -------------------------------

   Net loss                                    $(2,132,943)     $(2,584,940)
                                               ===============================
   Net loss per common share                          (.19)           $(.26)
                                               ===============================
   Weighted average number of common shares
      outstanding                               11,232,931        9,936,574
                                               ===============================





   See accompanying notes to consolidated financial statements


                                      - 6 -

<PAGE>




   CYCLO3PSS CORPORATION
   Consolidated Statements of Cash Flow
   (UNAUDITED)
   ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                        For  the nine months ended
                                                                  November 30, 1996     November 30,1995
   Cash flows from operating activities:                        ------------------------------------------
                                                                  <S>                   <C>   
   Net loss                                                       $(2,132,943)          $(2,584,940)
     Adjustments to reconcile net loss to net cash used in 
       operating activities:
      Depreciation and amortization                                   350,217               322,836
      Interest on convertible debt issuance                           108,267                --
      Issuance of warrants with convertible debt                       72,873                --
      Changes in assets and liabilities:
        (Increase) decrease in accounts receivable                        508              (23,310)
        (Increase) decrease in inventories                            151,424             (180,541)
        (Increase) decrease in prepaid expense, developed          
          patents, other                                              (31,211)             (20,241)
        Decrease in accounts payable and accrued liabilities         (102,112)             (13,642)
        Increase in deferred revenue                                  120,000               52,928
                                                                 ------------------------------------
     Net cash used in operating activities                         (1,462,977)          (2,446,910)
                                                                 ------------------------------------

     Cash flows from investing activities:
       Purchase of property and equipment                             (10,483)            (212,575)
       Purchase of Marketable Securities                           (1,459,027)
       Proceeds from sale of Marketable Securities                    152,212            1,192,849
        Net cash provided by (used in) financing activities      ------------------------------------
                                                                   (1,317,298)             980,274
                                                                 ------------------------------------

   Cash flows from financing activities:
     Proceeds from issuance of common stock                               277            1,460,410
     Proceeds from issuance of preferred stock                      2,755,000                --
     Proceeds from issuance of convertible debt obligation            351,000                --
     Principal payments under capital lease obligations                (9,802)             (10,093)
                                                                 -----------------------------------
   Net cash provided by financing activities                        3,096,475            1,450,317
                                                                 -----------------------------------
   Net increase in cash                                               316,200              (16,319)

   Cash and cash equivelants at beginning of period                   252,113              123,086
                                                                 -----------------------------------
   Cash and cash eqvilelants at end of period                        $568,313             $106,767

   Supplemental schedule of non-cash financing activities:
     Capital lease obligations incurred for acquisition of
     property and equipment                                             8,350               84,245
                                                                 ===================================

   Acquisitions
      Fair value of assets acquired                                      ----             $175,000
      Issuance of common stock                                           ----             (175,000)

</TABLE>




   See accompanying notes to consolidated financial statements



                                          - 7 -

<PAGE>




   
   CYCLO3PSS CORPORATION
   Notes to Consolidated Financial Statements
------------------------------------------------------------------------------


   1.  Summary of Significant Accounting Policies

   Financial Statements

   The accompanying interim 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 29, 1996 represents the Company's  audited
   consolidated balance sheet at that date.

   In  the  opinion  of  management,  the  accompanying  consolidated  financial
   statements  contain all normal  recurring  adjustments  necessary  to present
   fairly the  financial  position of Cyclo3pss  Corporation  ("Company")  as of
   November  30, 1996 and the results of its  operations  and cash flows for the
   three and nine month periods  ended  November 30, 1996 and November 30, 1995.
   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  consolidated  financial  statements and notes
   included in the Company's Annual Report to Shareholders and Annual Report for
   10-KSB for the year ended February 29, 1996.

   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).  The Company is engaged in
   the research and development of  technologies  for the  sterilization  and/or
   disinfection of surgical and medical instruments,  the manufacture,  sale and
   installation  of ozone washing and laundry  sorting and counting  systems for
   commercial  and  institutional  laundries,  and the  manufacture  and sale of
   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.

   Cash and cash equivalents

   Cash and cash  equivalents  include  highly liquid  investments  with minimal
   interest rate risk and original maturities of three months or less at date of
   acquisition.

   Marketable Securities

   The Company  adopted  Statement of Financial  Accounting  Standards  No. 115,
   "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115)
   which  requires  investment  securities  to be  classified  as either held to
   maturity,   trading  or  available  for  sale.  The  Company  classifies  its
   short-term investments as available-for-sale.  Available-for-sale  securities
   are carried at fair value, with unrealized gains and losses, net of



                                          - 8 -

<PAGE>



   CYCLO3PSS CORPORATION
   Notes to Consolidated Financial Statements
     ---------------------------------------------------------------------


   tax,  reported in a separate  component of  stockholders'  equity.  Realized
   gains or losses and  declines in value judged to be  other-than-temporary  on
   available-for-sale  securities  are included in the statement of  operations.
   The cost of securities sold is based on the specific  identification  method.
   Interest on  securities  classified  as  available-for-sale  are  included in
   interest income.

   Inventories

   Inventories  consist of raw materials and  work-in-process  and are stated at
   the lower of cost or  market,  cost  being  determined  using  the  first-in,
   first-out method. An inventory reserve has been established as an estimate of
   the cost of possible  design  changes in review for the  STER-O3-ZONETM  100.
   Inventories consists of the following:

                                       November 30,            February 29,
                                          1996                     1996

      Raw materials, net                $214,080                 $288,450
      Work-in-process                     43,385                  120,439
                                       ------------------------------------
                                        $257,465                 $408,889
                                       ====================================

   Other Assets

   Other assets  consist  primarily of goodwill and acquired  patents  which are
   recorded  at the lower of cost or their net  realizable  value.  Goodwill  is
   amortized over five years.  Acquired and developed patents are amortized on a
   straight-line  basis over the shorter of their estimated  useful lives or the
   remaining  life  of  the  patent.  The  Company   periodically   reviews  the
   recoverability  of these  intangible  assets in order to record them at their
   net realizable value.

   Revenue Recognition

   Revenue is recognized  upon  shipment,  or in the case of washing and laundry
   systems,  upon installation and customer  acceptance.  Payments received from
   customers  prior to  installation  and  customer  acceptance  are recorded as
   deferred revenue.

   Net Loss per Common Share

   Net loss per common share is calculated  based on the weighted average number
   of shares  of common  stock  outstanding  during  the  period.  Common  stock
   equivalents  are not  included in the  computation  as their  effect would be
   anti-dilutive.

   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.





                                          - 9 -

<PAGE>




   CYCLO3PSS CORPORATION
   Notes to Consolidated Financial Statements
------------------------------------------------------------------------------


   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 net loss for the year ended February 29, 1996 was $3,449,994. In the past
   the Company has been able to receive  funding  necessary  for its  operations
   through the issuance of common stock and preferred stock and other financing.
   The Company anticipates a net loss for the year ended February 28, 1997.

   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 trying  to  improve  these  conditions  by way of  financial
   assistance through collaborative  partnering agreements,  closely held common
   stock  issuances,  debt  arrangements,   and  product  sales.  Management  is
   confident that appropriate funding will be generated and future product sales
   will  result from these  opportunities  and that the  Company  will  continue
   operations over the next fiscal year.

   The Company has engaged in an offering of Series "B"  Preferred  Stock.  This
   Series "B"  Preferred  Stock was  designated by the Board of Directors on May
   30,  1996.  As of November  30, 1996,  net  proceeds of  $2,755,000  had been
   received in cash by the Company, and the offering was closed.

   3. Long-Term Debt

   During the year ended  February 29, 1996,  the  Company's  Board of Directors
   approved  the  issuance  of  $3,000,000  in  convertible  debt to  individual
   investors.  Principal  and  interest are payable in full three years from the
   date of  execution  of each  note.  Interest  accrues  at 12% per year on the
   principal balance.  The debt is secured by all the assets of the Company. The
   lender can convert all or a portion of its outstanding principal and interest
   into shares of common  stock at $3.50 per share.  Under the terms of the loan
   agreements,  the Company  will issue each lender a warrant to purchase  1,000
   shares of the  Company's  common stock at a price of $4.00 per share for each
   $3,500  principal  amount loaned to the Company.  Each warrant is exercisable
   for a period of 5 years from the date of the closing of each loan.  The Board
   of Directors has reserved  2,022,714 shares of the Company's common stock for
   the conversion of debt and exercise of warrants  offered with the convertible
   debt.  As of  November  30,  1996,  the  Company  had  issued  $1,226,000  in
   convertible  debt  (described  above)  to the  Company's  directors  or major
   stockholders,  with  maturities  between  December  1998 and  February  1999.
   Interest  expense of $108,267 was recorded for the nine months ended November
   30, 1996.

   The carrying amount of long-term debt approximates fair value. The fair value
   of the Company's  long-term  debt was estimated  using  discounted  cash flow
   analysis,  based on the Company's  current  incremental  borrowing  rates for
   similar types of debt arrangements.



                                          - 10 -

<PAGE>






   CYCLO3PSS CORPORATION
   Notes to Consolidated Financial Statements
------------------------------------------------------------------------------



   4. Stockholders' Equity

   On May 30, 1996 the Board of Directors  designated series "B" preferred stock
   which consists of 30,000 shares of non-voting stock with a par value of $.01.
   The stated value is $1,000 per share.  As of November 30, 1996,  3,170 shares
   of series "B" preferred stock had been issued with net proceeds of $2,755,000
   and  issuance  cost of $415,000.  As of November  30,  1996,  1,235 shares of
   series "B" preferred stock has been converted into 1,981,236 shares of common
   stock.  These  conversions  were made at 70% of the "Average  Stock Price" as
   designated by the Board of Directors and further defined as the average daily
   closing  bid  prices  of common  shares  for the  period of five  consecutive
   trading days immediately  proceeding the date of conversion of the series "B"
   shares.  As of November  30,  1996,  85,698  shares of common stock are to be
   issued  for  dividends  on  all  series  "B"  preferred   stocks  issued  and
   outstanding.  Dividends  are  accrued  at the rate of 8%  percent  per annum,
   commencing on the date of issuance thereof.

   5. 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 29, 1996.




                                          - 11 -

<PAGE>






                                       PART I - ITEM 2

                             MANAGEMENTS DISCUSSION AND ANALYSIS
                       OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   General

   The  Company was an inactive  corporation  from the 1930's to 1987.  From the
   commencement of operations in 1987 until July of 1994, the Company was in the
   development  stage engaged  primarily in the research and  development of its
   products.  From the period since reactivation (March 2, 1987) to November 30,
   1996,  the  Company  has  incurred  cumulative  net  losses of  approximately
   $10,655,186. The Company expects to continue to incur losses into next year.

   The Company's future operating results will depend on many factors, including
   the timing of the FDA  marketing  clearance,  the  demand  for the  Company's
   medical  sterilization  products at that time, and industry acceptance of the
   Company's  laundry  technologies,  system  equipment and attendant  products.
   Additional  factors  include the Company's  ability to manufacture and market
   its products on a  cost-effective  basis,  the level of  competition  and the
   ability of the Company to develop product  enhancements  and new products and
   to obtain the required financing.

   Results of Operations

   The Company's  revenues were $264,080 for the nine months ended  November 30,
   1996,  and $382,122 for the nine months ended  November 30, 1995. The revenue
   for the three months  ended  November  30,  1996,  were  $48,101  compared to
   $109,474  for the three  months  ended  November  30,  1995.  Only two of the
   Company's  wholly  owned  subsidiaries  are  currently  contributing  to  the
   Company's  revenues,  Cyclo3pss  Textile Systems,  Inc. ("CTS") and Cyclo3pss
   Biochemical  Corporation  ("CBC").  The  Company's  gross margin for the nine
   months ended November 30, 1996 was $50,751  compared to $218,654 for the nine
   months ended  November 30, 1995.  The gross margin for the three months ended
   November  30, 1996,  was $577  compared to $56,771 for the three months ended
   November 30, 1995. This decrease in gross margin is primarily attributable to
   the  reduction  of CTS  sales as the  result  of the  Company's  decision  to
   interrupt the direct sale of systems until the redesign  effort was completed
   and dependable systems could be reintroduced to the market.

   The Company  incurred  research and development  expenses of $637,798 for the
   nine months  ended  November  30, 1996 and $648,933 for the nine months ended
   November 30, 1995.  Research and development  expenditures  were $236,850 for
   the three months ended  November 30, 1996,  and $214,301 for the three months
   ended November 30, 1995.  Management sees no continued  overall  reduction of
   research and development  expenses.  These costs will continue to be expended
   as certain products complete the development process and are commercialized.

   The Company incurred general and administrative  expenses of $901,514 for the
   nine months  ended  November 30, 1996,  compared to  $1,477,450  for the nine
   months ended November 30, 1995. General and  administrative  expenses for the
   three months ended November 30, 1996 were $330,330 and $495,917 for the three
   months ended November 30, 1995. This decrease is due generally to decrease in
   staffing.  Also,  Management  has taken  aggressive  steps to reduce  current
   monthly expenses.  As the Company  completes  development on certain products
   and prepares for  commercialization,  the human resource  requirements of the
   Company will change.



                                          - 12 -

<PAGE>



   The Company incurred selling and marketing  expenses of $135,034 for the nine
   months  ended  November  30,  1996,  compared to $378,475 for the nine months
   ended  November 30, 1995.  The selling and  marketing  expenses for the three
   months  ended  November  30, 1996 were  $50,631  compared to $132,775 for the
   three months ended  November 30, 1995.  This decrease is mainly due to higher
   marketing  staff and  advertising  expenses during the quarter ended November
   30,  1995  for  Cyclo3pss  Textile  Systems,  Inc.  The  Company  anticipates
   marketing  expenses to  increase  slightly in the fiscal year 1997 due to the
   hiring and training of additional marketing personnel and the attendant costs
   related to their endeavors. The Company will also increase marketing activity
   and incur additional expenses should it receive positive indications from the
   FDA as to marketing  clearance for its medical  sterilization  systems during
   the year 1997.

   For the nine months ended November 30, 1996, the Company had interest  income
   of $30,163 as compared to interest  income for the nine months ended November
   30, 1995, of $24,101. The interest income for the three months ended November
   30,  1996 was $18,540  compared  to  interest  income of $5,079 for the three
   months ended November 30, 1995. The Company anticipates that this amount will
   continue to increase  due to the  increase in the  company's  cash  resources
   which earn  interest.  New funds  received by the Company  generally  will be
   allocated to short term investments.

   The  Company's  net loss for the nine  months  ended  November  30,  1996 was
   $2,132,943,  as  compared  to the nine  months  ended  November  30,  1995 of
   $2,584,940.  The Company's net loss for three months ended  November 30, 1996
   was  $810,532,  as compared to the three  months  ended  November 30, 1995 of
   $905,819. The Company anticipates that it will operate at a loss for the year
   ended February 28, 1997.  However,  it is anticipated  that the losses should
   begin to diminish if and when the revenues of Cyclo3pss Textile Systems, Inc.
   and Cyclo3pss BioChemical Corporation begin to accelerate.

   Liquidity and Capital Resources

   The Company has offered its series "B" preferred  stock, as designated by the
   Board of Directors on May 30, 1996. As a result, $2,755,000 has been received
   in cash by the Company,  net of issuance  cost of $415,000.  The offering was
   closed on August 16, 1996.  There are no  assurances  that future  efforts to
   locate and secure  additional  financing will be  successful.  The failure to
   secure  additional  financing  could  substantially  alter  the  management's
   assumptions as presented in the remainder of this section.

   During the  quarter  ended  November  30,  1996,  the  Company  has  invested
   $1,459,027 in short-term government backed securities.  Proceeds from sale of
   marketable  securities for the quarter ended November 30, 1996 , was $152,212
   compared to  $1,192,849  for November  30, 1995,  which was when all previous
   marketable securities were sold.

   Cash used in operating  activities  was  $1,462,977 for the nine months ended
   November 30, 1996,  compared to $2,446,910 for the nine months ended November
   30, 1995. Cash used for the nine months ended November 30, 1996 was comprised
   of cash on hand and collections of accounts receivable, which is comprised of
   service and part sales from  Cyclo3pss  Textile  Systems,  Inc.  and contract
   development   and  chemical   compound  sales  from   Cyclo3pss   Biochemical
   Corporation.

   Total assets  increased to $3,849,517 for nine months ended November 30, 1996
   from  $2,678,618 for the year ended  February 29, 1996,  primarily due to the
   increase in the Company's cash as a result of net proceeds of $2,755,000 from
   the issuance of series B preferred stock.





                                          - 13 -

<PAGE>



   As of November 30, 1996, the current  liabilities total was $449,722 which is
   a slight  increase  over total current  liabilities  of $441,636 for the year
   ended February 29, 1996. All of the Company's current liabilities at November
   30, 1996 were attributed to accounts payable, accruals and deferred revenues,
   and the current portion of certain capital  equipment  leases. As of November
   30, 1996 long term liabilities  were $1,411,905  compared to $944,289 for the
   year ended February 29, 1996. Of the November 30, 1996 $1,348,930  represents
   the  principal  and  interest  owed  pursuant  to the  Company's  offering of
   convertible  debt  instruments,  compared  to  $889,663  for the  year  ended
   February 29, 1996. The additional $62,975 represents the long term portion of
   leases payable for certain leased equipment as of November 30, 1996, compared
   to $54,626 for the year ended February 29, 1996.

   On October 17, 1995 the Board of  Directors  approved the issuance of a up to
   $3,000,000  of  Convertible  Secured  Promissory  Notes  to  investors.   The
   Convertible  Notes which include warrants to purchase shares of the Company's
   restricted  common stock at $4.00 per share,  also bear interest at a rate of
   12% per annum.  Both the interest and principal are  convertible to shares of
   the  Company's  restricted  common stock at $3.50 per share.  The  conversion
   shares and warrants carry certain registration rights and requirements. These
   notes  are  secured  by all  assets  of the  Company.  As of  May  31,  1996,
   $1,226,000 had been received from this offering and it was closed.

   Plan of Operation

   The  anticipated  plan of operation  during the next twelve (12) months is to
complete the following:

      1.    The continued  review of the  engineering and design elements of the
            STER-O3-ZONETM  ozone  gas  sterilizer  in  order  to  determine  an
            efficient  and cost  effective  manner in which to  correct  certain
            process controls of the system.

      2.    Evaluate and  determine the time line required to execute the design
            changes to the STER- O3-ZONETM ozone gas sterilizer.  Determine what
            action  to take  with  the FDA in  respect  to the  current  pending
            application of the Company's 510(k)  Premarket  Notification for the
            STER-O3- ZONETM 100. The Company will not engage in any pre-approval
            sales  under  the  Investigational  Device  Exemption  (IDE)  of the
            STER-O3-ZONETM   100  until  the  design  changes  have  been  fully
            resolved.

      3.    Continuation of validation  testing of the Company's liquid chemical
            sterilant,   SterOxTM,  preparatory  to  submission  of  the  510(k)
            Premarket  Notification to the FDA. To be determined is whether this
            will be completed by the Company or with an existing  market  leader
            of liquid disinfectants  resulting in a possible licensing agreement
            to complete the testing on this product as well as  formalization of
            the application and presentation of SterOxTM to the FDA.

      4.    Continued development of products and enhancements for the Company's
            textiles subsidiary which include:

            (1) Completion of validation  testing for the  application  for cold
            water ozone disinfection of health care textiles,  both domestically
            and abroad.

            (2)  Reintroduction  and sales of the Company's revised and modified
            Vacuum Soils Counting System (VAC) and ozone washing systems.

            (3)  Aggressive  marketing  of  the  revised  and  modified  textile
            products.  Additional  plans to market  through  proposed  strategic
            alliances with parties currently in negotiation.


                                          - 14 -

<PAGE>




      5.    Continuation  of  contract  research  and  development   within  the
            Biochemical  subsidiary and the ongoing manufacture and sales of its
            existing and future speciality chemicals product line.

      6.    With  appropriate  financing  in  place,  there  may  be  additional
            diversification of the Company's business  activities through future
            acquisitions.

   Although the Company will be primarily  engaged in the  aggressive  sales and
   support  of  its  completed  products,   it  anticipates  that  research  and
   development  expenses  will be  ongoing,  and could  range from  $800,000  to
   $1,000,000  during the next twelve months in support of the completion of key
   future products. Based on current manufacturing assumptions,  the estimate on
   the equipment  expenditures  will range from $200,000 - $400,000 for the next
   twelve  months.  Management  has taken  aggressive  steps to  reduce  current
   monthly  expenses  by  reducing  personnel  and other  expenses.  The Company
   anticipates  that no more than six additional  employees will be hired during
   the next twelve  months,  unless:  (i) the market  acceptance  of the textile
   systems is accelerated ; and (ii) the sterilizer products are approved by the
   FDA in a more timely manner than management predicts.  It is anticipated that
   general and administrative  expenses would not increase by more than $600,000
   on an annualized basis as a result of any such increase in employees.

   However,  these estimates are forward looking  statements that are inherently
   uncertain.  Actual expenditures could differ materially from those projected.
   All  of  these  forward  looking   statements  are  based  on  estimates  and
   assumptions made by management of the Company,  which although believed to be
   reasonable,  are  inherently  uncertain and difficult to predict;  therefore,
   undue  reliance  should not be placed  upon such  estimates.  There can be no
   assurance  that  the  expenditures   anticipated  in  these  forward  looking
   statements will be realized.  The following important factors,  among others,
   could cause the Company not to attain the expenditures contemplated herein or
   otherwise cause the Company's results of operations to be adversely  affected
   in future periods:  (i) the FDA review process;  (ii) the availability of new
   technologies;  (iii)  the  success  of the  marketing  efforts  for  existing
   products; (iv) continued or increased competitive pressures from existing and
   new  competitors  and new entrants;  (v) loss or retirement of key members of
   management;  (vi)  increases  in  interest  rates  or the  Company's  cost of
   borrowing;  (vii)  deterioration in general or regional economic  conditions;
   (viii) adverse state or federal  legislation or regulation that increases the
   costs of  compliance,  or adverse  findings  by a regulator  with  respect to
   existing operations;  (ix) adverse  determinations in connection with pending
   or future  litigations or other material claims against the Company;  and (x)
   the  unavailability of funds for capital  expenditures.  Many of such factors
   are beyond the control of the Company. In addition, there can be no assurance
   that  unforeseen  expenses  or other  factors  will not alter  the  projected
   expenditures in whole or in part.

















                                          - 15 -

<PAGE>




   PART II - OTHER INFORMATION

      Item 1.     Legal Proceedings.  None.

      Item 2.     Changes in Securities.  None.

      Item 3.     Defaults Upon Senior Securities.  None.

      Item 4.     Submission of Matters to a Vote of Security Hold  None.

      Item 5.     Other Information. None

      Item 6(a).  Exhibits.   None.

      Item 6(b).  Reports on Forms 8 - K. None
      Item 6(c).  Reports on Form S 8.              None





























                                          - 16 -

<PAGE>


                                         SIGNATURES

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



                                          CYCLO3PSS CORPORATION


   Date: January 14, 1997                 By/s/ John M. Williams
                                            --------------------
                                                John M. Williams
                                                Chief Executive Officer
                                                Chairman
                                                Principal Executive Officer



   Date: January 14, 1997                 By/s/ William R. Stoddard
                                            -----------------------
                                                William R. Stoddard
                                                President
                                                Principal Financial Officer



                                          - 17 -

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