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 September 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                 October 30, 1998                    2,399,689

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

                                        1

<PAGE>

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


                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

Part I   Financial Information

         Item 1.   Financial Statements:

                           Consolidated Balance Sheet                          3
                           Consolidated Statements of Operations               5
                           Consolidated Statements 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 1.   Legal Proceedings                                          14
         Item 4.   Submission of Matters to a Vote of                         14
                   Security Holders
         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
                                                                       09/30/98
                                                                       --------
CURRENT ASSETS

         Cash                                                         $  365,389

         Marketable securities                                             3,250

         Accounts receivable, trade, less allowance for doubtful         533,055
         accounts of $ 6,381

         Inventories                                                   1,612,981

         Other current assets                                              6,600
                                                                      ----------

         TOTAL CURRENT ASSETS                                          2,521,275
                                                                      ----------

PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, less accumulated depreciation of $177,213                  918,261
                                                                      ----------

OTHER ASSETS

         Advances to joint venture                                       187,854

         Other intangible assets                                          23,509

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

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

TOTAL ASSETS                                                          $3,652,581
                                                                      ==========


See notes to financial statements

                                        3

<PAGE>

                           CONSOLIDATED BALANCE SHEET
                      LIABILITIES AND SHAREHOLDERS' EQUITY
                                   (Unaudited)
                                                                        As of
CURRENT LIABILITIES                                                    9/30/98
-------------------                                                    -------

         Notes payable                                              $   358,125

         Accounts payable                                               224,936

         Accrued liabilities                                            255,416

         Net liabilities of discontinued operations                     449,398
                                                                    -----------


TOTAL CURRENT LIABILITIES                                             1,287,875

DEFERRED RENT                                                            61,769



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

         Series A Preferred Stock, .01 par value,
             220,000,000 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                                         (5,485,063)
         Unrealized gain on marketable securities                         3,250
                                                                    -----------


         TOTAL SHAREHOLDERS' EQUITY                                   2,302,937
                                                                    -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          $ 3,652,581
                                                                    ===========


See notes to financial statements

                                        4

<PAGE>
<TABLE>
<CAPTION>

                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (Unaudited)

                                                                 Three Months
                                                              Ended September 30,
                                                           --------------------------

                                                              1998           1997
                                                           -----------   ------------

<S>                                                        <C>            <C>        
Net Revenues                                               $   944,754    $   393,233
Cost of goods sold                                             493,412        347,236
                                                           -----------    -----------
         Gross profit                                          451,342         45,997
                                                           -----------    -----------

Operating expenses:
         Selling, general and administrative expenses          513,687        499,432
         Research and development                                3,780          9,309
                                                           -----------    -----------
                  Total operating expenses                     517,467        508,741
                                                           -----------    -----------
         Loss from operations                                  (66,125)      (462,744)
                                                           -----------    -----------

Other Income (Expense)
         Other income (expense)                                 (2,500)        76,880
         Interest Income                                         5,990          1,152
         Interest expense                                       (7,935)        (4,787)
                                                           -----------    -----------
                  Total Other Income (Expense)                  (4,445)        73,245
                                                           -----------    -----------


Income (Loss) Before Income Taxes                              (70,570)      (389,499)
                                                           -----------    -----------
Provision (Benefit) For Income Taxes:
         Current                                                  --             --
         Deferred                                                 --             --
            Total Provision (Benefit) for Income Taxes            --             --
                                                           -----------    -----------

Income (loss) from continuing operations                   $   (70,570)   $  (389,499)

Discontinued operations
         Income (Loss) from discontinued operations             (2,712)       (94,037)
         Gain on disposal of discontinued operations          (503,997)          --
                                                           -----------    -----------
                                                              (501,285)       (94,037)
                                                           -----------    -----------

Net Income (Loss)                                          $  (571,855)   $  (483,536)
                                                           ===========    ===========

Earnings per share
         Net Income (loss) per share - basic and diluted
                  Continuing operations                    $      (.03)   $      (.18)
                                                           ===========    ===========
                  Discontinued operations                  $      (.21)   $      (.04)
                                                           ===========    ===========
Weighted average number of common
and common equivalent shares outstanding                     2,399,689      2,168,433
                                                           ===========    ===========


See notes to financial statements

                                          5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (Unaudited)

                                                                 Nine Months
                                                              Ended September 30,
                                                           --------------------------

                                                              1998           1997
                                                           -----------    -----------

<S>                                                        <C>            <C>        
Net Revenues                                               $ 2,174,672    $ 2,474,282
Cost of goods sold                                           1,288,094      1,972,022
                                                           -----------    -----------
         Gross profit                                          886,578        502,260

Operating expenses:
         Selling, general and administrative expenses        1,189,877      1,386,762
         Research and development                               12,908         32,532
                                                           -----------    -----------
         Total operating expenses                            1,202,785      1,419,294
                                                           -----------    -----------
         Loss from operations                                 (316,207)      (917,034)

Other Income (Expense)
         Other income (expense)                                 (2,500)        76,880
         Interest Income                                         6,029          3,268
         Interest expense                                      (19,879)       (11,854)
                                                           -----------    -----------
                  Total Other Income (Expense)                 (16,350)        68,294
                                                           -----------    -----------

Income (Loss) Before Income Taxes                             (332,557)      (848,740)

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

Income (loss) from continuing operations                   $  (332,557)   $  (848,740)

Discontinued operations
         Loss from discontinued operations                    (108,550)      (256,780)
         Loss on disposal of discontinued operations        (1,018,411)          --
                                                           -----------    -----------
                                                            (1,126,961)      (256,780)
                                                           -----------    -----------


Net Income (Loss)                                          ($1,459,518)   ($1,105,520)
                                                           ===========    ===========
Earnings per share
         Net Income (loss) per share - basic and diluted
             Continuing operations                         $      (.15)   $      (.39)
                                                           ===========    ===========
             Discontinued operations                       $      (.50)   $      (.12)
                                                           ===========    ===========
Weighted average number of common
and common equivalent shares outstanding                     2,245,518      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 Nine Months Ended September 30, 1998

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

<S>                   <C>         <C>             <C>        <C>             <C>         <C>        
BALANCE
01/01/98                  --     $      --            --     $      --       2,168,433   $ 6,588,980

Issuance of
stock in
private
placements,
net of
offering
costs                  880,000       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 nine
months                    --            --            --            --            --            --   



Balance
9/30/98                880,000   $   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                   
01/01/98           $   (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 nine
months                    --             --      (1,459,518)          --             --       (1,459,518)

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


Balance
9/30/98            $   (86,857)   $   145,764   $(5,485,063)   $     3,250    $      --      $ 2,302,937
                   ===========    ===========   ===========    ===========    ===========    ===========



                                                       7
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                                Nine Months
                                                            Ended September 30
                                                        --------------------------

                                                            1998           1997
                                                            ----           ----
<S>                                                     <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)                                       $(1,459,518)   $(1,105,520)
Adjustments to reconcile net income to net cash
   used for operating activities:
         Loss on disposal of subsidiary                   1,018,411           --
         Losses on disposed subsidiary                       26,418           --
         Depreciation and amortization                       82,775        172,578
         Deferred income taxes                                 --          (10,000)
         Deferred rent                                       15,112         27,112
         Inventory reserves                                    --          200,000
         Changes in operating assets and liabilities:
         Accounts receivable, trade, net                     44,545        388,710
         Inventories                                        143,723        158,056
         Other current assets                                 8,177         11,940
         Other assets                                           987            634
         Accounts payable                                   (60,326)      (390,884)
         Accrued liabilities                                (12,620)       (28,926)
         Unearned revenue                                  (143,695)       (50,820)
                                                        -----------    -----------
Net cash used for operating activities                     (336,011)      (627,120)
                                                        -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment                        (1,919)       (12,491)
Proceeds from auction of equipment                          165,064           --
                                                        -----------    -----------
         Net cash used for investing activities             163,145        (12,491)
                                                        -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placements of stock                   362,070           --
Short-term borrowings                                       101,000           --
Bank line of credit - advances                              117,125         18,450
Net increase (decrease) in Nutek line of credit            (389,123)       133,182
Repayments of long-term debt                               (167,712)       (53,752)
Additional borrowing under long-term debt                      --          100,000
                                                        -----------    -----------
         Net cash provided by financing activities           23,360        197,880
                                                        -----------    -----------
EFFECT OF EXCHANGE RATE CHANGES
   ON CASH                                                     --           (1,524)
                                                        -----------    -----------
NET INCREASE (DECREASE) IN CASH                            (149,506)      (443,255)
CASH AT BEGINNING OF PERIOD                                 514,895        723,170
                                                        -----------    -----------
CASH AT END OF PERIOD                                   $   365,389    $   279,915
                                                        ===========    ===========
Supplemental Disclosure:
         Cash paid for:
                  Interest                              $    19,879    $   204,697
                  Taxes                                 $      --      $      --


                                        8
</TABLE>

<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:

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
October 30, 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).

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

During the second 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, the
"PIC Agreement".

The "PIC  Agreement"  is  expected to  commence  with the first  China  shipment
expected to be in the first quarter of 1999.

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  880,000  shares of the Company's  Series A
Preferred  Stock for a purchase price of $.125 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.  The  Preferred  Stock,  as of this date,  has not been
converted.

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.
                                                
                                        9

<PAGE>


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

During the nine months ended  September 30, 1998, the Company  declared a 4 to 1
reverse stock split.  All shares  within these  financial  statements  have been
adjusted to reflect this reverse stock split.

Short-Term Borrowing
--------------------

During the quarter ended  September 30, 1998, the Company  borrowed  $101,000 at
the rate of 8% per annum due October 30, 1998 from Turbodyne Technologies,  Inc.
for the China project expenses.

3.   Inventories:

Inventories at September 30, 1998 consisted of the following:

                         Raw Materials      $  853,603
                         Work-in-Progress      132,511
                         Finished Goods        626,867
                                            ----------
                                            $1,612,981
                                            ==========

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 still  presently in dispute.  The probability or amount of any loss to
the Company cannot be determined at this time.

The  Company  has  provided  approximately  $450,000  of  net  liabilities  from
discontinued  operations  (See  "Discontinued  Operations")  with respect to the
disposition of Nutek.

5.   Shareholders' Equity:

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

As of  September  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.

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  were
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  $1,018,411,an
increase of $349,422 over the prior quarter as a result of lesser  proceeds than
anticipated  from the auction of  operating  assets and an increase in estimated
costs  of  the  disposal.   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


                                       10

<PAGE>


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 was held by the  secured  lender on July 28,  1998.  On July 1,
1998, 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 has 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,  however the Default  Judgment  described above has
been decreased to approximately  $400,000. The Company has established a reserve
of $450,000 for this matter.

b. Negotiations regarding sale of Dasibi and LMD.

In March 1998 the Company  began  negotiating  an  agreement to sell 100% of the
stock of Dasibi and LMD to Turbodyne  Technologies,  Inc. A definitive agreement
was exercised in August and subsequently  repudiated by Turbodyne.  As a result,
the Company has instituted suit against Turbodyne Technologies, Inc.


8.   Supplemental Disclosure of Noncash Investing and Financing Activity:

During the nine  months  ended  September  30,  1998,  the  Company  purchased a
building for $800,000 by issuing 450,000 shares of Series B Preferred Stock.


                                       11

<PAGE>


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.

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  reorganization  plan has been  expanded  to  attempt to raise
operating and expansion capital in the amount of $1,000,000 to $2,000,000.

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

Nine Months Ended  September  30, 1998,  versus Nine Months Ended  September 30,
1997

Net revenues  decreased 12% from  $2,474,282 in 1997 to $2,174,672  during 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  41% in  1998  versus  20%  for  1997,  because  the  Company
experienced an easing of competitive pressures in the instrument market.

Selling,  general and administrative  expenses decreased $196,885, or 14% during
the nine month period ended  September  30, 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 ($848,740)  during 1997 to a net operating loss of ($332,557)
for the same period of 1998.

                                       12

<PAGE>



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

Net revenues  increased  140% from $393,233  during the third quarter of 1997 to
$944, 754 during the third quarter of 1998. The increase was primarily due to an
apparent  easing of  competitive  price  pressures in the  pollution  monitoring
instrument market. It is too early to expect this easing to continue.

Gross  margin  was 48% for the third  quarter  of 1998  versus 12% for the third
quarter of 1997,  due to the  apparent  easing of  competitive  price  pressures
indicated above.

Selling,  general and administrative  expenses increased $14,255,  or 3%, during
the third  quarter of 1998,  over the same period in 1997,  in  anticipation  of
shipments under the China Contract.  See Note 2 to Financial  Statements - China
Contract.

As a result of the foregoing  factors,  net operating  loss decreased from a net
operating loss of ($389,499) during the third quarter of 1997 to a net operating
loss of ($70,570) during the third quarter of 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 nine months ended  September  30, 1998,  operations  depleted cash by
$336,011  which  was  partially  offset  by  two  private  placements  totalling
$362,000.  During the same period the Nutek working  capital line was reduced by
$389,123,  the  Dasibi  line of credit  was  increased  to  $117,125  due to the
factoring of receivables, and long-term debt was paid down by $167,712 resulting
in a net cash decrease of $149,506.

Working capital at September 30, 1998 was $1,233,400,  a decrease from September
30, 1997 of $715,809, 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 off. Instead, Dasibi obtained a new credit facility which involves
factoring receivables. The new line is $500,000 where there is a 1% fee for each
factored  receivable,  and a monthly fee of 2.25% of the amount  advanced  still
outstanding.

Management  believes  that it will be able to meet its  current  and  contingent
obligations  with  funds  generated  from  operations  connected  with the China
Contract  provided the Company is  successful  in obtaining  financing  for such
Contract.

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.


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<PAGE>




PART II  - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In August 1998, the Company  executed an agreement with Turbodyne  Technologies,
Inc.  which was  subsequently  repudiated by Turbodyne.  On October 2, 1998, the
Company filed suit in the Superior Court of the State of California,  which case
is entitled Pollution Research and Control Corp., Dasibi Environmental Corp. and
Logan Medical  Devices v. Turbodyne  Technologies,  Inc. and Does 1 through 100,
inclusive, Case No. BC 198 521. The complaint alleges that Turbodyne breached an
agreement to purchase the Company's two subsidiaries, Dasibi Environmental Corp.
and Logan Medical Devices when Turbodyne willfully  repudiated its contract with
the Company shortly after signing and delivering it. The Complaint  alleges that
Turbodyne's actions constituted breach of contract,  a breach of the covenant of
good faith and fair dealing,  intentional interference with prospective business
advantage and negligent  interference with prospective  business advantage.  The
Complaint seeks compensatory damages, punitive damages and declaratory relief.

See Note 7a "Subsequent  Events" concerning legal proceedings  regarding closure
of the Nutek subsidiary.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a)  On October 15, 1998 the Company's  Annual Meeting of Shareholders  was
          held. The following  members of the Board of Directors were re-elected
          with the following vote:

                Name                      Vote For             Withheld
                ----                      --------             --------
                Albert E. Gosselin        1,617,689            36,591
                Gary L. Dudley            1,618,399            35,881
                Craig E. Gosselin         1,615,398            38,882
                Barbara L. Gosselin       1,617,023            37,257
                Marcia Smith              1,618,399            35,881
                Barry Soltani             1,618,399            35,881

          The  one-for-four  reverse  stock  split  pursuant to which every four
          shares of common stock of the Company  outstanding on May 15, 1998 was
          converted  into one share of Common  Stock,  was ratified and approved
          with the following vote:

                 For                1,588,397
                 Against               55,736
                 Abstain               10,147

          Additionally,  the  firm  of AJ.  Robbins,  P.C.  was  elected  as the
          Company's  auditors for the fiscal year ending  December 31, 1998 with
          the following vote:

                 For                1,537,058
                 Against              107,673
                 Abstain                9,549

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Not applicable

     (b)  The Company filed one report on Form 8-K during the three months ended
          September 30, 1998 which  described the  repudiation  of the Turbodyne
          Agreement.  See "Note 7 to the  Financial  Statements  -  Negotiations
          regarding sale of Dasibi and LMD."

                                       14

<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:    October 30, 1998               By:  /s/ Albert E. Gosselin
         ----------------                    -----------------------
                                             Albert E. Gosselin, Jr., President
                                             and Chief Executive Officer


Date:   October 30, 1998                By: /s/ Donald Ford
        ----------------                    ---------------
                                            Donald Ford, Chief Financial Officer



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