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


                       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 MAY 31, 1997

                                          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 July 14, 1997 - 12,798,340 shares of $.001 par value
Common Stock.


                      DOCUMENTS INCORPORATED BY REFERENCE: NONE

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



<PAGE>





                                       FORM 10-QSB

                             Financial Statements and Schedules
                                    CyclO3PSS Corporation

                             For Three Months Ended May 31, 1997

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

                               PART I - FINANCIAL INFORMATION

                                                                Page of
                                                               Form 10-Q
   Item 1. Financial  Statements

           Consolidated Balance Sheets.................................3
           Consolidated Statements of Operations.......................5
           Consolidated Statements of Cash Flow........................6
           Notes to Consolidated Financial Statements..................7

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

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

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

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

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

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



                                      - 2 -

<PAGE>




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




                                                      May 31      February 28
                                                       1997           1997
                                                   ------------ --------------
  Assets

   Current assets:

      Cash                                          $821,355     $1,275,636
      Accounts receivable, less allowance for 
        doubtful accounts of $2,000 at May 31,
        1997 and  February 28, 1997                  219,763         97,605
      Inventories                                    115,282        100,584
      Prepaid expenses                               154,741        102,815
                                                   ________________________
  Total current assets                             1,311,141      1,576,640

  Property and equipment, net                        335,809        370,994

  Other assets:
      Goodwill, net                                  483,253        540,375
      Acquired patents, net                          400,627        411,187
      Developed patents and other, net               123,675        125,650

                                                  _________________________
                                                  $2,654,505     $3,024,846
                                                  =========================







                                      - 3 -

<PAGE>




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



                                                       May 31      February 28
                                                        1997           1997
                                                    ------------ --------------
   Liabilities and Stockholders' Equity

  Current liabilities:
      Accounts payable                                 $141,040       $108,619
      Accrued liabilities                                90,620        135,190
      Current portion of capital lease obligations       27,156         26,120

                                                      ___________  ____________
  Total current liabilities                             258,816        269,929

   Long-term debt obligations                         1,156,000      1,156,000
   Interest payable on long-term debt obligation        186,410        151,730
   Long-term portion of capital lease obligations        30,303         37,356

  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; 1,932 shares issued and
       outstanding                                           19             19
     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; 12,793,340 shares issued at February
       28, 1997                                          12,798         12,793
      Additional paid-in capital                     13,567,383     13,546,195
      Accumulated deficit                           (11,972,035)   (11,479,987)
      Deferred compensation                             (84,000)      (168,000)
      Less treasury stock, 264,000 common shares at
        cost                                           (501,545)      (501,545)
                                                   ____________________________
      Total stockholders' equity                      1,015,923      1,409,831
                                                   ____________________________
                                                     $2,654,505     $3,024,846
                                                   ============================


   See accompanying notes to consolidated financial statements


                                      - 4 -

<PAGE>




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


                                                     For the three months ended
                                                              May 31, 
                                                        1997           1996
                                                   -------------- -------------

   Net Revenues                                        $302,391       $94,172

   Costs and expenses:
      Cost of sales                                     245,191        115,610
      Research and development                           77,865        234,271
      Selling and marketing                              47,452         51,019
      General and administrative                        271,107        314,875
      Depreciation and amortization                     108,830        116,772
                                                    ___________________________
                Total Expenses                          750,445        832,547

  Loss from operations                                 (448,054)      (738,375)

  Interest income                                        14,212          2,104
  Interest expense                                      (58,206)       (53,844)
                                                    ___________________________
  Net loss                                             (492,048)      (790,115)
   Preferred stock dividends                            (38,958)          -    
                                                    ___________________________
   Net loss applicable to common stock                $(531,006)     $(790,115)
                                                    ===========================
   Net loss per common share
                                                           (.04)          (.08)
                                                    ===========================

    Weighted average number of common shares
     issued and outstanding                          12,821,875      10,493,520
                                                    ===========================









   See accompanying notes to consolidated financial statements




                                      - 5 -

<PAGE>






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


<TABLE>
<CAPTION>
                                                                          For the three months ended
                                                                                     May 31,
                                                                              1997            1996
                                                                       --------------------------------
<S>                                                                        <C>            <C>

  Cash flows from operating activities:
      Net loss                                                             $(492,048)     $(790,115)
      Adjustments to reconcile net loss to net cash used in operating
            activities:
     Depreciation and amortization                                           108,830        116,772
     Accrued interest on convertible debt issuance                            34,680         34,707
     Issuance of warrant with convertible debt                                21,193         16,400
             Common stock issued for services                                 84,000            -
     Changes in assets and liabilities:
       (Increase) decrease in accounts receivable                           (122,158)         1,280
       (Increase) decrease in inventories                                    (14,698)       111,543
       (Increase) decrease in prepaid expense                                (51,926)        32,638
       Decrease in accounts payable and accrued liabilities                  (12,149)       (71,822)
       Increase in deferred revenue                                              -           87,500
                                                                          _____________________________
  Net cash used in operating activities                                     (444,276)      (461,097)
                                                                          _____________________________

  Cash flows from investing activities:
      Purchase of property and equipment                                      (3,988)             0
                                                                           ____________________________
  Net cash used in investing activities                                       (3,988)             0
                                                                           ____________________________

  Cash flows from financing activities:
      Proceeds from issuance of common stock                                    0               354
      Proceeds from issuance of convertible debt obligations                    0           351,000
      Principal payments under capital lease obligations                      (6,017)        (3,855)
                                                                          -----------------------------
  Net cash used in (provided by) financing activities                         (6,017)       347,499
                                                                          -----------------------------
  Net decrease in cash                                                      (454,281)      (113,598)

  Cash at beginning of period                                              1,275,636        252,113
                                                                          -----------------------------
  Cash at end of period                                                     $821,355       $138,515
                                                                          =============================
</TABLE>






   See accompanying notes to consolidated financial statements.





                                             - 6 -

<PAGE>




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



   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 28, 1997 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 May
   31,  1997,  and the  results  of its  operations  and its cash  flows for the
   interim  periods ended May 31, 1997 and May 31, 1996.  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 financial statements for the year ended February 28, 1997.

   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  manufacture,  sale and installation of ozone washing and laundry sorting
   and  counting  systems  for  commercial  and  institutional   laundries,  the
   manufacture and sale of specialty  compounds and chemicals,  and research and
   development of  technologies  for the  sterilization  and/or  disinfection of
   surgical and medical instruments.

   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.






                                    - 7 -

<PAGE>




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


   1.  Summary of Significant Accounting Policies (continued)

   Cash and Cash Equivalents

   Cash   equivalents   consist   primarily  of  short  term   investments  with
   insignificant  interest rate risk and original  maturities of three months or
   less at the  date of  acquisition.  The  carrying  amount  of cash  and  cash
   equivalents reported on the balance sheets approximates their fair value.

   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  (FIFO)  method.  Currently,  inventory  of $115,282  and  $100,584
   consists of raw  materials  only,  as of May 31, 1997 and  February  28, 1997
   respectively.

   Property & Equipment

   Property and equipment  are stated at cost,  less  accumulated  depreciation.
   Depreciation and amortization is determined  using the  straight-line  method
   over the  estimated  useful  lives of the assets  ranging from three to seven
   years.  Depreciation  expense was  $39,172  and $43,187 for the three  months
   ended May 31, 1997 and 1996 respectively.

   Stock Options

   The Company has elected to follow Accounting Principles Board Opinion No. 25,
   "Accounting for Stock Issued Employees" (APB 25) and related  Interpretations
   in  accounting  for its  employee  stock  options  rather than  adopting  the
   alternative fair value accounting  provided for under FASB Statement No. 123,
   "Accounting for Stock-based  Compensation"  (SFAS 123). Under APB 25, because
   the exercise price of the Company's  stock options equals the market price of
   the  underlying  stock on the  date of  grant,  no  compensation  expense  is
   recognized.

    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.  Amortization  expense was $69,658 and $73,585
   for the three  months ended May 31, 1997 and 1996  respectively.  The Company
   periodically  reviews the  recoverability of these intangible assets in order
   to record them at their net realizable value.






                                    - 8 -

<PAGE>




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


   1.  Summary of Significant Accounting Policies (continued)

   Revenue Recognition

   Revenue  is  recognized  upon  shipment,  or in case of washing  and  laundry
   system, it is recognized in part on receipt of an order and the corresponding
   first progress payment, upon shipment and upon completion of installation, as
   outlined in each individual contract.

   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).  Common stock
   equivalents  are not  included in the  computation  as their  effect would be
   anti-dilutive.

   New Accounting Pronouncements

   In February 1997, the Financial  Accounting  Standards Board issued Statement
   No. 128, Earnings per Share,  which is required to be adopted by February 28,
   1998.  At that  time,  the  Company  will be  required  to change  the method
   currently  used to  compute  earnings  per  share  and to  restate  all prior
   periods.  Under the new  requirements  for calculating  primary  earnings per
   share,  the dilutive effect of stock options will be excluded.  The impact is
   not expected to be material since common stock equivalents are dilutive based
   on the Company's anticipated losses.

   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 February 28, 1997 of $11,479,987  and  $11,972,035 at
   May 31,  1997,  and  periodic  cash  flow  difficulties,  all of which  raise
   substantial doubt of the Company's ability to continue as a going concern.

   The net loss for the year ended February 28, 1997 was $2,957,744 and $492,048
   for the three months ended May 31, 1997. 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




                                    - 9 -

<PAGE>




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



   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.  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 through the next fiscal year.

   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.

   At May 31,  1997,  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
   $34,680, which is included in interest payable on long-term debt obligations,
   was recorded for the three months ended May 31, 1997.

   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.


   4. Stockholders' Equity

   Preferred Stock

   On May 30, 1996 the Board of Directors  authorized for issuance 30,000 shares
   of Series "B" convertible preferred stock with a $0.01 par value and a stated
   value of $1,000  per share.  The shares  provide  for  payment of  cumulative
   dividends at 8% annually,  paid in cash or stock at the Company's  option. As
   of May 31, 1997, 3,170 shares of Series "B" convertible  preferred stock have
   been issued for net proceeds of $2,755,000  after issuance costs of $415,000.
   The Company also  recorded the required 8% dividend in  additional  preferred
   stock, rather than cash.



                                    - 10 -

<PAGE>




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


   4. Stockholders' Equity (Continued)

   During  the  three  months  ended  May 31,  1997,  3  shares  of  Series  "B"
   convertible  preferred  stock were  converted to  approximately  4,900 common
   shares.  Defferred  compensation for three months ened May 31, 1997 decreased
   to  $84,000  from  $168,000  for the year ended  February  28,  1997,  due to
   recognition of certain deferred compensation expense as consulting fees.

   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 28, 1997.


























                                 PART I - ITEM 2





                                    - 11 -

<PAGE>




                       MANAGEMENTS DISCUSSION AND ANALYSIS
                 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   General

     The Company has been  involved in research and  development  and  marketing
several products since 1987. From the period since reactivation  (March 2, 1987)
to May 31, 1997, the Company had incurred a cumulative net loss of  $11,972,035.
The Company  expects to continue to incur losses into the next fiscal year.  The
Company's  current  cash  assets  may not be  sufficient  to fund its long  term
operations  and the  Company  may  need to  generate  positive  cash  flow  from
operations  or raise  additional  debt or  equity  capital  in order to fund its
operation in future.  There can be no assurance that the Company will be able to
obtain  additional  capital to fund  operations  in the  future.  The  Company's
financial position is discussed further below.

     The  Company's  future  operating  results  will  depend  on many  factors,
including acceptance of the Company's laundry technologies,  systems,  equipment
and attendant products in the various markets for the Company's products and the
timing of FDA  marketing  clearance,  if  received,  for the  Company's  medical
sterilization and disinfection products,  which require such clearance,  and the
demand for such products at that time.  Additional factors include the Company's
ability to manufacture and market its products on a  cost-effective  basis,  the
level of  competition  which it  encounters  in its  various  marketplaces,  the
ability of the Company to develop product enhancements and new products in order
to achieve  and  maintain  market  share,  and its  ability  to obtain  adequate
financing.

   Results of Operations

     The  Company's  revenues  were  $302,391 for the three months ended May 31,
1997,  and $94,172 for the three months ended May 31, 1996. 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 three months ended May 31, 1997 was
$57,200  compared to $(21,438)  for the three  months  ended May 31, 1996.  This
significant  increase in gross margin is  attributable to increased sales of CTS
due to increasing acceptance of its technologies by its customers, and increased
sales of CBC due to increasing  interest in and use of its products and services
by medical  researchers and chemical suppliers and CBC's reputation for quality.
 .

     Research  and  development  expenditures  were $77,865 for the three months
ended May 31,  1997,  and  $234,271  for the three  months  ended May 31,  1996.
Although  research and  development  expenses  have been  reduced  tremendously,
management sees no continued overall  reduction of these expenses.  Research and
development  costs are expected to increase due to anticipated  redesign efforts
on the Company's  laundry  products and medical  sterilization  and disinfection
products.

     The Company  incurred general and  administrative  expenses of $271,107 for
the three months  ended May 31, 1997,  compared to $314,875 for the three months
ended May 31,  1996.  This  decrease  is due to  management's  decision  to take
aggressive steps to reduce current monthly expenses, even with a slight increase
in  staffing.  At  quarter  end May  31,  1997,  the  Company  had 24 full  time
employees,  compared to 19 full time  employees at quarter end May 31, 1996.  As
the Company


                                    - 12 -

<PAGE>




completes development on certain products and prepares for commercialization,
the human resource requirements of the Company will change.

     The  Company  incurred  selling and  marketing  expenses of $47,452 for the
three months ended May 31, 1997,  compared to $51,019 for the three months ended
May 31, 1996. This decreased  expense is  attributable to significant  re-use of
previously prepared sales and marketing materials.  The Company anticipates that
marketing  expenses  will  increase  significantly  in the  fiscal  year  ending
February 28, 1998 due to the hiring and  training of  additional  marketing  and
sales  personnel  for the  textiles  operations  (CTS) and the  attendant  costs
related to their endeavors.  The Company also anticipates  increasing its direct
marketing efforts to potential customers of CBC.

     For the three months ended May 31, 1997, the Company had interest income of
$14,212 as compared to interest  income for the three months ended May 31, 1996,
of $2,104.  This  increase was due to an increase in the amount of cash on hand.
The Company  incurred $58,206 in interest expense for the three months ended May
31, 1997  including  $2,313  attributable  to  equipment  leasing  arrangements,
$34,700 in  interest  accrued on  long-term  debt,  and  $21,193 in  interest on
warrants  accrued,  in  conjunction  with the  convertible  debt  offering  (see
discussion  below under Liquidity and Capital  Resources in regards to this debt
offering).  The Company  anticipates  that this amount will continue to increase
due to the convertible debt currently being recorded.

     The  Company's  net  loss  for the  three  months  ended  May 31,  1997 was
$492,048,  as compared to $790,115 for the three months ended May 31, 1996.  The
Company  anticipates  that it will operate at a loss for the year ended February
28, 1998.  However,  it is anticipated that the losses will continue to decrease
as the revenues of CTS and CBC continue to increase.

   Liquidity and Capital Resources

     Management is aggressively  exploring  additional financing for the ongoing
operations of the Company and has entered into an investment  banking  agreement
with Southwest  Securities  Group.  There are no assurances  that the efforts to
locate and secure  additional  financing will be successful,  and the failure to
secure this financing would substantially alter the management's  assumptions as
presented heretofore and in the remainder of this section.

     Cash used in operating  activities  was $444,276 for the three months ended
May 31, 1997, compared to $461,097 for the three months ended May 31, 1996. Cash
used for the three months  ended May 31, 1997 was  comprised of cash on hand and
collections of accounts receivable,  which is comprised of VAC sales and service
from  CyclO3PSS  Textile  Systems,  Inc. and contract  development  and chemical
compound sales from CyclO3PSS Biochemical Corporation.

     No Cash was provided from issuance of convertible debt for the three months
ended May 31,  1997,  compared to $351,000  for the three  months  ended May 31,
1996.

     Total  assets  decreased to  $2,654,505  for the three months ended May 31,
1997 from $3,024,846 for the year ended February 28, 1997,  primarily due to the
decrease in the Company's  cash,  which was the result of continued  losses from
operations.





                                    - 13 -

<PAGE>




     Total  current  liabilities  decreased  slightly to $258,816  for the three
months ended May 31, 1997 from  $269,929  for the year ended  February 28, 1997.
All of the  Company's  current  liabilities  at May 31, 1997 were  attributed to
accounts  payable,  accrued  liabilities,  and the  current  portion  of certain
capital equipment leases. Long term liabilities  increased to $1,379,766 for the
three months ended May 31, 1997 from  $1,345,086 for the year ended February 28,
1997.  Of the  total,  $1,342,410  represents  principal  and  interest  on debt
generated  from the Company's  offering of  convertible  debt  instruments.  The
additional  $30,303  represents  the long term  portion  of leases  payable  for
certain  leased  equipment,  compared to $37,356 for the year ended February 28,
1997.

   Plan of Operation

   The plan of  operation  during  the next  twelve  (12)  months  includes  the
following:

1.   Aggressively  market the Company's Ozone Laundry Systems initially,  to the
     Healthcare   market  and  then  the  commercial   and  Industrial   Laundry
     marketplaces.

2.   Continue  testing and validation and initiate sales and installation of the
     Company's Healthcare Ozone Laundry Systems with healthcare providers in the
     United States and Internationally.

3.   Complete  design and development of the Company's Ozone Laundry Systems for
     institutional  users such as hotels,  resorts,  prisons,  etc and  initiate
     sales and installation of these systems to such institutions.

4.   Continue to increase marketing, sales and installation of the Company's VAC
     laundry   counting   and  sorting   systems  to   commercial,   industrial,
     institutional and healthcare customers.

5.   Complete  validation  testing of the Company's  liquid chemical  sterilant,
     SterOxTM,  preparatory  to  completion  of a  licensing  agreement  with an
     established   medical   product   manufacturing/marketing   company  and/or
     preparation and submission of a 510(k) Premarket Notification to the FDA.


6.   Produce data and design elements in support of desired  labeling claims for
     FDA officials reviewing the Company's 510(k) Premarket Notification for the
     STER-O3- ZONE 100TM.

7.   Continued  development  of  products  and  enhancements  for the  Company's
     textile operations.

8.   Increased   marketing  and  continued  growth  of  contract   research  and
     development  within the BioChemical  group and the ongoing  manufacture and
     sales of their current and future products.

9.   With adequate financing in place,  there may be additional  diversification
     of the Company's business activities through future acquisitions or product
     development.


                                    - 14 -

<PAGE>





   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 and  completion  of key
   future products.

   The Company  currently  anticipates  that its  expenditures on equipment will
   range from  $200,000 - $400,000  during  the next  twelve  months  based upon
   current  manufacturing  assumptions,  assuming that the required financing is
   obtained and available.

   The Company had 24 full time and 4 part-time  employees  as of the year ended
   February 28, 1997. The Company  anticipates  that no more than six additional
   employees will be hired during the next twelve months,  and then, only as the
   market  acceptance  of  the  Company's  textile  systems  accelerates.  It is
   anticipated  that general and  administrative  expenses would not increase by
   more than $200,000 on an annualized basis as a result of any such increase in
   employees.

   The information  set forth herein as to anticipated  research and development
   costs,  equipment  purchases and increase in employees are management's  best
   estimate 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.

   From  time to  time,  the  Company  may  publish  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 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.  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 additional operating capital in the form of debt or equity;

     3.   The existence of an orderly market in the Company's securities; and

     4.   Increased sales of the various products of the Company.













                                    - 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 Holders. None.

Item 5. Other Information. At the regular board of directors meeting held on May
     30, 1997,  William R. Stoddard was  unanimously  elected to the position of
     Chief  Executive  Officer (CEO),  replacing John Williams who had indicated
     his intention to resign due to health related reasons.  William  Stoddard's
     election as CEO was  effective  June 15,  1997.  John  Williams  remains as
     chairman  of the board and will  continue  to be employed by the Company to
     ensure continuity and a smooth transition.

Item 6. Exhibits. None.






                                   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:  July 14, 1997                   By/s/ William R. Stoddard
                                          --------------------------------
                                          William R. Stoddard
                                          Chief Executive Officer
                                          President
                                          Principal Executive Officer



   Date:  July 14, 1997                   By/s/ Mondis Nkoy
                                          --------------------------------
                                          Mondis Nkoy
                                          Controller, Corporate Secretary
                                          Principal Financial Officer



                                    - 16 -