<PAGE>   1
                                   FORM 10-QSB
                                   -----------

                       SECURITIES AND EXCHANGE COMMISSION
                       ----------------------------------

                             WASHINGTON, D.C. 20549
                             ----------------------


(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  
-----------------------------------------------------------------------
    EXCHANGE ACT OF 1934
    --------------------

For the quarterly period ended          May 31, 1998
----------------------------------------------------

                                       OR

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


For the transition period from          to

Commission File Number  0-13328
                        ---------------

                         SENTEX SENSING TECHNOLOGY, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                              <C>       
  New Jersey                                                  22-2333899
-------------------------------                  ------------------------------------
(State or other jurisdiction of                  (I.R.S. Employer Identification No.)
incorporation or organization)

  1801 East Ninth Street, Cleveland, Ohio                                  44114
  ----------------------------------------                              ----------
  (Address of principal executive offices)                              (Zip Code)
</TABLE>

Registrant's telephone number, including area code  (216)687-9133
                                                    --------------

(Former name, former address and former fiscal year, if changed since last
report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities and 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.

                                    Yes   X      No 
                                        -----       -----

<PAGE>   2



              APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                 PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934
after the distribution of securities under a plan confirmed by a court.

                                    Yes          No 
                                        -----       -----


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 100,514,911.
                                           -----------


<PAGE>   3



                SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                       NOVEMBER 30, 1997 AND MAY 31, 1998


<TABLE>
<CAPTION>
                                                                NOVEMBER 30,   MAY 31,
                                                                   1997         1998
                                                                (AUDITED)     (UNAUDITED)
                                                                ---------     -----------
      ASSETS
      ------

<S>                                                             <C>           <C>       
CURRENT ASSETS:
   Cash and cash equivalents                                    $1,331,981    $1,240,035
   Accounts receivable                                           1,248,187     1,076,554
   Inventories                                                   1,399,944     1,360,406
   Other current assets                                            164,920       206,077
   Income tax refunds                                               16,000        16,000
                                                                ----------    ----------

   TOTAL CURRENT ASSETS                                          4,161,032     3,899,072

EQUIPMENT AND IMPROVEMENTS - [NET
   OF ACCUMULATED DEPRECIATION AND
   AMORTIZATION]                                                   242,647       225,700

OTHER ASSETS
  Goodwill and other intangibles                                   238,833       767,605
  Deposits and other assets                                         33,360        26,694
                                                                ----------    ----------

   TOTAL ASSETS                                                 $4,675,872    $4,919,071
                                                                ==========    ==========
</TABLE>




See Notes to Consolidated Financial Statements.




                                       3
<PAGE>   4

                SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                       NOVEMBER 30, 1997 AND MAY 31, 1998


<TABLE>
<CAPTION>
                                                                NOVEMBER 30,      MAY 31,
                                                                   1997            1998
                                                                (AUDITED)       (UNAUDITED)
                                                                ---------       -----------

      LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------

<S>                                                             <C>             <C>        
CURRENT LIABILITIES:
   Bank loans                                                   $ 2,100,000     $ 2,195,400
   Accounts payable                                                 857,937         838,597
   Accrued expenses and other current liabilities                   861,935         877,637
   Due to related party                                              33,333         551,000
                                                                -----------     -----------

   TOTAL CURRENT LIABILITIES                                      3,853,205       4,462,634
                                                                -----------     -----------

LONG-TERM DEBT
   Convertible subordinated notes payable                           515,000          10,810
   Other Accrued Expenses                                               ---         335,049
                                                                -----------     -----------

   TOTAL LONG-TERM DEBT                                             515,000         345,859
                                                                -----------     -----------

STOCKHOLDERS' EQUITY:
    Common stock, no par value, authorized
      200,000,000 shares, issued 87,865,762
      and 109,460,911 shares, outstanding
      78,919,762 and 100,514,911 shares,
      respectively                                                2,153,489       2,880,079
    Accumulated deficit                                          (1,554,555)     (2,480,058)
    Treasury shares at cost, 8,946,000 shares                      (313,218)       (313,218)
    Cumulative translation adjustment                                21,951          23,775
                                                                -----------     -----------

   TOTAL STOCKHOLDERS' EQUITY                                       307,667         110,578
                                                                -----------     -----------

   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 4,675,872     $ 4,919,071
                                                                ===========     ===========
</TABLE>





See Notes to Consolidated Financial Statements.



                                       4
<PAGE>   5

                SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS [UNAUDITED]

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED                SIX MONTHS ENDED
                                                   ------------------                ----------------
                                               MAY 31,          MAY 31,          MAY 31,          MAY 31,
                                            ------------     ------------     ------------     ------------
                                                1998             1997             1998             1997
                                            ------------     ------------     ------------     ------------

<S>                                         <C>              <C>              <C>              <C>         
Net sales                                   $  1,624,552     $  2,057,242     $  2,974,824     $  3,867,140

Cost of sales                                    812,118          993,002        1,520,072        1,851,304
                                            ------------     ------------     ------------     ------------

       Gross profit                              812,434        1.064.240        1,454,752        2,015,836

Selling, General and Admin                     1,122,609        1,290,301        2,146,922        2,548,193
Research and Development                          79,044           97,890          151,548          187,030
                                            ------------     ------------     ------------     ------------

       Operating loss                           (389,219)        (323,951)        (843,718)        (719,387)
                                            ------------     ------------     ------------     ------------

Other income (expense)
       Interest income                            20,366           12,168           35,458           30,529
       Other income                                6,081            9,822            8,398           22,842
       Interest expense                          (68,690)         (13,264)        (121,118)         (35,511)
       Foreign currency transaction loss           3,262          (28,695)          (4,523          (82,113)
                                            ------------     ------------     ------------     ------------

          Loss before income tax expense        (428,200)        (343,920)        (925,503)        (783,640)

Provision for income taxes                             0            5,988                0            5,988
                                            ------------     ------------     ------------     ------------

       Net loss                             $   (428,200)    $   (349,908)    $   (925,503)    $   (789,628)
                                            ============     ============     ============     ============


Net loss per share                          $      (0.01)    $          0     $      (0.01)    $      (0.01)
                                            ============     ============     ============     ============

Weighted Average Number of
   Shares Outstanding                         82,518,953       78,919,762       80,719,358       78,919,762
                                            ============     ============     ============     ============
</TABLE>





See Notes to Consolidated Financial Statements.


                                       5
<PAGE>   6


                SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]


<TABLE>
<CAPTION>
                                                                    SIX MONTHS ENDED
                                                                MAY 31,          MAY 31, 
                                                                -------          ------- 
                                                                 1998             1997
                                                                -------          ------- 
<S>                                                          <C>             <C>         
OPERATING ACTIVITIES:
   Net loss                                                  $  (925,503)    $  (789,628)
   Adjustments to reconcile net [loss] income to net cash
     Provided by [used in] operating activities:
      Depreciation and amortization                               32,807          48,642
   Change in assets and liabilities:
     [Increase] decrease in:
       Accounts receivable                                       171,633        (445,578)
       Inventories                                                39,538         192,062
       Other current assets                                      (38,473)         33,506
     Increase [decrease] in:
       Accounts payable                                          177,560          47,184
       Accrued expenses and other current liabilities           (158,798)       (254,954)
       Currency translation adjustment                             1,824          22,962
                                                             -----------     -----------

     TOTAL ADJUSTMENTS                                           226,091        (356,176)
                                                             -----------     -----------

   NET CASH USED BY OPERATING ACTIVITIES                        (699,412)     (1,145,804)
                                                             -----------     -----------

INVESTING ACTIVITIES:
   Acquisition of equipment and improvements                      (5,601)              0
   Payment to prior shareholder                                  (33,333)        (33,333)
                                                             -----------     -----------

NET CASH USED BY INVESTING ACTIVITIES                            (38,934)        (33,333)
                                                             -----------     -----------
FINANCING ACTIVITIES:
   Net proceeds on note payable - bank                            95,400         865,000
   Net proceeds on note payable - related party                  551,000         250,000
   Net decrease in factoring of accounts receivable                    0         (76,948)
                                                             -----------     -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                        646,400       1,038,052
                                                             -----------     -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             (91,946)       (141,085)

 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIODS              1,331,981       1,697,767
                                                             -----------     -----------

   CASH AND CASH EQUIVALENTS - END OF PERIODS                $ 1,240,035     $ 1,556,682
                                                             ===========     ===========
</TABLE>

     See Notes to Consolidated Financial Statements.



                                       6
<PAGE>   7

                SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]


[1] In the opinion of management, the unaudited financial statements contain all
adjustments [consisting of only normal recurring accruals and repayments]
necessary to present fairly the financial position at May 31, 1998 and the
results of operations and cash flows for the six months ended May 31, 1998 and
May 31, 1997.

These interim statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the fiscal year ended November 30, 1997 (Commission File No.
2-13328).

[2] The results of operations for the six months ended May 31, 1998 and May 31,
1997 are not necessarily indicative of the results to be expected for the full
year.

[3] INVENTORY

Inventories consist of:

<TABLE>
<CAPTION>
                                              MAY 31,
                                              -------
                                                1998
                                                ----

<S>                                          <C>       
               Raw Materials                 $  493,827
               Work-in-Process                  186,245
               Finished Goods                   680,334
                                             ----------

                  Total                      $1,360,406
                                             ==========
</TABLE>


[4] EARNINGS PER SHARE

Earnings [loss] per share are based on the weighted average number of common
shares outstanding for the periods presented, after adjustment for the shares
issued in the stock acquisition.

[5] PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Sentex Sensing
Technology, Inc. and its wholly-owned subsidiaries [the "Company"]. All material
inter-company accounts and transactions have been eliminated in consolidation.

[6] ACQUISITIONS

In March 1998, the Company purchased Cypress Instruments, Inc. ("Cypress") for
the purpose of acquiring a new product line that is currently under development
and, upon completion, is intended to be folded into the Monitek product line.
The acquisition is not material to the overall business of the Company. The
acquisition of Cypress by the



                                       7
<PAGE>   8

Company may result in the Company being obligated to make payments to the
shareholders of Cypress (for payment of shares and performing future consulting
services) of approximately $535,000 over the next four fiscal years, with over
$200,000 of such amounts potentially being payable in fiscal 1998.



[7] STOCKHOLDERS' EQUITY

On May 15, 1998, Clarion Capital Corporation ("Clarion") converted two
convertible notes in the aggregate principal amount of $609,558 into an
aggregate number of 16,569,404 Common Shares of the Company. Immediately
thereafter, CPS Capital Ltd. ("CPS") purchased all 16,569,404 Common Shares from
Clarion for $230,000.

In addition, on May 15, 1998, CPS and the Company entered into the Second
Amended and Restated Management Services Agreement, pursuant to which CPS agreed
to accept 5,025,745 Common Shares in lieu of accrued management fees equaling
$196,900. All the shares acquired by CPS were acquired for investment purposes.

[8] SUBSEQUENT EVENTS

Sales of Sentex products have not been successfully integrated into Monitek's
distribution channels, which has resulted in a further drop-off of Sentex sales
and even larger losses in this segment of the business. As a result, the
Company's management has determined that the Company's best course of action
will be to divest itself of the Sentex operation, which has generated less than
15% of the Company's revenues for the last eighteen months, while suffering 54%
of the Company's losses, as reported. Currently, the Company is engaged in
discussions with Amos Linenberg, a former director of the Company and a current
executive officer of the Company to sell Sentex to Mr. Linenberg. As of July 13,
1998, no definitive agreement had been reached. Mr. Linenberg was also one of
the principle shareholders of the Company prior to CPS's acquisition of its
interest in the Company. In the event the Company and Mr. Linenberg are unable
to complete a sale of Sentex to Mr. Linenberg, the Company intends to
discontinue the operations of Sentex. Although the Company has not selected a
final date for the terminations of operations of Sentex, the Company currently
anticipates that if the operations of Sentex were discontinued, they would be
discontinued prior to the next fiscal quarter.

In June 1998, the Company increased its existing $1,000,000 bank line of credit
to $2,000,000. The Company's management believes that the increase in this line
of credit, which is secured by a personal guarantee, of Robert S. Kendall, the
Chairman of the Company, will satisfy the company's working capital needs at
least through the remainder of fiscal 1998.




                                       8
<PAGE>   9

                SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS



The Company formed two wholly owned subsidiaries, Sentex Systems, Inc., and
Sentex Acquisitions Corp. on May 31, 1991, to separate the present operations of
the Company into a subsidiary to continue the business of designing, developing
and marketing gas chromatographic devices, and a subsidiary to develop and
acquire new investment opportunities.

Effective November 30, 1996, Monitek Technologies, Inc., a Delaware corporation
("Monitek") became a wholly owned subsidiary of the Company, pursuant to a
merger (the "Merger") of Sentex Merger Corp., a Delaware corporation and wholly
owned subsidiary of the Company ("Subcorp"), with and into Monitek. Monitek is
now being operated as a wholly owned subsidiary of the Company. Monitek also
operates a portion of its business through a wholly owned German subsidiary of
Monitek named Monitek GmbH, which over the last three years has accounted for
over 60% of Monitek's total revenues.

Hereinafter the "Company" shall refer to Sentex Sensing Technology, Inc. and its
three wholly owned subsidiaries, Monitek, Sentex Acquisition Corp. and Sentex
Systems, Inc. ("Sentex").

Monitek designs, develops, assembles and markets instruments for the measurement
of clarity (turbidity), suspended solids content, color, purity, flow, level and
volume of liquids in industrial and waste water environments. Monitek's current
line of products, which are based on optical, acoustic, magnetic and ultrasonic
technologies, have been specially adapted for various applications in the
chemical and petrochemical, food and beverage, water treatment, pulp and paper,
and bio-technology and pharmaceutical industries, where their abilities to
withstand high temperature, extremes in pressure and corrosive environments are
important factors. Monitek's products are currently sold world-wide.

Sentex is engaged in the business of developing, manufacturing and selling
automated devices designed to identify and measure the concentrations of certain
chemicals in air, water and soil. Since the Merger, sales of Sentex products
have represented less than 15% of the total revenues of the Company.

In March 1998, the Company purchased Cypress Instruments, Inc. ("Cypress") for
the purpose of acquiring a new product line that is currently under development
and, upon completion, is intended to be folded into the Monitek product line.
The acquisition is not material to the overall business of the Company.

The Company also intends to acquire other businesses that may be unrelated to
its present activities and is presently investigating such opportunities. As of
June 30, 1998, the Company had not entered into a firm commitment for any such
transaction.



                                       9
<PAGE>   10

FINANCIAL CONDITION
-------------------

Working capital decreased to a negative $564,000 at May 31, 1998 as compared to
$308,000 as of November 30, 1997. The decrease in working capital is primarily
due to the losses sustained by the Company during the first half of Fiscal 1998
and the accrued expense incurred in connection with an acquisition discussed
below. Cash and cash equivalents equaled approximately $1,240,000 as of May 31,
1998, $1,200,000 of which has been pledged to secure current borrowings on a
line of credit. As set forth in the independent auditors' report and notes to
consolidated financial statements that accompanied the Company's Form 10-KSB for
the fiscal year ended November 30, 1997, the Company's recurring losses from
operations and the resulting effect on cash flow have reduced the Company's
liquidity to its current level, which raises substantial doubt about the
Company's ability to continue as a going concern.

To address the Company's immediate working capital needs, the Company has
established two bank lines of credit and has borrowed an aggregate of $2,195,400
as of May 31, 1998 as compared to $1,435,000 in borrowings as of May 31, 1997.
The primary use of the additional proceeds was to fund operating losses incurred
during the past year. As of May 31, 1998, borrowings under one bank line of
credit were $1,200,000, and were secured by cash balances of the Company. The
other bank line of credit, as of May 31, 1998, was for a maximum of $1,000,000,
but in June 1998, the bank agreed to increase the line to $2,000,000. The
Company's management believes that the increase in this line of credit, which is
secured by the personal guarantee of Robert S. Kendall, the Chairman of the
Company, will satisfy the Company's working capital needs at least through the
remainder of fiscal 1998. Borrowings under this line of credit totaled $995,400
as of May 31, 1998. From time to time, CPS has provided the Company with
temporary working capital loans and, as of May 31, 1998, there was an
outstanding borrowing of $551,000 on such loans. The acquisition of Cypress by
the Company will result in the Company being obligated to make payments to the
shareholders of Cypress (for payment of shares and performing future consulting
services) of approximately $535,000 over the next four fiscal years, with over
$200,000 of such amounts potentially being payable in Fiscal 1998. CPS has
assured the Company that it will arrange or provide the financing required to
fund the acquisition of Cypress. There are currently no material commitments
anticipated for capital expenditures during fiscal 1998. The Company will
continue to seek growth through internal means as well as further acquisitions.
In the event an acquisition candidate were identified, the Company may need to
seek additional financing.

To address the Company's working capital needs on a more long-term basis, the
Company will attempt to generate cash from internal operations of the Company.
As anticipated in the Registration Statement containing the Joint
Proxy/Prospectus that was filed in connection with the Merger, however, the
Company has been unable to generate a profit during its first year and one-half
of operating Sentex and Monitek as a combined company and there can be no
assurance that the Company will generate a positive cash flow for the remainder
of Fiscal 1998. The Company has combined certain aspects of the two companies
such as realigning and re-staffing management, which has resulted in a modest
reduction in selling, general and administrative


                                       10
<PAGE>   11

                SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS (CONT'D)


expenses. Despite these achievements, the ultimate profitability of the Company
still depends, in large part, on further reducing expenses. Sales of Sentex
products have not been successfully integrated into Monitek's distribution
channels, which has resulted in a further drop-off of Sentex sales and even
larger losses in this segment of the business. As a result, the Company's
management has determined that the Company's best course of action will be to
divest itself of the Sentex operation, which has generated less than 15% of the
Company's revenues for the last eighteen months, while suffering 54% of the
Company's losses, as reported. Currently, the Company is engaged in discussions
with Amos Linenberg, a former director of the Company and a current executive
officer of the Company to sell Sentex to Mr. Linenberg. As of July 8, 1998, no
definitive agreement had been reached. Mr. Linenberg was also one of the
principle shareholders of the Company prior to CPS's acquisition of its interest
in the Company. In the event the Company and Mr. Linenberg are unable to
complete a sale of Sentex to Mr. Linenberg, the Company intends to discontinue
the operations of Sentex. Although the Company has not selected a final date for
the terminations of operations of Sentex, the Company currently anticipates that
if the operations of Sentex were discontinued, they would be discontinued prior
to the next fiscal quarter.

Net Operating Losses; IC-DISC

The Company has approximately $8,942,000 in net operating losses as of fiscal
1997, which will expire at various dates through the year 2012 that are mainly
attributable to losses incurred by Monitek. Federal tax law imposes restrictions
on the use of net operating loss carry-forwards in the event of a change in
ownership, such as a merger. Due to the Merger, approximately $6,265,000 of the
$8,942,000 net operating losses may be subject to these limitations and
potentially may not be able to provide any economic benefit to the Company.

As of April 1, 1991, Monitek's IC-DISC, Monitek International, Inc., was
effectively terminated. As a result, Monitek had begun repatriation of the
undistributed earnings of the IC-DISC as of April 1, 1991. The undistributed
earnings of approximately $780,000 has been and will continue to be recognized
as income, for tax return purposes, over the 10-year period ending March 31,
2001.


                                       11
<PAGE>   12

                SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS (CONT'D)


RESULTS OF OPERATIONS
---------------------

Six Months Ended May 31, 1998 Compared to Six Months Ended May 31, 1997

The Company's net sales decreased by 23%, from $3,867,000 for the six months
ended May 31, 1997 ("Fiscal 1997 Six Months") to $2,975,000 for the six months
ended May 31, 1998 ("Fiscal 1998 Six Months"). Sales of Sentex products
decreased by $192,000, or 40%, primarily as a result of the Company's inability
to effectively integrate the sale of Sentex products into Monitek's distribution
channels, as noted above. Monitek's domestic sales decreased by $7,000, or less
than 1%, while export sales from the United States decreased by $278,000, or
63%, as a result of a very sharp drop-off of orders from Asian countries,
primarily Japan. Sales to Continental Europe by Monitek GmbH decreased by
$415,000 from the Fiscal 1997 Six Months to the Fiscal 1998 Six Months,
primarily as a result of weakness in the European economy and an increase in the
value of the U.S. Dollar relative to the German Deutsche Mark (the "DM"). The
actual decrease in sales in Monitek GmbH's native currency, the DM, was 14% but
the decrease in U.S. Dollars, after converting the sales figures by the average
exchange rate for each period, amounted to 21%.

Cost of goods sold, as a percentage of sales, increased to 51% for the Fiscal
1998 Six Months from 48% for the Fiscal 1997 Six Months, primarily as a result
of the decrease in sales without a corresponding reduction in direct labor and
factory overhead. Direct labor and overhead increased to 14% of net sales for
the Fiscal 1998 Three Months from 11% for the comparable Fiscal 1997 period,
while material costs remained constant at 37% of net sales.

Selling, general and administrative expenses decreased to $2,147,000 for the
Fiscal 1998 Six Months from $2,548,000 for the Fiscal 1997 Six Months. Sales
commissions decreased to $494,000 from $580,000 as a direct result of the
decrease in net sales. Cost reduction measures in the U.S., which were
implemented by management during the second half of Fiscal 1997, resulted in a
decrease of approximately $180,000 for the Fiscal 1998 Six Months as compared to
the Fiscal 1997 Six Months. Expenses at Monitek GmbH decreased by $139,000, of
which $45,000 can be attributed to the fluctuation in currency exchange rates
during the two periods.

Research and development expenses decreased to $152,000 for the Fiscal 1998 Six
Months from $187,000 for the Fiscal 1997 Six Months, primarily as a result of a
decrease in activities by outside consultants.



                                       12
<PAGE>   13

                SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS (CONT'D)


Operating losses increased to $844,000 for the Fiscal 1998 Six Months from
$719,000 for the Fiscal 1997 Six Months, primarily as a result of the decrease
in sales and the increase in cost of goods sold, as a percentage of sales,
partially offset by the decreases in selling, general and administrative
expenses and research and development expenses.

Interest expense increased to $121,000 for the Fiscal 1998 Six Months from
$36,000 for the Fiscal 1997 Six Months as a result of increased bank and other
borrowings.

Foreign currency transactions between Monitek and its German subsidiary resulted
in losses of $5,000 for the Fiscal 1998 Six Months and $82,000 for the Fiscal
1997 Six Months as a result of fluctuations in the value of the U.S. Dollar
relative to the DM.

Net losses increased to $925,000 for the Fiscal 1998 Six Months from $790,000
for the Fiscal 1997 Six Months, primarily as a result of the increases in
operating losses and interest expense, partially offset by the decrease in
foreign currency exchange losses.


CHANGES IN ACCOUNTING STANDARDS
-------------------------------

In February 1997, SFAS 128, Earnings per Share and SFAS 129, Disclosure of
Information About Capital Structure, were issued. SFAS 128 establishes new
standards for computing and reporting earnings per share. SFAS 129 requires an
entity to explain the pertinent rights and privileges of outstanding securities.
The Company has adopted these new standards in the current fiscal year and the
affect of the adoption was not material.

In June 1997, SFAS 130, Reporting Comprehensive Income, was issued. SFAS 130
establishes new standards for reporting comprehensive income and its components
and is effective for fiscal years beginning after December 15, 1997. The Company
expects that comprehensive income (loss) will not differ materially from net
income (loss).

In June 1997, SFAS No. 131, Disclosures About Segments of an Enterprise and
Related Information, was issued. SFAS No. 131 changes the standards for
reporting financial results by operating segments, related products and
services, geographic areas and major customers. The Company must adopt the new
standard no later that November 30, 1999.




                                       13
<PAGE>   14

                              II. OTHER INFORMATION


ITEM 2

         (a)      Not Applicable.

         (b)      Not applicable.

         (c)      On May 15, 1998, Clarion Capital Corporation ("Clarion") 
converted two convertible notes in the aggregate principal amount of $609,558
into an aggregate number of 16,569,404 Common Shares of the Company. Immediately
thereafter, CPS purchased all 16,569,404 Common Shares from Clarion for
$230,000.

                  In addition, on May 15, 1998, CPS and the Company entered into
the Second Amended and Restated Management Services Agreement, pursuant to which
CPS agreed to accept 5,025,745 Common Shares in lieu of accrued management fees
equaling $196,900. All the Common Shares issued to Clarion and CPS were issued
in reliance on Section 4(2) to the Securities Act of 1933, as amended. The
shares sold by Clarion to CPS were sold in reliance on Section 4(1) of the
Securities Act of 1933, as amended. No underwriting discounts or commissions
were paid in connection the sale of any of these securities and all the shares
acquired by CPS were acquired for investment purposes.

ITEM 5
                    CAUTIONARY STATEMENT FOR PURPOSES OF THE
                    "SAFE HARBOUR" OF THE PRIVATE SECURITIES
                         LITIGATION REFORM ACT OF 1995.

Certain statements in the Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Financial Statements included in
this Quarterly Report on Form 10-QSB, in the Company's press releases and in
oral statements made by or with the approval of an authorized executive officer
of the Company constitute "forward-looking statements" as that term is defined
under the Private Securities Litigation Reform Act of 1995. These may include
statements projecting, forecasting or estimating Company performance and
industry trends. The achievement of the projections, forecasts or estimates is
subject to certain risks and uncertainties. Actual results and events may differ
materially from those projected, forecasted or estimated. The applicable risks
and uncertainties include general economic and industry conditions that affect
all businesses, as well as matters that are specific to the Company and the
markets it serves.

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<PAGE>   15


General risks that may impact the achievement of such forecasts include
compliance with new laws and regulations; significant raw material price
fluctuations; currency exchange rate fluctuations; business cycles; and
political uncertainties. Specific risks to the Company include an inability of
the Company to finance its working capital needs; an inability of the Company to
curtail its recurring losses; an inability of the Company to successfully
integrate the business of Sentex and Monitek; a risk of recession in the
economies in which its products are sold, such as the Chemical or Petroleum
industries; and new or emerging products from current competitors. In light of
these and other uncertainties, the inclusion of a forward-looking statement
herein should not be regarded as a representation by the Company that the
Company's plans and objectives will be achieved.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)      10(4) The Second Amended and Restated Management Agreement between the
         Company and CPS Capital, Ltd., dated March 15, 1998.

         10(5) The Note Exchange Agreement between the Company and Clarion
         Capital Corporation, dated March 15, 1998.

(b)      During the quarter ended May 31, 1998, the Company did not file any
         reports on Form 8-K.







                                    SIGNATURE


Pursuant to the requirements of section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized:

Date: July 15, 1998               SENTEX SENSING TECHNOLOGY, INC.


                                  By: /s/ Robert S. Kendall
                                     ------------------------------------------
                                     Robert S. Kendall, Chief Executive Officer


                                     /s/ James S. O'Leary
                                     ------------------------------------------
                                     James S. O'Leary, Chief Financial Officer


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