U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

(Mark One)
{X}       Quarterly Report under Section 13 or 15(d) of the Securities  Exchange
          Act of 1934.

For the Quarterly Period ended June 30, 1998

{  }      Transition  Report  pursuant to Section 13 or 15(d) of the  Securities
          Exchange Act

For the Transition Period from __________ to __________

Commission file Number  0-14266

                      POLLUTION RESEARCH AND CONTROL CORP.
                      ------------------------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)

         California                                             95-2746949
         ----------                                             ----------
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                            Identification Number)

                  506 Paula Avenue, Glendale, California 91201
                  --------------------------------------------
                    (Address of Principal Executive Offices)

                                 (818) 247-7601
                 ----------------------------------------------
                (Issuer's telephone number, including area code)

Check whether the Small Business Issuer (1) has filed all reports required to be
filed by  Section  13 or 15(d) of the  Exchange  Act of 1934  during the past 12
months (or such  shorter  period that the  registrant  was required to file such
reports),  and (2) has been subject to such filing  requirements  of the past 90
days.

Yes X  No _

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

          Class                 Date                No. of Shares Outstanding
          -----                 ----                -------------------------
         Common              July 24, 1998                  2,399,689

Traditional Small Business Disclosure Format (check one):
YES   X           No ___

<PAGE>
                                                       

                      POLLUTION RESEARCH AND CONTROL CORP.
                                   Form 10-QSB
                  For the Six-Month Period Ended June 30, 1998


                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----

Part I    Financial Information

          Item 1.      Financial Statements:

                       Consolidated Balance Sheet                           3
                       Consolidated Statements of Operations                5
                       Consolidated Statement of Shareholders' Equity       7
                       Consolidated Statements of Cash Flows                8
                       Notes to Financial Statements                        9

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

Part II   Other Information                                                14

          Item 6(b)    Reports on Form 8-K                                 14



                                        2

<PAGE>


                         PART 1 - FINANCIAL INFORMATION
                          Item 1. FINANCIAL STATEMENTS
                           CONSOLIDATED BALANCE SHEET
                                     ASSETS
                                   (Unaudited)

                                                                         As Of
                                                                       06/30/98
CURRENT ASSETS                                                         --------

         Cash                                                         $  315,678

         Marketable securities                                             3,250

         Accounts receivable, trade, less allowance for doubtful         377,319
         accounts of $ 6,381

         Inventories                                                   1,512,117

         Net assets of discontinued operations                            65,888

         Other current assets                                              7,340
                                                                      ----------

         TOTAL CURRENT ASSETS                                          2,281,592
                                                                      ----------

PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, less accumulated depreciation of $169,938                  925,536
                                                                      ----------

OTHER ASSETS

         Advances to joint venture                                       187,854

         Other intangible assets                                          23,509

         Other assets                                                      1,682
                                                                      ----------

TOTAL OTHER ASSETS                                                       213,045
                                                                      ----------

TOTAL ASSETS                                                          $3,420,173
                                                                      ==========




See notes to financial statements

                                        3

<PAGE>

                           CONSOLIDATED BALANCE SHEET
                      LIABILITIES AND SHAREHOLDERS' EQUITY
                                   (Unaudited)
                                                                       As of
                                                                      6/30/98
CURRENT LIABILITIES                                                   -------

         Notes payable                                              $    70,000

         Accounts payable                                               203,921

         Accrued liabilities                                            206,059
                                                                    -----------

TOTAL CURRENT LIABILITIES                                               479,980


DEFERRED RENT                                                            65,402



SHAREHOLDERS' EQUITY :
     Preferred Stock, 5,000,000 shares authorized:

         Series A Preferred Stock, .01 par value,
             220,000 shares issued and outstanding                      110,000

         Series B Preferred Stock, .01 par value,
            450,000 shares issued and outstanding                       800,000

         Common Stock, no par value; 7,500,000 shares
            authorized,  2,399,689 shares issued and outstanding      6,815,843

         Less notes due from sale of stock                              (86,857)
         Other paid in capital                                          145,764
         Accumulated deficit                                         (4,913,209)
         Unrealized gain on marketable securities                         3,250
                                                                    -----------


         TOTAL SHAREHOLDERS' EQUITY                                   2,874,791
                                                                    -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          $ 3,420,173
                                                                    ===========




See notes to financial statements

                                        4
<PAGE>
<TABLE>
<CAPTION>

                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (Unaudited)
                                                                  Three Months
                                                                 Ended June 30,
                                                                 --------------

                                                               1998           1997
                                                               ----           ----

<S>                                                        <C>            <C>        
Net Revenues                                               $   652,887    $   914,407
Cost of goods sold                                             578,585        875,131
                                                           -----------    -----------
         Gross profit                                           74,302         39,276
                                                           -----------    -----------

Operating expenses:
         Selling, general and administrative expenses          313,924        454,142
         Research and development                                8,168         16,493
                                                           -----------    -----------
                  Total operating expenses                     322,092        470,635
                                                           -----------    -----------
         Loss from operations                                 (247,790)      (431,359)

Other Income (Expense)
         Other income                                             --             --
         Interest Income                                            10          1,105
         Interest expense                                       (5,194)        (2,369)
         Interest expense, related parties                      (4,336)          --
                                                           -----------    -----------
                  Total Other Income (Expense)                  (9,520)        (1,264)
                                                           -----------    -----------

Income (Loss) Before Income Taxes                             (257,310)      (432,623)
Provision (Benefit) For Income Taxes:
         Current                                                  --             --
         Deferred                                                 --             --
                                                           -----------    -----------
           Total Provision (Benefit) for Income Taxes             --             --
                                                           -----------    -----------

Income (loss) from continuing operations                   $  (257,310)   $  (432,623)

Discontinued operations
         Loss from discontinued operations                     (84,844)      (191,025)
         Loss on disposal of discontinued operations          (668,989)          --
                                                           -----------    -----------
                                                              (753,833)      (191,025)
                                                           -----------    -----------

Net Income                                                  (1,011,143)      (623,648)
                                                           ===========    ===========

Earnings per share
         Net Income (loss) per share - basic and diluted   $      (.47)   $     (0.29)
                                                           ===========    ===========

Weighted average number of common
and common equivalent shares outstanding                     2,169,711      2,168,433
                                                           ===========    ===========


See notes to financial statements

                                           5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (Unaudited)
                                                                   Six Months
                                                                  Ended June 30,
                                                                  --------------

                                                               1998           1997
                                                               ----           ----

<S>                                                        <C>            <C>        
Net Revenues                                               $ 1,229,918    $ 2,081,049
Cost of goods sold                                             794,683      1,624,786
                                                           -----------    -----------
         Gross profit                                          435,235        456,263

Operating expenses:
         Selling, general and administrative expenses          676,190        887,330
         Research and development                                9,128         23,223
                                                           -----------    -----------
         Total operating expenses                              685,318        910,553
                                                           -----------    -----------
         Loss from operations                                 (250,083)      (454,290)

Other Income (Expense)
         Other income                                             --             --
         Interest Income                                            39          2,116
         Interest expense                                       (5,194)        (7,067)
         Interest expense, related parties                      (6,750)          --
                                                           -----------    -----------
                  Total Other Income (Expense)                 (11,905)        (4,951)
                                                           -----------    -----------

Income (Loss) Before Income Taxes                             (261,988)      (459,241)

Provision (Benefit) For Income Taxes:
         Current                                                  --             --
         Deferred                                                 --             --
                                                           -----------    -----------
           Total Provision (Benefit) for Income Taxes             --             --
                                                           -----------    -----------

Income (loss) from continuing operations                   $  (261,988)   $  (459,241)

Discontinued operations
         Loss from discontinued operations                    (111,262)      (162,743)
         Loss on disposal of discontinued operations          (514,414)          --
                                                           -----------    -----------
                                                              (625,676)      (162,743)
                                                           -----------    -----------


Net Income                                                    (887,664)      (621,984)
                                                           ===========    ===========

Earnings per share
         Net Income (loss) per share - basic and diluted   $      (.41)   $     (0.29)
                                                           ===========    ===========

Weighted average number of common
and common equivalent shares outstanding                     2,169,711      2,168,433
                                                           ===========    ===========




See notes to financial statements

                                           6

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                        POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                               For the Six Months Ended June 30, 1998


                                                                                                   
                    Series A Preferred Stock    Series B Preferred Stock          Common Stock     
                      Shares        Amount        Shares       Amount         Shares        Amount 
                      ------        ------        ------       ------         ------        ------ 


BALANCE
                     <C>         <C>             <C>         <C>             <C>         <C>         
12/31/97                  --     $      --            --     $      --       2,168,433   $ 6,588,980 
                                                                                                     
Issuance of                                                                                          
stock in                                                                                             
private                                                                                              
placements,                                                                                          
net of                                                                                               
offering                                                                                             
costs                  220,000       110,000                                   231,256       226,863         
                                                                                                     
Issuance of                                                                                          
common stock                                                                                         
for                                                                                                  
building                                           450,000       800,000          --            --        
                                                                                                     
Change in trans-                                                                                     
lation gain               --            --            --            --            --            --   
                                                                                                     
Net loss for                                                                                         
the six                                                                                              
months                    --            --            --            --            --            --   
                   -----------   -----------   -----------   -----------   -----------   -----------
                                                                                                     
Balance                                                                                              
6/30/98                220,000   $   110,000       450,000   $   800,000     2,399,689   $ 6,815,843 
                   ===========   ===========   ===========   ===========   ===========   =========== 
     


(Continued)
                      Notes Due       Other                       Gain on       Currency        Total              
                      From Sale      Paid In     Accumulated     Marketable    Translation   Shareholders'                          
                      of Stock       Capital       Deficit       Securities       Gain          Equity  
                      --------       -------       -------       ----------       ----          ------  
                                            

BALANCE
12/31/97            $   (86,857)   $   145,764   $(4,025,545)   $     3,250   $    24,587    $ 2,650,179

Issuance of
stock in
private
placements,
net of
offering
costs                      --             --            --             --            --           336,863

Issuance of
common stock
for
building                   --             --            --             --            --           800,000

Change in trans-
lation gain                --             --            --             --         (24,587)       (24,587)

Net loss for
the six
months                     --             --        (887,664)          --            --         (887,664)
                    -----------    -----------   -----------    -----------   -----------    -----------

Balance
6/30/98             $   (86,857)   $   145,764   $(4,913,209)   $     3,250   $      --      $ 2,874,791
                    ===========    ===========   ===========    ===========   ===========    ===========

                                                  7
                                          
</TABLE>

                                      
<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                                Six Months
                                                              Ended June 30
                                                              -------------
                                                            1998         1997
                                                            ----         ----

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income                                               $(887,664)   $(621,984)
Adjustments to reconcile net income to net cash
         used for operating activities:
         Gain on disposal of subsidiary                    514,415         --
         Losses on disposed subsidiary                      26,418         --
         Depreciation and amortization                      75,500      116,574
         Deferred income taxes                                --        (10,000)
         Deferred rent                                      18,745       27,745
         Inventory reserves                                             200,000
         Changes in operating assets and liabilities:
         Accounts receivable, trade, net                  (142,184)     324,004
         Inventories                                       244,587      151,390
         Other current assets                                7,436      (10,992)
         Other assets                                          987       (1,221)
         Accounts payable                                   (7,765)    (288,568)
         Accrued liabilities                               (61,977)     (39,492)
         Unearned revenue                                 (143,695)     (50,820)
                                                         ---------    ---------
Net cash used for operating activities                    (355,197)    (203,364)
                                                         ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, equipment and leasehold            (1,922)      (5,224)
         improvements                                    ---------    ---------
         
         Net cash used for investing activities             (1,922)      (5,224)
                                                         ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placements of stock                  362,070
Bank line of credit - advances (repayments)                (70,000)       5,000
Net increase (decrease) in Nutek line of credit           (104,086)     152,342
Repayments of long-term debt                               (30,082)     (95,518)
Additional borrowing under long-term debt                     --        100,000
                                                         ---------    ---------
         Net cash provided by financing activities         157,902      161,824
                                                         ---------    ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                       --         (1,468)
                                                         ---------    ---------
NET INCREASE (DECREASE) IN CASH                           (199,217)     (48,232)
CASH AT BEGINNING OF PERIOD                                514,895      723,170
                                                         ---------    ---------
CASH AT END OF PERIOD                                    $ 315,678    $ 674,938
                                                         =========    =========
Supplemental Disclosure:
         Cash paid for:
                  Interest                               $  27,782         --
                  Taxes                                  $    --           --




See notes to financial statements

                                        8
<PAGE>

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

1. Basis of Presentation

The information  furnished herein reflects all  adjustments,  consisting only of
normal recurring adjustments, which are, in the opinion of management, necessary
to a fair  presentation  of the financial  statements for the period  presented.
Interim results are not necessarily indicative of results for a full year.

The  financial  statements  should  be read in  conjunction  with the  financial
statements  and notes thereto  included in the  Company's  annual report on Form
10-KSB for the year ended December 31, 1997.

2. Recent Developments:

Issuance of Preferred Stock
---------------------------

The Company is  authorized to issue up to 5,000,000  shares of preferred  stock,
$.01 par value per share (the "Preferred Shares"), in series to be designated by
the Board of Directors. The Company has issued an aggregate of 670,000 Preferred
Shares,  220,000 of which shares are designated Series "A" Convertible Preferred
Shares  (the  "Series "A"  Preferred  Shares")  and 450,000 of which  shares are
designated  Series "B" Convertible  Preferred  Shares (the "Series "B" Preferred
Shares"),  and may issue additional Preferred Shares from time to time in one or
more series as may be determined  by the Board of  Directors.  The voting powers
and preferences, the relative rights of each such series and the qualifications,
limitations  and  restrictions  thereof  shall be  established  by the  Board of
Directors,  except  that no holder of  Preferred  Shares  shall have  preemptive
rights.  The Series "A" and "B"  Preferred  Shares are not  entitled  to receive
dividends.  The offering  prices of the Series "A" and "B" Preferred  Shares are
$.50 and $1.777 per share, respectively.  Each outstanding Series "A" and Series
"B"  Preferred   Share  is   convertible   by  the  Company  for  no  additional
consideration  into one share of  common  stock,  no par  value  per share  (the
"Conversion Ratio"),  subsequent to July 30 and December 31, 1998, respectively,
and each  Preferred  Share is entitled to one vote at meetings of the  Company's
shareholders  based upon the Conversion Ratio. Upon the voluntary or involuntary
liquidation,  dissolution or winding up of the Company,  the shareholders of the
Series "A" and "B" Preferred Shares are entitled to a liquidation  preference as
to each share in an amount equal to the offering price thereof,  i.e.,  $.50 and
$1.777 in the case of the Series  "A" and "B"  Preferred  Shares,  respectively,
with the Series "A" Preferred  Shares ranking senior to the Series "B" Preferred
Shares.  The Board of  Directors  of the Company may use its  authority to issue
Preferred  Shares to  effect  the  business  purposes  of the  Company  and,  in
addition,  as an  "anti-takeover"  device  as a means of  resisting  a change of
control of the Company.  The Board of  Directors  has no plan to issue any other
series of  Preferred  Shares for the  foreseeable  future  unless  the  issuance
thereof shall be in the best interests of the Company.

Purchase of Building
--------------------

On June 24,  1998 the Company  purchased a building in Macau (a foreign  country
located outside of China) in exchange for 450,000 shares of the Company's Series
B Preferred Stock.  The Series B Preferred Stock has voting rights,  no dividend
rights and is convertible  into 450,000 shares of the Company's  common stock on
December 31, 1998. The building was valued at $800,000.

The building  was  purchased  from PIC  Computers,  Ltd.,  a Macau  Corporation.
Subsequent to this purchase, the building was leased back to PIC Computers, Ltd.
under a five year lease requiring  monthly payments of $8,000.  The lease may be
cancelled after one year if the China jobs are completed (See China Contract).

                                        9

<PAGE>


China Contract
--------------

During this quarter, the Company's  subsidiary,  Dasibi Environmental Corp., was
awarded a $5.2  million  contract  with  China to  install  an  eleven  city air
monitoring  network in China. As a result, the Company entered into an agreement
with PIC Computers,  Ltd., to provide and supervise  three  engineers to perform
work on the Company's behalf under the China contract for $9,000 per month.

Private Placements
------------------

On June 30, 1998, the Company issued 231,256  restricted shares of the Company's
common stock under a private placement, receiving net proceeds of $226,863 after
paying a finders fee of $25,207 plus  warrants to purchase  23,125 shares of the
Company's common stock at $2.20 per share.

On May 8, 1998,  the Company  issued  220,000  shares of the Company's  Series A
Preferred Stock for a purchase price of $.50 per share, resulting in proceeds to
the Company of $110,000. This stock is convertible into 220,000 shares of common
stock after July 30, 1998. The Series A Preferred Stock has voting rights but no
dividend rights.

Options Issued
--------------

In May,  1998 the Company  entered  into a  cancelable  agreement  with a public
relations firm to provide  related  services to the Company for $2,500 per month
plus  options to  purchase  50,000  shares of the  Company's  stock at $2.20 per
share. These options expire May 15, 2001.

Reverse Stock Split
-------------------

During this quarter,  the Company had a 4 to 1 reverse  stock split.  All shares
within these  financial  statements  have been  adjusted to reflect this reverse
stock split.

3. Inventories:

Inventories at June 30, 1998 consisted of the following:

               Raw Materials                      $    773,603
               Work-in-Progress                        126,511
               Finished Goods                          612,003
                                                  ------------
                                                  $  1,512,117
                                                  ============

4. Commitments and Contingencies:

In October 1996, the Company  terminated  its agreement with a public  relations
firm and cancelled  1,300,000  options held by the public  relations  firm.  The
matter is presently  in dispute.  The  probability  or amount of any loss to the
Company cannot be determined at this time.

5. Shareholders' Equity:

Options and Warrants
--------------------

As of June 30, 1998, the Company had 1,090,209 options and warrants  outstanding
at exercise  prices  ranging  from $2.20 to $8.00  which,  if  exercised,  would
generate proceeds to the Company of $4,602,832.

                                       10

<PAGE>


6.       Discontinued Operations:

Nutek, Inc. filed for protection under Chapter 11 of the Federal Bankruptcy Code
in April, 1998 and continued to operate as Debtor in Possession.  In July, 1998,
the  Bankruptcy  Court  ruled that Nutek,  Inc.  was not a going  concern.  As a
result,  Nutek,  Inc.  ceased  operations  and all the operating  assets will be
auctioned in late July to satisfy the secured lender.  Included in the financial
statements  is an  estimate  of the  anticipated  loss from the  disposal of the
assets and  repayment of the  obligations  of this  operation of $780,251.  This
subsidiary accounted for 48% of the 1997 consolidated revenues of the Company.

Effective  February  28, 1998 the Company  disposed of one of its  subsidiaries,
Logan  Research,  Ltd. a private United Kingdom  company  engaged in the design,
manufacture and marketing of medical instrumentation.  This subsidiary accounted
for 7% of the 1997  consolidated  revenues  of the  Company.  The  disposal  was
accomplished  through a return of 100% of LRL's stock to the  original  owner in
exchange for release from a $300,000  note payable,  as well as related  accrued
interest of  $47,250.  As a result,  the Company  realized a gain on disposal of
this operation of $154,575. Prior to the disposal, the Company advanced funds to
this  subsidiary.  These advances are expected to be repaid from a joint venture
relationship between the Company and LRL.

7. Subsequent Events:

a.  Chapter 11

Attempts to sell Nutek, Inc. as a going business failed. Management then decided
that every effort should be made to maximize the liquidated value of fabrication
equipment  and that the  "printed  circuit  board"  portion of Nutek,  Inc.  had
operating value as a vehicle to eventually pay off deficiency  sums, if any, and
unsecured creditors.  Nutek was therefore placed into Chapter 11 reorganization.
The major secured  lender has opposed this filing and at a June 19, 1998 hearing
before  the  Bankruptcy  Court,  prevailed  against  Nutek,  Inc.  in having the
Bankruptcy Code's automatic stay, imposed when the case was filed,  vacated,  to
permit a secured lender sale of the mortgaged  property based  principally  upon
the secured lender's  assertion that the assets of Nutek, Inc. were insufficient
to cover the amount of the secured loans. The assertion was supported by a "new"
appraisal  which  management of Nutek,  Inc. had not seen until the  proceedings
were  commenced  by the secured  lender to vacate the  automatic  stay.  From an
original  1996  appraisal  which  disclosed a forced  liquidation  value for the
mortgaged property of $1,200,000,  the new appraisal indicated an apparent value
of approximately $341,000.  Management believes that there is the possibility of
questionable  activities in the original  1996  purchase of Nutek,  Inc. and the
financing  with the secured  lender and  appraisal  obtained and utilized and is
investigating the role of all parties involved in the acquisition and financing.
An auction  sale has been  scheduled  by the secured  lender for July 28,  1998.
Management  does not believe that the ultimate  determined  amount of deficiency
will have a material  adverse  affect on the  Company  notwithstanding  that the
secured lender commenced a Texas state court action on April 7, 1998 against the
Company by filing of an Original Petition which was never served on the Company,
followed by the filing of a First Amended Original Petition on May 8, 1998 which
was never properly  effected  according to the Company's  retained Texas counsel
and thereafter procured the entry of a Default Judgment against the Company. The
Company had no notice or knowledge of the Texas state court action until July 1,
1998,  when the Company  received  by United  States  Mail,  a copy of a Default
Judgment  against  the  Company  entered in the Texas  state court in the sum of
$766,708.77.  The Company's  retained Texas counsel filed a Notice of Removal of
the Texas state court case to the United States District Court Northern District
of Texas Dallas  Division and has filed a Motion to dismiss and/or quash service
of  process  and to set aside the  Default  Judgment.  The  matter is  presently
pending and has not been determined.

b.  Negotiations regarding sale of Dasibi and LMD.


                                       11
<PAGE>


Low cash  levels  resulting  from  decreasing  sales and net income in the third
quarter of 1997, coupled with increasing cash requirements from Nutek,  prompted
the adoption of a  reorganization  plan by the Board of Directors of the Company
to attempt to raise  capital  through  the sale of some or all of the  Company's
intangible  technology  assets.  In March 1998 the Company began  negotiating an
agreement  to sell  100% of the  stock  of  Dasibi  and LMD to a third  party in
exchange for stock of such party.  The  intention of both parties is to effect a
Company dividend in kind of approximately 40% in stock face value and retain the
balance of stock in the Company.  These negotiations  continue at this date, and
the  transaction,  if  completed,  must be  approved  by a majority  vote of the
outstanding shares of the Company.

If the  transaction  is completed,  the Company will only own two  subsidiaries,
Dasibi  Environmental  Control  Corporation  (DECC) and the non-operating  Nutek
corporation.  Proceeds  from the sale of the balance of stock  remaining  in the
Company should be adequate  funding for  exploitation of DECC's patent "Flue Gas
Purification   System"   granted  in  1996,   contingency   funding   for  Nutek
requirements,  working capital for operation of a planned acquisition of a water
monitoring  instrumentation  company and,  funds to initiate a joint  venture in
China to exploit the new  instrumentation  acquisition  with the Company's joint
venture  partner,  PIC  Computers,  in Macau.  Any stock to be  received  by the
Company in connection with above transaction will be restricted securities under
U. S.  Securities  laws.  The sale of such  stock  must be  registered  with the
Securities  and  Exchange  Commission  or must occur  pursuant to an  applicable
exemption from registration. There can be no assurance that such will occur.

8. Supplemental Disclosure of Noncash Investing and Financing Activity:

During the  quarter,  the Company  purchased a building  for $800,000 by issuing
450,000 shares of Series B Preferred Stock.

Item 2.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULT OF OPERATIONS

General

The Company designs,  manufactures and markets automated  continuous  monitoring
instruments  used to detect and measure  various types of air pollution  through
its wholly-owned subsidiary, Dasibi Environmental  Corp.("Dasibi").  The Company
currently derives the majority of its revenue for sales of Dasibi's  instruments
and their replacement parts, referred to as the "core business".

Until the second  quarter of 1998, the Company  realized  revenue from two other
wholly  owned  subsidiaries,  Nutek  Inc.  ("Nutek")  and  Logan  Research  Ltd.
("Logan").  Due to declining sales and operating  problems the Logan  subsidiary
was sold back to the  original  owner and Nutek  operations  were  discontinued.
These  actions were part of a  reorganization  of the Company  intended to limit
cash drain.

The  reorganization  also  contemplated  selling  Dasibi  on  the  basis  of its
intangible  design  technology  capabilities,  and  restructuring the Company to
pursue new, but related pollution  measurement and control work on an adequately
funded basis.

As of this date,  the  financial  condition  and results  primarily  reflect the
initial  disposition of assets  described  above while the Dasibi  operation has
remained  intact in a downsized,  on-going,  highly  competitive  price pressure
environment.  The sale of Dasibi remains in a negotiation stage which management
believes is very positive for completion.


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<PAGE>


The Company's future  operating  results may be affected by a number of factors,
including;  uncertainties  relative  to  global  economic  conditions;  industry
factors;  the  availability  and cost of  components;  the Company's  ability to
develop,  manufacture and sell its products profitably; the Company's ability to
successfully  increase its market share in its core business while expanding its
product base into other markets; the strength of its distribution  channels; the
Company's  ability to  effectively  manage  expense  growth  relative to revenue
growth in  anticipation of continued  pressure on gross margins,  and whether or
not a sale of its Dasibi subsidiary can be successfully concluded.

RESULTS OF OPERATIONS

Six Months Ended June 30, 1998, versus Six Months Ended June 30, 1997

Net  revenues  decreased  40% from  $2,081,049  during the first half of 1997 to
$1,229,918  during the first half of 1998.  The decrease was  primarily due to a
decrease of Dasibi  revenue,  resulting  from a  continuation  of price pressure
levels realized in the third and fourth quarters of 1997.

Gross margin was 35% for the first half of 1998 versus 22% for the first half of
1997, because the Company downsized in accordance with the indicated revenues of
the third and fourth quarters of 1997.

Selling,  general and administrative expenses decreased $211,140, or 23%, during
the first half of  1998,over  the same  period in 1997,  principally  due to the
downsizing discussed above.

As a result of the foregoing  factors,  net operating  loss decreased from a net
operating loss of ($459,241)  during the six months ended June 30, 1997 to a net
operating loss of ($261,988) during the six months ended June 30, 1998.

Three Months Ended June 30, 1998, versus Three Months Ended June 30, 1997

Net revenues  decreased 28% from $914,407  during the second  quarter of 1997 to
$652,887  during the second quarter of 1998. The decrease was primarily due to a
decrease of $583,000 of Dasibi  revenue,  resulting from a continuation of price
pressure levels realized in the third and fourth quarters of 1997.

Gross  margin  was 11% for the second  quarter of 1998  versus 4% for the second
quarter of 1997, but they do not reflect an accurate comparison since 1997 was a
result of a sharp  decline in  revenues  with no  downsizing  and 1998  includes
start-up expenses for anticipated and awarded contracts.

Selling,  general and administrative expenses decreased $140,218, or 31%, during
the second quarter of 1998, over the same period in 1997, principally due to the
downsizing discussed above.

As a result of the foregoing  factors,  net operating  loss decreased from a net
operating loss of ($432,632)  during the six months ended June 30, 1997 to a net
operating loss of ($257,310) during the three months ended June 30, 1998.

Liquidity and Capital Resources

The  Company  has  historically  financed  its growth  and cash needs  primarily
through borrowings, and the public and private sales of its securities.

During the six months ended June 30, 1998,  operations  depleted  cash  $355,000
which required two private placements totalling $362,000. During the same period
the Nutek  working  capital  line was  reduced by  $104,000,  the Dasibi line of
credit was paid down $70,000 and long-term debt was paid down $30,000  resulting
in a net cash decrease of $199,000.

                                       13

<PAGE>


Working  capital at June 30, 1998 was  $1,801,612,  an increase of $524,516 from
the previous due to the disposition of the Nutek subsidiary.

Dasibi was unable to renew its line of credit with a bank and the existing  line
has been paid down to $70,000 from $200,000, as of June 30, 1998.

As of June 30, 1998 the Company has no access to financing any potential  growth
through  borrowings  and its depressed  stock price  precludes any generation of
cash  through  public or private  sales.  Management  believes  that the current
negotiated  sale  of  Dasibi  would  provide   adequate   funding  to  meet  all
reorganization goals.  Management also believes that it will be able to meet its
current  and  contingent   obligations  with  funds  generated  from  operations
connected with the recently awarded,  twelve month 5 million dollar  (5,000,000)
contract, should the negotiated sale not be successfully concluded.

Inflation

The  Company  believes  that  inflation  has not had a  material  impact  on its
business.

Seasonality
The Company does not believe that its business is seasonal.


                                       14
<PAGE>


PART II  - OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a.) Not applicable

          (b.) The Company did not file any reports on Form 8-K during the three
               months ended June 30, 1998.



                                       15
<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.

                                         POLLUTION RESEARCH AND CONTROL CORP.
                                         ------------------------------------
                                                    (Registrant)


Date:    July 24, 1998                   By: /s/ Albert E. Gosselin Jr
         -------------                      ------------------------------------
                                                 Albert E. Gosselin, Jr.,
                                                 President and Chief Executive
                                                 Officer


Date:   July 24, 1998                    By: /s/ Donald Ford
        -------------                       ------------------------------------
                                                 Donald Ford, Chief Financial
                                                 Officer



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