<PAGE>

================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-Q

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

                 For Quarterly Period Ended September 30, 1999

                                       or

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

    For the transition period from __________________ to __________________

                        Commission file number 001-07894

                              ERLY INDUSTRIES INC.
             (Exact name of registrant as specified in its charter)

        California                                        95-231-2900
(State or Other Jurisdiction of                          (I.R.S. Employer
   Incorporation or Organization)                      Identification Number)

    8641 United Plaza Boulevard
     Baton Rouge, Louisiana                                   70809
(Address of Principal Executive Offices)                    (Zip Code)

      Registrant's telephone number, including area code:  (225) 922-4664

     Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [_]      No  [X]

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court.  Yes [X]    No  [_]

     As of September 30, 1999 there were 5,762,088 shares of common stock of
ERLY Industries Inc. issued and outstanding.
================================================================================
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                              ERLY Industries Inc.

                                     INDEX

<TABLE>
<CAPTION>
                                                                        Page No.
                                                                        --------
<S>                                                                       <C>

COVER PAGE...............................................................  1

INDEX....................................................................  2

PART I - FINANCIAL INFORMATION...........................................  4

     Item 1.  Financial Statements (Unaudited)...........................  4

     Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations.............. 10

     Item 3.  Quantitative and Qualitative Disclosures
              About Market Risk.......................................... 10

PART II - OTHER INFORMATION.............................................. 10

     Item 1.  Legal Proceedings.......................................... 10

     Item 2.  Changes in Securities and Use of Proceeds.................. 10

     Item 3.  Defaults upon Senior Securities............................ 10

     Item 4.  Submission of Matters to a Vote of Security Holders........ 10

     Item 5.  Other Information.......................................... 10

     Item 6.  Exhibits and Reports on Form 8-K........................... 10

SIGNATURES............................................................... 12
</TABLE>

                                       2

<PAGE>

Special Cautionary Notice Regarding Forward Looking Statements

          This report includes "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 which involve risks and
uncertainties.  All statements, other than statements of historical facts,
included in this report that address activities, events or developments that
ERLY Industries Inc, a Corporation corporation (the "Company"), expects or
anticipates will or may occur in the future, including such things as business
strategy and measures to implement strategy, competitive strengths, goals,
expansion and growth of the Company's business and operations, plans, references
to future success and other such matters are forward-looking statements.  When
used in this report, the words "anticipates," "believes," "expects," or words of
similar import are intended to identify forward-looking statements.  The
forward-looking statements are based on certain assumptions and analyses made by
the Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances.  However, whether actual results
and developments will conform to the Company's expectations and predictions is
subject to a number of risks:  general economic, market or business conditions;
the opportunities (or lack thereof) that may be presented to and pursued by the
Company; competitive actions by other companies; changes in laws or regulations;
and other factors, many of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this report are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequences to
or effects on the Company or its business operations.  Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date hereof.  The Company undertakes no obligation to publish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.  Readers are urged
to carefully review and consider the various disclosures made by the Company to
advise interested parties of certain risks and other factors that may affect the
Company's business and operating results, including the disclosures made under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in this report.

                                       3
<PAGE>

                         PART I - FINANCIAL INFORMATION

                              ERLY Industries Inc.

Item 1.  Financial Statements (Unaudited)

                              ERLY INDUSTRIES INC.
                          CONSOLIDATED BALANCE SHEETS
                             AT SEPTEMBER 30, 1999




Assets                                                  $  0
------                                                  ----


Liabilities                                             $  0
-----------                                             ----


Stockholders' Equity                                    $  0
--------------------                                    ----

                                       4
<PAGE>

                              ERLY INDUSTRIES INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                        AUGUST 20 TO SEPTEMBER 30, 1999
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                        August 20 to September 30, 1999
                                                        -------------------------------

<S>                                                                          <C>
Net Sales                                                                       $0

Cost of Sales                                                                   $0
                                                                     -------------

Gross Profit                                                                    $0

Selling and Administrative Expenses                                             $0
                                                                     -------------

Earnings from Operations                                                        $0

Interest Expense                                                                $0

Interest Income                                                                 $0

Other Expenses                                                                  $0
                                                                     -------------

Earnings (loss) before taxes                                                    $0
                                                                     -------------

Net Earnings (loss)                                                             $0
                                                                     =============
</TABLE>

                                       5
<PAGE>

                              ERLY INDUSTRIES INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                        AUGUST 20 TO SEPTEMBER 30, 1999
                                  (UNAUDITED)


<TABLE>
<CAPTION>

<S>                                                                <C>
Cash Flows from Operating Activities

              Net Earnings (loss)                                               $0

              Other                                                             $0
                                                                    --------------

              Net Cash provided by operating activities                         $0


Cash Flows from Investing Activities

              Property, Plant and Equipment                                     $0

              Other                                                             $0
                                                                    --------------

              Net Cash used in investing activities                             $0

Cash Flows from Financing Activities

              Increase (decrease) in Notes Payable                              $0

              Other, net                                                        $0
                                                                    --------------

              Net Cash provided by financing activities                         $0
                                                                    --------------

Net Increase in Cash and Cash Equivalents                                       $0

Cash and Cash Equivalents:

              Beginning of the Period                                           $0
                                                                    --------------

              End of the Period                                                 $0
                                                                    ==============
</TABLE>

                                       6
<PAGE>

                              ERLY INDUSTRIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


1. Organization, Basis of Presentation, and Principles of Consolidation
   --------------------------------------------------------------------

   ERLY Industries, Inc.(ERLY) filed for a voluntary petition of reorganization
   under Chapter 11 of the U.S. Bankruptcy Code, in the U.S. Bankruptcy Court
   for the Southern District of Texas, Corpus Christi Division (the Bankruptcy
   Court) on September 28, 1998 (see Note 2).  Watch-Edge International, Inc.
   (WEI) (formerly known as Chemonics Industries, Inc.), a wholly owned
   subsidiary of ERLY, also filed a voluntary petition for reorganization under
   Chapter 11 of the bankruptcy code on November 30, 1998 in the Bankruptcy
   Court.  Both Companies continued to operate since the filing of their
   petitions as debtor-in-possession. Other subsidiaries of ERLY included in the
   August 20, 1999 consolidated balance sheet presented include The Beverage
   Source, Inc. and ERLY Juice, Inc.  Other subsidiaries of WEI included in the
   consolidated balance sheet presented include Chemonics Fire-Trol, Inc. and
   Chemonics International, Inc.  (Collectively referred to as the Company)

   At the date ERLY filed its petition for bankruptcy, it held 81% of the voting
   power of American Rice, Inc. (ARI), comprised of 32% direct common stock
   equity interest and an additional 49% voting preferred stock interest.  ERLY
   previously included ARI in its consolidated balance sheet with appropriate
   adjustments to reflect the minority interest.  ERLY's 81% stock interest in
   ARI has also been pledged by ERLY to ARI's creditors.  ARI filed for
   bankruptcy under Chapter 11 of the Bankruptcy Code on August 11, 1998.  (Case
   No. 98-21895 before the Bankruptcy Court). ARI filed a Plan of Reorganization
   was confirmed and made effective October 1, 1999 provides no distribution or
   continuing ownership to ERLY or ARI's other shareholders.  Accordingly, ERLY
   has not included ARI, or ARI's wholly-owned subsidiaries, in the consolidated
   balance sheet presented at August 20, 1999.

   As described in Note 3, the Bankruptcy Court's confirmation of the Company's
   Joint Plan of Reorganization became effective August 20, 1999.  This
   completed a significant financial restructuring which resulted in the Company
   retaining no assets of value and a discharge of liabilities.  The Company has
   accounted for the restructuring in accordance with the American Institute of
   Certified Public Accountants Statement of Position 90-7, Financial Reporting
   by Entities in Reorganization under the Bankruptcy Code, which requires that
   assets and liabilities be adjusted to their fair values ("fresh-start"
   values) and a new reporting entity created.  Accordingly, the consolidated
   balance sheet at August 20, 1999 reflected the assets and liabilities at the
   fair value assessed by management of zero (see Notes 3 and 4 for additional
   discussion) and reclassified the value of common stock to eliminate a deficit
   retained earnings.

   Since August 20, 1999, the Company has not engaged in any business
   activities.

                                       7
<PAGE>

2. Bankruptcy Proceedings
   ----------------------

   On August 9, 1999, the Bankruptcy Court confirmed a Chapter 11 Joint Plan of
   Reorganization as Modified filed by ERLY and WEI  (the Debtors) and ERLY's
   Creditor's Committee (the Plan) in the above referenced bankruptcy
   proceedings.  The Confirmation Order provides that all entities who have
   held, hold or may hold a claim are permanently enjoined on or after the
   confirmation date from making demand on, commencing, or continuing in any
   manner any action or proceeding of any kind with respect to any such claim
   against the Debtors.

   The Plan was effective on August 20, 1999 and provides that all of the assets
   of ERLY and WEI (except certain contracts and assets, which management has
   determined to be of no value, necessary for the Debtors to continue
   operations involving a sublease and Terminal Service Agreement in connection
   with the WEI operations in Phoenix, Arizona, net operating losses and
   carryovers, and stock of WEI) are to be paid, transferred and assigned to a
   newly formed limited partnership for the benefit of the creditors.  The
   purpose of the limited partnership is to liquidate assets of the Debtors and
   to distribute those proceeds to the Creditors.

   All claims and causes of action of ERLY and WEI existing as of and subsequent
   to the petition date were preserved and inure to the benefit of the
   reorganized Debtors and are not extinguished by the Confirmation Order.   In
   full and final satisfaction of all claims against the Debtors, the
   Confirmation Order shall automatically (i) vest all property of the Debtors
   and their Estates, including the Debtors' actions (ii) transfer and/or assign
   to the limited partnership for the benefit of the Debtors' Creditors, and all
   property of the Debtors' estates and their subsidiaries, except the
   exceptions in the preceding paragraph.

   On August 20, 1999, all intercompany claims by and among the Debtors or Old
   Chemonics were eliminated, all guarantees executed by the Debtors or Old
   Chemonics were deemed to have been one obligation of ERLY payable solely by
   the limited partnership and any claim filed or to be filed against the
   Debtors were deemed one claim against ERLY payable solely by the limited
   partnership, all remaining assets of Old Chemonics were either assigned to,
   paid, or otherwise vest and assigned to the limited partnership.

3.  Income Taxes
    ------------

   The Company is not presently able to determine its net operating loss (NOL)
   carryforwards at September 30, 1999; however, it could be significant on a
   consolidated tax return basis.  The NOL is subject to certain tax sharing
   agreements and continuing disputes with its former subsidiary, American Rice,
   Inc., which have thus far prohibited the preparation of these tax returns and
   the assessment of any NOLs. Management does not know whether the NOL will
   have any significant value after any adjustments for events occurring during
   the bankruptcy proceedings including the sale of assets, forgiveness of
   indebtedness, as well as the possible de-consolidation of American Rice, Inc.
   for income tax purposes.

                                       8
<PAGE>

3.  Income Taxes  (continued)
    ------------

   Due to the inability of management to ascertain the amount of any NOLs
   available to the Company as well as the uncertainty of future taxable income
   during the NOL carryover period, management has established a full valuation
   allowance at September 30, 1999.  Due to the inability to determine the
   amount of any NOL, the valuation allowance is established as any amount
   necessary to reduce the tax benefit of any NOL to zero.

4.  Specific Contracts and Leases
    -----------------------------

   WEI leases a parcel of property in Phoenix, Arizona under a quarter to
   quarter tenancy that was paid through September 30, 1999.  WEI has subleased
   the property to two entities.  WEI is also party to a Terminal Service
   Agreement whereby WEI provides certain equipment and services.  These leases
   and agreements remained with the reorganized Debtors on August 20, 1999.
   Management sold all equipment at this location for approximately $750 and
   terminated these leases and contracts on September 30, 1999.

   Management determined that there was no value to these leases or agreements
   at August 20, 1999 and accordingly reduced the carrying value of these assets
   to zero in its consolidated balance sheet.

5.  Stockholders' Equity
    --------------------

   At September 30, 1999, ERLY had 6,000 shares of $100 par value preferred
   stock authorized but unissued.

   At September 30, 1999, ERLY had 15,000,000 shares of $.01 par value common
   stock authorized and 5,762,088 shares issued and outstanding.

   In the fiscal year ended March 31, 1996, ERLY granted stock options to a key
   employee for 88,500 shares at a price of $4.55 per share (as adjusted for
   stock dividends).  These options were to expire on their own terms in the
   year 2001.  These options were cancelled by action of ERLY's Board of
   Directors and are not deemed outstanding at September 30, 1999.

6.  Significant Litigation
    ----------------------

   The Company has been involved in significant litigation related to actions
   brought prior to its bankruptcy petition and as a part of its bankruptcy
   proceedings.  Based on management's assessment of these proceedings, and
   considering the Confirmation Order discussed in Note 2, the balance sheet
   presented provides no liabilities for such litigation and asserted or
   unasserted contingent liabilities at September 30, 1999.

                                       9
<PAGE>

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

General

        The Company has emerged from voluntary bankruptcy with no assets,
liabilities, or equity and has no ongoing operations.  Management is evaluating
various business plans and alternatives strategies for the Company to pursue.
It is also possible that management will conclude to cease operations entirely
and to liquidate or shut down the Company.

Results of Operations

        Not applicable.

Liquidity And Capital Resources

        The Company currently does not have any source of liquidity and is not
carrying on any significant business activities. If management develops a viable
business plain, it will be necessary to raise sufficient capital to enable the
Company to commence operations. There can be no assurance offered that ERLY will
be successful in obtaining the capital necessary to carry out a business plan,
if developed, or to continue as a going concern. The Company has abandoned its
plan, reported on Form 8-K by the Company on August 24, 1999, to acquire four
radio stations in Hot Springs, Arkansas.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

        Not applicable.

                          PART II - OTHER INFORMATION

Item 1. Legal Proceedings

        The Company has been involved in significant litigation related to
actions brought prior to its bankruptcy petition and as a part of its bankruptcy
proceedings. Based on management's assessment of these proceedings, and
considering the Confirmation Order discussed in Note 2 to Consolidated Financial
Statements, management believes that the outcome of all pending legal
proceedings in the aggregate will not have a material adverse effect on the
Company's consolidated financial condition or its results of operations.

Item 2. Changes in Securities and Use of Proceeds

        Not applicable.

Item 3. Defaults upon Senior Securities

        Not applicable.

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

        Not applicable.

Item 5. Other Information

        Not applicable.

Item 6. Exhibits and Reports on Form 8-K

(a)     Exhibits

        Not applicable.

                                       10
<PAGE>

(b)  Reports on Form 8-K

     On August 24, 1999 the Company filed a Current Report on Form 8-K, which
was later amended on September 3, 1999 and October 14, 1999, reporting Items 2,
3 and 4, in connection with the Company's intent to acquire the assets and
business of four radio stations; confirmation of the Modified Debtors' and ERLY
Creditors' Committee Joint Plan of Reorganization by the bankruptcy court; and
changes in the Company's certifying accountant.

                                       11
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, ERLY
Industries Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


<TABLE>

<S>                                   <C>
Date:  November 24, 1999              ERLY INDUSTRIES INC.

                                      By:  /s/ Nanette N. Kelley
                                          --------------------------------------
                                                       Nanette N. Kelley
                                          Chairman, President and Chief Executive Officer

Date:  November 24, 1999              By:  /s/ Nanette N. Kelley
                                          ---------------------------------------------
                                                        Nanette N. Kelley
                                                   Principal Financial Officer
</TABLE>

                                       12