<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q

             Quarterly Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                    For the Quarter Ended September 30, 1998

                         Commission file number: 0-23156

                                  CONSEP, INC.
             (Exact name of registrant as specified in its charter)







               Oregon                                   93-0874480
               ------                                   ----------
     (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                  Identification No.)

                    213 S.W. Columbia Street, Bend, OR    97702
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (541) 388-3688






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 the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                                  [X] Yes [ ] No

               Number of shares of common stock outstanding as of
                                November 6, 1998:
                   9,667,357 shares, $.01 par value per share
                   ------------------------------------------



<PAGE>   2

                                  CONSEP, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                            PAGE NO.
                                                            --------
<S>                                                         <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets as of
          September 30, 1998 and December 31, 1997              3
         
         Consolidated Statements of Operations for the
          three months ended September 30, 1998 and 1997        4
         
         Consolidated Statements of Operations for the
          nine months ended September 30, 1998 and 1997         5
         
         Consolidated Statements of Cash Flows for the
          nine months ended September 30, 1998 and 1997         6
         
         Notes to Consolidated Financial Statements             7

Item 2.  Management's Discussion and Analysis of

         Financial Condition and Results of Operations         10
         

PART II. OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K                      17

Signatures                                                     18
</TABLE>



                                       2
<PAGE>   3

                         PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                         CONSEP, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,               DECEMBER 31,
                                                                         1998                       1997
                                                                     ------------                ------------
                                                                                   (UNAUDITED)
<S>                                                                  <C>                         <C>
ASSETS

Current assets:
   Cash and cash equivalents                                         $    767,961                $  1,615,773
   Short-term investments                                                  65,284                      69,334
   Accounts receivable, net                                             7,390,212                   4,733,525
   Other receivables                                                      616,647                     458,283
   Inventories, net (note 2)                                            9,070,533                   9,316,144
   Prepaid expenses                                                       448,957                     372,023
                                                                     ------------                ------------

          Total current assets                                         18,359,594                  16,565,082

Property, plant and equipment, net                                      5,555,456                   5,520,640
Intangible assets, net                                                  1,427,647                   1,519,344
Goodwill, net                                                           1,893,204                   2,014,874
Notes receivable and other assets                                          59,093                      57,620
                                                                     ------------                ------------

          Total assets                                               $ 27,294,994                $ 25,677,560
                                                                     ============                ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Bank lines                                                        $  3,652,960                $  1,492,973
   Accounts payable                                                     5,096,612                   4,581,462
   Current portion of notes and leases payable                            489,648                     559,272
   Accrued liabilities                                                  1,311,038                     925,568
   Customer deposits                                                       59,122                     734,148
                                                                     ------------                ------------

          Total current liabilities                                    10,609,380                   8,293,423

Notes and leases payable, excluding current maturities                  2,100,822                   2,148,119
Mandatory stock warrant obligation                                         19,500                      19,500
                                                                     ------------                ------------

          Total liabilities                                            12,729,702                  10,461,042

Shareholders' equity:
   Common stock                                                            96,674                      94,602
   Additional paid-in capital                                          44,240,553                  44,313,127
   Foreign currency translation adjustment                               (123,660)                    (13,590)
   Accumulated deficit                                                (29,648,275)                (29,177,621)
                                                                     ------------                ------------

          Total shareholders' equity                                   14,565,292                  15,216,518
                                                                     ------------                ------------

          Total liabilities and shareholders' equity                 $ 27,294,994                $ 25,677,560
                                                                     ============                ============
</TABLE>



See accompanying notes to consolidated financial statements



                                       3
<PAGE>   4

                         CONSEP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                        THREE MONTHS ENDED
                                                                                -----------------------------------
                                                                                SEPTEMBER 30,          SEPTEMBER 30,
                                                                                    1998                   1997
                                                                                ------------           ------------
                                                                                             (UNAUDITED)
<S>                                                                             <C>                    <C>         
REVENUES
   Proprietary products                                                         $  2,329,164           $  2,769,892
   Distribution products                                                           8,307,760              6,877,718
                                                                                ------------           ------------

          Total revenues                                                          10,636,924              9,647,610
                                                                                ------------           ------------

COST OF REVENUES
   Proprietary products                                                            1,426,656              1,865,285
   Distribution products                                                           6,711,015              5,739,866
                                                                                ------------           ------------

          Total cost of revenues                                                   8,137,671              7,605,151
                                                                                ------------           ------------

          Gross margin                                                             2,499,253              2,042,459
                                                                                ------------           ------------

OPERATING EXPENSES (note 4)
   Research and development                                                          249,552                285,591
   Selling, general and administrative                                             1,545,366              1,585,031
   Distribution                                                                    1,077,553                848,759
                                                                                ------------           ------------

          Total operating expenses                                                 2,872,471              2,719,381
                                                                                ------------           ------------

          Operating loss                                                            (373,218)              (676,922)
                                                                                ------------           ------------

OTHER INCOME (EXPENSE)
   Interest income                                                                    45,582                 40,730
   Interest expense                                                                 (191,123)              (156,365)
   Other, net                                                                        (12,396)               101,923
                                                                                ------------           ------------

          Net other expense                                                         (157,937)               (13,712)
                                                                                ------------           ------------

          Net loss                                                              $   (531,155)          $   (690,634)
                                                                                ============           ============

Basic and diluted net loss per share (note 5)                                   $      (0.06)          $      (0.07)
                                                                                ============           ============

Weighted average number of shares used
in the computation of (note 5):
   Basic earnings per share                                                        9,664,091              9,455,881
   Diluted earnings per share                                                      9,664,091              9,455,881
                                                                                ============           ============
</TABLE>



See accompanying notes to consolidated financial statements



                                       4
<PAGE>   5

                         CONSEP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                         NINE MONTHS ENDED
                                                                                -----------------------------------
                                                                                SEPTEMBER 30,          SEPTEMBER 30,
                                                                                    1998                   1997
                                                                                ------------           ------------
                                                                                            (UNAUDITED)
<S>                                                                             <C>                    <C>         
REVENUES
   Proprietary products                                                         $  9,748,950           $ 12,157,681
   Distribution products                                                          23,665,699             22,095,804
                                                                                ------------           ------------

          Total revenues                                                          33,414,649             34,253,485
                                                                                ------------           ------------

COST OF REVENUES
   Proprietary products                                                            6,211,643              7,252,970
   Distribution products                                                          18,848,570             18,092,117
                                                                                ------------           ------------

          Total cost of revenues                                                  25,060,213             25,345,087
                                                                                ------------           ------------

          Gross margin                                                             8,354,436              8,908,398
                                                                                ------------           ------------

OPERATING EXPENSES (note 4)
   Research and development                                                        1,074,360                899,706
   Selling, general and administrative                                             4,128,378              5,005,301
   Distribution                                                                    3,257,892              2,680,788
   Write down of manufacturing facility                                                   --                175,000
                                                                                ------------           ------------

          Total operating expenses                                                 8,460,630              8,760,795
                                                                                ------------           ------------

          Operating income (loss)                                                   (106,194)               147,603
                                                                                ------------           ------------

OTHER INCOME (EXPENSE)
   Interest income                                                                   108,789                 92,727
   Interest expense                                                                 (482,761)              (327,068)
   Other, net                                                                          9,512                310,107
                                                                                ------------           ------------

          Net other income (expense)                                                (364,460)                75,766
                                                                                ------------           ------------

          Net income (loss)                                                     $   (470,654)          $    223,369
                                                                                ============           ============

Basic and diluted net income (loss) per share (note 5)                          $      (0.05)          $       0.02
                                                                                ============           ============

Weighted average number of shares used
in the computation of (note 5):
   Basic earnings per share                                                        9,625,957              9,447,867
   Diluted earnings per share                                                      9,625,957              9,531,108
                                                                                ============           ============
</TABLE>



See accompanying notes to consolidated financial statements



                                       5
<PAGE>   6

                         CONSEP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                      NINE MONTHS ENDED
                                                                              ---------------------------------
                                                                              SEPTEMBER 30,         SEPTEMBER 30,
                                                                                  1998                  1997
                                                                              -----------           -----------
                                                                                         (UNAUDITED)
<S>                                                                           <C>                   <C>        
OPERATING ACTIVITIES
   Net income (loss)                                                          $  (470,654)          $   223,369
   Adjustments to reconcile net income (loss) to
      net cash used in operating activities:
         Depreciation and amortization                                            959,996               864,384
         Provision for bad debts                                                  267,295                95,757
         Inventory reserve                                                        111,535                84,884
         Loss on disposal of equipment                                              1,636                 3,016
         Other non-cash items                                                      82,939               185,684
         Changes in assets and liabilities:
            Short-term investments                                                  4,050                   500
            Accounts receivable                                                (2,971,220)           (4,376,317)
            Other receivables                                                    (158,333)             (556,581)
            Inventories                                                            99,844              (649,598)
            Prepaid expenses                                                      (89,092)              702,817
            Accounts payable                                                      562,181               373,410
            Accrued liabilities                                                   388,474               292,237
            Other assets                                                            1,263                 6,461
            Customer deposits                                                    (675,026)             (234,746)
                                                                              -----------           -----------

               Net cash used in operating activities                           (1,885,112)           (2,984,723)
                                                                              -----------           -----------

INVESTING ACTIVITIES
   Acquisition of intangible assets                                              (115,503)             (144,031)
   Acquisition of property, plant and equipment                                  (601,879)           (1,085,220)
   Additional costs related to acquisitions of subsidiaries                      (177,744)                    0
   Proceeds from sale of property, plant and equipment                             10,500                 1,000
   Issuance of notes receivable, net of payments received                          (3,479)              287,867
                                                                              -----------           -----------

               Net cash used in investing activities                             (888,105)             (940,384)
                                                                              -----------           -----------

FINANCING ACTIVITIES
   Increase in bank lines                                                       2,159,977             2,577,340
   Proceeds from issuance of notes payable                                        157,359               250,000
   Principal payments on notes payable                                           (418,791)             (326,127)
   Net proceeds from issuance of common stock                                      79,497                58,749
                                                                              -----------           -----------

               Net cash provided by financing activities                        1,978,042             2,559,962
                                                                              -----------           -----------

               Effect of exchange rate changes on cash
                        and cash equivalents                                      (52,637)                 (717)
                                                                              -----------           -----------

               Net decrease in cash and cash equivalents                         (847,812)           (1,365,862)

Cash and cash equivalents at beginning of period                                1,615,773             2,443,508
                                                                              -----------           -----------

Cash and cash equivalents at end of period                                    $   767,961           $ 1,077,646
                                                                              ===========           ===========
</TABLE>



See accompanying notes to consolidated financial statements



                                       6
<PAGE>   7

                                  CONSEP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



NOTE 1 - BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. However, certain
information or footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the statements include all
adjustments necessary (which are of a normal and recurring nature) for the fair
presentation of the results of the interim periods presented. These financial
statements should be read in conjunction with the Company's audited consolidated
financial statements for the year ended December 31, 1997, as included in the
Company's 1997 Annual Report to Shareholders.


NOTE 2 - INVENTORIES

Inventories, stated at the lower of cost or market, consist of:

<TABLE>
<CAPTION>
                                   September 30,    December 31,
                                       1998             1997
                                    ----------       ----------
<S>                                <C>              <C>       
Raw materials                       $1,658,247       $1,998,509
Finished goods - proprietary         4,299,901        4,640,578
Finished goods - distribution        3,708,242        3,227,485
                                    ----------       ----------
                                     9,666,390        9,866,572
Less reserve for obsolescence          595,857          550,428
                                    ----------       ----------

                                    $9,070,533       $9,316,144
                                    ==========       ==========
</TABLE>


NOTE 3 - BANK LINES

The Company has operated under a $7.5 million bank line of credit which matures
in December 1998 and is secured by substantially all of the Company's current
assets. This line of credit has been reduced to $5.0 million from the $7.5
million originally available. Maximum borrowings under the credit line cannot
exceed 70% of eligible accounts receivable and between 40% and 50% of eligible
inventory from certain of the Company's distribution operations. Under the terms
of the credit agreement, the Company is required to maintain certain financial
ratios and other financial conditions. At September 30, 1998, $3,653,000 was
outstanding under this line of credit and the Company was not in compliance with
the profitability and the quick ratio covenants. The Company has obtained a
waiver of compliance for the quarter ended September 30, 1998.



                                       7
<PAGE>   8

NOTE 4 - OPERATING EXPENSES

Research and development and selling, general and administrative expenses are
allocated to the Company's proprietary product operations. Distribution expenses
consist entirely of selling, general and administrative costs of the Company's
distribution operations.


NOTE 5 - NET INCOME (LOSS) PER COMMON SHARE

For the three and nine months ended September 30, 1998 and 1997, net income
(loss) per common share is based upon the weighted average number of common
shares outstanding during each period, with diluted net income (loss) per share
including the effect of potentially dilutive common shares.

Potentially dilutive common shares related to stock options are anti-dilutive in
a net loss situation and, therefore, were not included in the diluted net loss
per share in the accompanying financial statements for the three months ended
September 30, 1998 and 1997 and for the nine months ended September 30, 1998.

NOTE 6 - COMPREHENSIVE INCOME

During the first quarter of 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income" which establishes standards for the reporting and display
of comprehensive income and its components. The following is a reconciliation of
net income to comprehensive income:

<TABLE>
<CAPTION>
                                                          Three Months Ended                 Nine Months Ended
                                                       --------------------------        --------------------------
                                                       Sept. 30,        Sept. 30,        Sept. 30,        Sept. 30,
                                                         1998             1997             1998             1997
                                                       ---------        ---------        ---------        ---------
<S>                                                    <C>              <C>              <C>              <C>      
Net income (loss)                                      $(531,155)       $(690,634)       $(470,654)       $ 223,369
   Other comprehensive income (loss), net of tax
      Foreign currency translation adjustments           (64,854)           2,950         (110,069)          (7,322)
                                                       ---------        ---------        ---------        ---------

Comprehensive income (loss)                            $(596,009)       $(687,684)       $(580,723)       $ 216,047
                                                       =========        =========        =========        =========
</TABLE>


NOTE 7 - SUPPLEMENTAL STATEMENTS OF CASH FLOW DISCLOSURES

Cash paid for interest and income taxes was as follows:

<TABLE>
<CAPTION>
       Nine Months Ended                                                  Income
         September 30,                              Interest               Taxes
         -------------                              --------               -----
<S>                                                <C>                 <C>
            1998                                   $  476,726          $      7,008
            1997                                   $  333,202          $     13,431
</TABLE>



                                       8
<PAGE>   9

Following is a summary of non-cash investing and financing activities of the
Company for the nine months ended September 30, 1998 and 1997:

          During the nine months ended September 30, 1998, the Company acquired
          vehicles for $142,003 through the issuance of notes payable.

          During the nine months ended September 30, 1997, the Company acquired
          equipment and vehicles for $208,406 through the issuance of notes and
          leases payable. In June 1997, the Company completed the purchase of
          its headquarters and manufacturing facility which was partially
          financed by a $1,125,000 note payable to a bank.

          In addition, during the nine months ended September 30, 1997, as a
          result of the Company's intention to sell its unfinished specialty
          chemicals manufacturing plant in Alachua, Florida, the Company
          recorded a $175,000 write down to adjust the facility's carrying value
          to the estimated fair market value.


NOTE 8 - NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". The
Statement changes the way public companies report segment information in annual
financial statements and also requires those companies to report selected
segment information in interim financial reports to shareholders. The Company
plans to adopt the statement for the year ended December 31, 1998. At this time
the impact on the Company's consolidated financial statements is not known.

On April 3, 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" (SOP
98-5). SOP 98-5 requires that the costs of start-up activities, including
organization costs, be expensed as incurred. SOP 98-5 is effective for financial
statements for fiscal years beginning after December 13, 1998. The impact of
adopting SOP 98-5 will not be material to the Company's consolidated financial
statements.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The adoption of this Statement will not have a
material impact on the Company's consolidated financial statements.

NOTE 9 - MERGER

Previously, the Company announced its intent to merge with Verdant Brands, Inc.
(formerly Ringer Corporation), in a .95 for one stock swap. On October 26, 1998,
Verdant Brands, Inc. completed the registration of its common shares, which are
to be issued in connection with the Company's proposed merger with Verdant
Brands, Inc. The Securities and Exchange Commission permitted the registration
of those shares, filed on Form S-4, to become effective October 22, 1998.
Consep, Inc. and Verdant Brands, Inc. have distributed a joint proxy statement
to their respective shareholders. Assuming shareholders of both companies
approve the merger, the transaction is expected to close on or about December 7,
1998. In addition to shareholder approval by the shareholders of both companies,
the proposed merger is subject to applicable third party consents and approvals.



                                       9
<PAGE>   10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW
Consep derives its revenues from the sale of its proprietary products to the
commercial agriculture and consumer home, lawn and garden markets and from sales
by its distribution subsidiaries of products produced by other manufacturers,
including both biorational insect control products and conventional toxic
pesticides as well as fertilizers and farm supplies. The Company's primary focus
is the development of proprietary products and expansion of the markets for
those products. A significant element of the Company's strategy for the
commercialization of its proprietary commercial agriculture products has been to
acquire distribution operations in key agricultural regions and to introduce its
proprietary products through those operations. In addition, the Company
distributes a line of consumer products, based on natural oils, to repel biting
insects. These insect repellent products, which are manufactured by, and are the
proprietary products of, a third party, are being marketed on an exclusive basis
in the United States under the Company's Blocker label as part of its consumer
proprietary product line.

For the three months ended September 30, 1998, the Company recorded a net loss
of $531,000 compared to a net loss of $691,000 in the corresponding period of
1997. Included in the net loss for the quarter was $132,000 in transaction
expenses related to the proposed merger with Verdant Brands, Inc. For the nine
months ended September 30, 1998, the Company recorded a net loss of $471,000
compared to net income of $223,000 in the corresponding period of 1997. The net
loss for the nine months ended September 30, 1998 includes an expense of
$327,000 for scale-up and development costs associated with the production of
the Company's first batch of pheromones produced using a new proprietary
synthesis route. In addition, the results from the nine months ended September
30, 1997 included an accrual of $320,000 that lowered the Company's cost of
goods sold in anticipation of an insurance settlement from the fire that
destroyed the Company's Farchan manufacturing facility. $220,000 of this accrual
was reversed in the Company's fiscal 1997 year end results after settlement
discussions were terminated and the Company filed a lawsuit against its
insurance carrier.

Since its inception, Consep has funded its growth primarily through equity
financings. Funds from these financings have allowed the Company to build its
organization, develop and register proprietary products for both the commercial
agriculture and consumer home, lawn and garden markets, acquire distribution
operations for the introduction of its commercial agriculture products and
expand its sales efforts through both domestic and international channels of
distribution.

The Company has incurred annual operating losses since its inception in 1984.
The Company expects to incur an annual operating loss for 1998. The Company
believes annual profitability will be dependent on continued growth of revenues,
maintaining or strengthening gross margins and controlling the growth of
operating expenses. There can be no assurance that the Company will become
profitable on an annual basis.

The Company's business is seasonal with its highest revenues historically being
recognized in the first and second quarters of each year and its lowest revenues
being recognized in the third and fourth quarters of each year. This seasonality
coincides with the commercial growing season in the Northern Hemisphere and, to
a lesser extent, the consumer home, lawn and garden buying season. The Company
anticipates this seasonal profile will continue with a slight shift to third and
fourth quarter revenues as sales to international markets and sales of new
non-seasonal products increase. In contrast to revenues, many of the Company's
operating expenses are largely independent of the quarterly selling cycles. As a
result, operating expenses will generally represent a higher percentage of
revenues in the 



                                       10
<PAGE>   11

third and fourth quarters as compared to the first two quarters and the Company
may experience a loss in the third and fourth quarters of an otherwise
profitable year.

RESULTS OF OPERATIONS

REVENUES. Total revenues for the three months ended September 30, 1998 increased
10.3% to $10.6 million from $9.6 million in the corresponding period of 1997.
For the nine months ended September 30, 1998, total revenues decreased 2.4% to
$33.4 million from $34.3 million in the corresponding period of 1997. Revenues
from the sale of proprietary products decreased 15.9% during the three months
ended September 30, 1998 to $2.3 million from $2.8 million in the corresponding
period of 1997. For the nine months ended September 30, 1998, revenues from the
sale of proprietary products were $9.7 million, a decrease of 24.7% from
proprietary product revenues of $12.2 million recorded in the comparable period
of 1997. Revenues from the Company's distribution operations increased 20.8%
during the three months ended September 30, 1998 to $8.3 million from $6.9
million in the corresponding period of 1997. For the nine months ended September
30, 1998, revenues from the Company's distribution operations increased 7.1% to
$23.7 million from $22.1 million in the corresponding period of 1997.

The decrease in proprietary product revenues for the three months and nine
months ended September 30, 1998 was attributable to decreases in revenues for
the Company's specialty chemicals operations and commercial agriculture
products. In addition, the decrease in proprietary product revenues for the nine
months ended September 30, 1998 was also impacted by a reduction in revenues for
the Company's consumer products.

Revenues from the sale of commercial agriculture products decreased $108,000 and
$690,000, or 9.0% and 15.9%, respectively, for the three months and nine months
ended September 30, 1998 as compared to the corresponding periods of 1997. The
decreases were primarily attributable to the same cooler and wetter weather
conditions in California, Florida, the southwest United States and Mexico, as
previously reported in the first and second quarters of 1998, that resulted in
lower insect populations in those regions. In addition to the cooler and wetter
weather, sales of the Company's product to control peach twig borer ("CheckMate
PTB") were lower in the three months and nine months ended September 30, 1998 as
compared to the corresponding periods in 1997, as a result of a shortage in the
supply of pheromone for this product. The pheromone supply shortage was due to
production delays related to the process scale-up in the Company's initial
production of this pheromone by a contract manufacturer using a new proprietary
synthesis route.

Revenues from the sale of consumer products from the Company's SureFire and
Blocker line of products in the United States and Chemfree products in Canada
increased by $197,000, or 1.9%, for the three months ended September 30, 1998 as
compared to the corresponding period of 1997. For the nine months ended
September 30, 1998, consumer product revenues decreased $813,000, or 11.9%, as
compared to the corresponding period in 1997. The increase in consumer product
revenues for the three months ended September 30, 1998 was primarily
attributable to increased sales of the Company's SureFire products in the United
States and Chemfree products in Canada. Revenues from the sale of these products
increased 13.4% and 13.2% in the three month and nine month periods ended
September 30, 1998, respectively, as compared to the corresponding periods of
1997. The increase in these revenues was primarily the result of more favorable
weather conditions in certain regions of the United States and Canada as well as
lower initial inventories at the retail level as compared to 1997. The decrease
in consumer product revenues in the nine months ended September 30, 1998 was
primarily attributable to a 57.1% decrease in revenues for the Company's Blocker
line of products as compared to the corresponding period in 1997. The decrease
in Blocker revenues was primarily a result 



                                       11
<PAGE>   12

of i) inventory carried over from 1997, the introductory year, by distributors
and retailers; ii) a change in the sales program which requires that the Company
partially reserve against revenues for potential product returns; and iii) a 25%
reduction in the selling price.

Revenues from the Company's specialty chemical operations decreased $529,000 and
$905,000, or 96.7% and 93.4%, respectively, in the three months and nine months
ended September 30, 1998, as compared to the corresponding periods of 1997.
These decreases are the result of i) winding down business operations at the
Farchan facility and ii) the sale of the research chemicals catalog and
inventory in 1997.

Revenues from the Company's foreign proprietary operations, which are included
in the discussion of revenues from proprietary consumer and agricultural
products set forth above, increased $89,000 and $58,000, or 20.5% and 2.4%,
respectively in the three months and nine months ended September 30, 1998, as
compared to the corresponding periods of 1997. The increase for the three months
ended September 30, 1998 is primarily attributable to increased revenues from
sales at i) Chemfree, the Company's wholly owned Canadian consumer products
subsidiary in the amount of $53,000 and ii) Consep de Mexico, the Company's
wholly owned Mexican agriculture products subsidiary in the amount of $37,000.
The increase in revenues for the nine months ended September 30, 1998 is
primarily attributable increased sales at i) Chemfree in the amount of $198,000
and ii) Consep de Mexico in the amount of $19,000. These increases were
substantially offset by a reduction in sales at Consep GmbH, the Company's
wholly owned Austrian agriculture products subsidiary in the amount of $159,000.
The reduced sales for Consep GmbH were primarily a result of excess inventory
carried over from 1997 by some of Consep GmbH's European customers.

The revenue increases of 20.8% and 7.1% from the Company's distribution
operations during the three months and nine months ended September 30, 1998,
respectively, as compared to the corresponding periods of 1997 were primarily
the result of i) the addition of a new sales and warehousing location for the
Company's Massachusetts distribution operation and ii) a larger and more
experienced sales force. In addition, the revenue increase in the three months
ended September 30, 1998 was also attributable to the cooler and wetter weather
conditions in the second quarter delaying sales into the third quarter of 1998.

GROSS MARGIN. The consolidated gross margin percentage for the Company increased
to 23.5% in the three months ended September 30, 1998 from 21.2% in the
corresponding period of 1997. For the nine months ended September 30, 1998, the
consolidated gross margin decreased to 25.0% from 26.0% in the corresponding
period of 1997. The gross margin percentage on the sale of proprietary products
during the three months ended September 30, 1998 increased to 38.7% from the
32.7% gross margin achieved on proprietary product revenues in the corresponding
period of 1997. Gross margin on proprietary products decreased to 36.3% in the
nine month period ended September 30, 1998 from 40.3% in the corresponding
period of 1997. Distribution gross margins increased in the three month and nine
month periods ended September 30, 1998 to 19.2% and 20.4%, from 16.5% and 18.1%,
respectively, in the corresponding periods of 1997.

The gross margin percentage on commercial agriculture proprietary product sales
for the three month and nine month periods ended September 30, 1998 decreased to
36.3% and 33.8% from 36.9% and 35.8%, respectively, in the corresponding periods
of 1997. For the three months ended September 30, 1998 the decreases were
primarily attributable to the change in product mix as a result of decreased
sales for the Company's higher margin CheckMate PBW and CheckMate PBW-F products
as compared to the corresponding period of 1997. For the nine months ended
September 30, 1998 the decreases were primarily attributable to i) the $320,000
accrual for estimated insurance recoveries for the 



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<PAGE>   13

additional pheromone expenses incurred in the three month and six month periods
ended June 30, 1997 due to the October 1996 fire that destroyed the Company's
specialty chemicals manufacturing facility and ii) the change in product mix
discussed above. The one-time insurance accrual reduced cost of revenues by
$320,000 for the nine month period ended September 30, 1997 and positively
impacted the gross margin percentage in 1997 on agriculture proprietary product
sales by 7.4%. $220,000 of this accrual was reversed in the fourth quarter of
1997 after settlement discussions were terminated and the Company filed a
lawsuit against its insurance carrier.

The gross margin percentage on proprietary consumer product sales for the three
month period ended September 30, 1998 increased to 47.2% from 37.3% in the
corresponding period of 1997. The increase in gross margin was primarily
attributable to changes in the product sales mix within the SureFire and
Chemfree line of products. The gross margin percentage on proprietary consumer
product sales for the nine months ended September 30, 1998 decreased to 42.7%
from 47.2% in the corresponding period of 1997. The decrease in gross margin was
primarily attributable to a 25% price reduction on the Blocker line of products
which decreased the gross margin for this product line to 48.1% from 57.7%, for
the nine month period ended September 30, 1998 as compared to the corresponding
period of 1997. In order to make the Blocker products more competitive in the
marketplace, the Company reduced its selling price for the 1998 season.

The gross margin percentage from distribution revenues increased to 19.2% and
20.4% from 16.5% and 18.1%, respectively, for the three month and nine month
periods ended September 30, 1998 as compared to the corresponding periods of
1997. The increases were primarily attributable to differences in the product
sales mix for distribution operations.

The gross margin from specialty chemical operations decreased from $80,000 and
$116,000 to a negative $69,000 and $272,000, respectively, for the three month
and nine month periods ended September 30, 1998 as compared to the corresponding
periods of 1997. The decreases were primarily the result of winding down
business operations at the Farchan facility.

OPERATING EXPENSES. Operating expenses during the three months ended September
30, 1998 increased 5.6% to $2.9 million from $2.7 million in the corresponding
period of 1997. The increase in operating expenses was primarily attributable to
i) a $229,000, or 27.0%, increase in operating expenses at the Company's
distribution operations primarily as a result of the increased personnel
required to meet the needs of anticipated sales growth and ii) $132,000 in
transaction expenses related to the merger with Verdant Brands, Inc. Partially
offsetting these increases was a $112,000 reduction in expenses as a result of
closing the Company's Farchan operation.

During the nine months ended September 30, 1998, operating expenses decreased
3.4% to $8.5 million from $8.8 million in the corresponding period of 1997. The
decrease was primarily attributable to i) a reduction in advertising costs
associated with the Company's Blocker line of insect repellent products in the
amount of $694,000 and ii) a reduction in expenses as a result of winding down
business operations at Consep's Farchan facility in the amount of $426,000.
Partially offsetting these decreases was i) a $577,000, or 21.5%, increase in
operating expenses at the Company's distribution operations as discussed
earlier, ii) the $132,000 in transaction expenses related to the merger with
Verdant Brands, Inc. and iii) as previously reported, $327,000 in scale-up and
development costs related to the initial production of pheromone for the
Company's CheckMate PTB and CheckMate SF products by a contract manufacturer
using a new proprietary synthesis route.

Operating expenses from the Company's foreign proprietary operations, which are
included in the discussion of proprietary operating expenses set forth above,
decreased $65,000 and $83,000, or 



                                       13
<PAGE>   14

18.4% and 8.4%, respectively in the three months and nine months ended September
30, 1998, as compared to the corresponding periods of 1997. The decrease for the
three months ended September 30, 1998 is primarily attributable to i) decreased
expenses in the amount of $27,000 at Chemfree as a result of reduced personnel
costs and ii) decreased expenses in the amount of $29,000 at Consep de Mexico as
a result of lower bad debt reserves recorded in 1998 as compared to 1997. The
decrease in operating expenses for the nine months ended September 30, 1998 is
primarily attributable i) decreased expenses in the amount of $41,000 at
Chemfree and $33,000 at Consep GmbH as a result of reduced personnel.

OTHER INCOME AND EXPENSE. During the three month and nine month periods ended
September 30, 1998, the Company recorded net other expense of $158,000 and
$364,000, respectively, compared to net other expense of $14,000 and net other
income of $76,000, respectively, in the corresponding periods of 1997. These
decreases were primarily attributable to i) the recognition of $100,000 and
$295,000 in business interruption insurance proceeds in the three month and nine
month periods ended September 30, 1997, respectively, that did not occur in 1998
and ii) an increase of $35,000 and $156,000 for the three month and nine month
periods ended September 30, 1998, respectively, in interest expense as a result
of increased average borrowings outstanding as compared to the corresponding
periods of 1997.

LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has used cash generated from operations, equity
financings and bank borrowings to fund its research and development, marketing,
acquisition of capital equipment, acquisitions of other business operations and
working capital requirements. Since its inception, the Company has raised $44.3
million of equity. In addition to equity financings, the Company operates under
a line of credit from Silicon Valley Bank (the "Bank") pursuant to an Amended
and Restated Loan and Security Agreement (the "Loan Agreement") with a maximum
borrowing capacity of $5 million to support the working capital requirements of
both the Company's principal proprietary product and distribution operations.
This line of credit matures December 10, 1998 and is secured by substantially
all of the Company's current assets. Under the terms of the Loan Agreement, the
Company is required to maintain certain financial ratios and other financial
conditions. At September 30, 1998, the Company was not in compliance with
certain covenants under the Loan Agreement including the profitability and quick
ratio covenants, but has subsequently obtained the Bank's waiver with respect to
such non-compliance for the quarter ended September 30, 1998.

At September 30, 1998, the Company had cash, cash equivalents and short-term
investments of $833,000 and working capital of $7.6 million. Borrowings under
the Bank line of credit discussed above were $3.7 million. The Company believes
that cash and cash equivalents at September 30, 1998, cash generated from
operations and cash available from existing bank lines of credit will be
sufficient to fund the Company's operations through at least 1998. The Company's
capital needs may increase depending upon several factors, including failure to
consummate the Company's proposed merger with Verdant Brands, Inc. discussed
below, the Bank's willingness to extend or renew the Company's line of credit if
the proposed merger with Verdant Brands, Inc. is not consummated before December
10, 1998, as expected, future acquisitions, changes to planned research and
development activities, expanded manufacturing and commercialization programs,
additional technological, regulatory and competitive developments and the timing
of regulatory approvals for new products. As a result, the Company may need to
raise additional cash. There can be no assurance that additional financing would
be available and, if available, that the terms would be acceptable to the
Company or that the additional financing could be obtained in a timely manner.



                                       14
<PAGE>   15

As previously reported, the Company has partially completed the first phase of
an addition to its headquarters and manufacturing facility in Bend, Oregon for
the purpose of producing pheromones and other specialty chemicals. The Company
has re-evaluated its plans for the completion of the addition as well as its
plans to produce significant quantities of pheromones and other specialty
chemicals at the Bend, Oregon facility. At the present time, the Company has
indefinitely postponed any additional capital expenditures for the completion of
the addition as well as any significant production of pheromones or other
specialty chemicals. However, the Company has plans to purchase some pheromone
that will require additional processing using the Company's new distillation
equipment. The Company still believes that, long term, the greatest cost-savings
will be achieved through the production of its own pheromones.

On October 26, 1998, Verdant Brands, Inc. (formerly Ringer Corporation)
completed the registration of its common shares, which are to be issued in
connection with the Company's proposed merger with Verdant Brands, Inc. The
Securities and Exchange Commission permitted the registration of those shares,
filed on Form S-4, to become effective October 22, 1998. Consep, Inc. and
Verdant Brands, Inc. have distributed a joint proxy statement to their
respective shareholders. Assuming shareholders of both companies approve the
merger, the transaction is expected to close on or about December 7, 1998. In
addition to shareholder approval by the shareholders of both companies, the
proposed merger is subject to applicable third party consents and approvals.

YEAR 2000 ISSUES 
"Year 2000" issues relate to the fact that computer software and firmware have
been written using two digits rather than four digits to define the applicable
year. These issues could result in system failures or miscalculations that could
cause disruptions of operations or the inability of suppliers of material
services and/or products to continue to support the Company's operations.

The Company's information technology systems include a PC based network
consisting of Novell NetWare and Microsoft NT based servers and PC workstations.
The Company has assessed its Year 2000 readiness in regard to these issues. The
Company's assessment revealed that all information technology systems are
currently Year 2000 compliant, or that upgrades are available for installation
to make these systems Year 2000 compliant. The installation of these upgrades,
including upgrades to workstation operating systems, software, and hardware, are
currently being done during the normal course of replacing or upgrading such
systems. All systems, including network operating systems, desktop operating
systems, software, accounting systems, and hardware are currently in the process
of being upgraded, and all upgrades and compliance testing should be completed
prior to October 31, 1999. The financial impact of any change is not anticipated
to be material to the financial position or results of the Company's operations.

The greatest risk anticipated by the Company in regard to the Year 2000 issues
would be system corruption due to non-compliant data supplied by suppliers of
material services and/or products, or the interruption of the supply of such
material products and/or services. The Company is currently in the process of
obtaining Year 2000 compliance letters and reports from suppliers of material
services and/or products. To date, no such supplier has indicated an inability
to continue supplying material services and/or products to the Company due to
any Year 2000 issues, although most are in the process of evaluating and
upgrading their internal systems and can not yet assure the Company of their
Year 2000 compliance. Accordingly, the Company does not currently anticipate
that the Year 2000 issues will have a material adverse effect upon the Company's
operations. However, there can be no assurances that the systems of other
companies on which the Company's operations rely will be timely remedied, or
that a failure by another company to remediate its systems in a timely manner
would not have a material adverse effect on the Company.

The Company does not yet have a contingency plan in effect to guard against
reasonably likely worst case scenarios resulting from Year 2000 issues with
respect to its own information technology systems or such systems of suppliers
of material products and/or services.

                                       15
<PAGE>   16

FORWARD-LOOKING STATEMENTS
The statements set forth above regarding i) the Company's belief that it has
sufficient sources of capital to fund its operations through at least 1998, ii)
the Company's expectation that its merger with Verdant Brands, Inc. will be
completed on or about December 7, 1998 and iii) the Company's expectation that
the Year 2000 issues will not have a material adverse effect upon the Company's
operations, are forward-looking statements which are made pursuant to the Safe
Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are not guarantees of future performance and involve
risks, uncertainties and assumptions which are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed or
forecasted in such forward-looking statements due to numerous factors. These
factors include, without limitation, the factors discussed elsewhere herein and
in the Company's other filings that are made from time to time with the
Securities and Exchange Commission. The forward-looking statements should be
considered in light of these risks, uncertainties and assumptions.



                                       16
<PAGE>   17

                           PART II. OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

          (a)   Exhibits:

<TABLE>
<CAPTION>
                  Exhibit
                  Number                    Description
                  ------                    -----------
                  <S>                       <C>
                  27.0                      Financial Data Schedule
</TABLE>


          (b)     No reports were filed on Form 8-K during the quarter for which
                  this report is filed.


              (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)



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                                   SIGNATURES

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


                                        CONSEP, INC.
                                        (REGISTRANT)



DATE:  November 13, 1998                By: /s/ Volker G. Oakey
       -----------------                   -------------------------------------
                                           VOLKER G. OAKEY
                                           Chairman of the Board, President, 
                                           Chief Executive Officer and Chief 
                                           Financial Officer



                                       18