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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)
[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

     For the quarterly period ended March 31, 2000

[ ]  Transition Report Pursuant to 13 or 15(d) of the Securities Exchange Act of
     1934

     For the transition period from __________ to __________

                         Commission file number 0-27839

                            EMPYREAN BIOSCIENCE, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)


                   Wyoming                                       86-0973095
       (State or other jurisdiction of                        (I.R.S. Employer
        Incorporation or organization)                       Identification No.)

23800 Commerce Park Road, Suite A, Cleveland, Ohio                 44122
   (Address of principal executive offices)                      (Zip Code)

                    Issuer's telephone number (216) 360-7900


              (Former Name, Former Address and Former Fiscal Year,
                          If Changed Since Last Report)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the Exchange Act,  during the past 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 [ ]

As of May 12,  2000,  the  Registrant  had  36,304,551  shares of  common  stock
outstanding.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

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<PAGE>
                          PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                            EMPYREAN BIOSCIENCE, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS EXCEPT SHARE AMOUNTS)


                                                         March 31,  December 31,
                                                           2000        1999
                                                         --------    --------
                                                        (Unaudited)  (Audited)
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                              $  1,595    $    286
  Accounts receivable                                          32           7
  Prepaid expenses and deposits                                 2          49
  Finished goods inventory                                    229         284
  Other                                                        --           3
                                                         --------    --------
      Total current assets                                  1,858         629

EQUIPMENT AND IMPROVEMENTS                                     35          52
                                                         --------    --------
      Total assets                                       $  1,893    $    681
                                                         ========    ========

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable and accrued liabilities               $  1,574    $  2,045
  Deferred revenue                                            100         100
  Short-term notes payable                                     --         198
                                                         --------    --------
      Total current liabilities                             1,674       2,343

COMMITMENTS AND CONTINGENCIES                                  --          --

STOCKHOLDERS' EQUITY (DEFICIT)
  Common stock, authorized 100,000,000 shares,
    without par value; issued and outstanding
    (2000: 36,304,551 ; 1999: 31,522,109)                  23,994      21,494
  Accumulated deficit                                     (23,775)    (23,156)
                                                         --------    --------
      Total stockholders' equity (deficit)                    219      (1,662)
                                                         --------    --------
      Total liabilities and stockholders'
        equity (deficit)                                 $  1,893    $    681
                                                         ========    ========

                 See accompanying notes to financial statements

                                        2
<PAGE>
                            EMPYREAN BIOSCIENCE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)


                                                           Three Months Ended
                                                         ----------------------
                                                         March 31,     March 31,
                                                           2000          1999
                                                         --------      --------
Net revenues                                             $    352      $     53
Cost of sales                                                 191            17
                                                         --------      --------

  Gross profit                                                161            36

Selling, general and administrative                           756         1,107
                                                         --------      --------

  Loss from operations                                       (595)       (1,071)

Interest expense                                               (6)          (33)
Interest income                                                 7            --
Other, net                                                    (25)           (4)
                                                         --------      --------
  Other expense                                               (24)          (37)
                                                         --------      --------

  Net loss                                               $   (619)     $ (1,108)
                                                         ========      ========

  Basic and diluted loss per share                       $  (0.02)     $  (0.04)
                                                         ========      ========

  Weighted average number of shares outstanding            35,587        26,812
                                                         ========      ========

                 See accompanying notes to financial statements

                                        3
<PAGE>
                            EMPYREAN BIOSCIENCE, INC.

       CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                   Common Stock
                                                -------------------   Accumulated
                                                 Shares     Amount      Deficit      Total
                                                --------   --------     --------    --------
<S>                                             <C>        <C>          <C>         <C>
Balances, January 1, 2000                         31,522   $ 21,494     $(23,156)   $ (1,662)

Common stock issued for cash                       2,904      1,452           --       1,452
Stock options and warrants exercised for cash        740        405           --         405
Common stock issued for royalties                    476        238           --         238
Common stock issued for debt                         662        333           --         333
Fair value of option and warrant grants               --         72           --          72
Net loss                                              --         --         (619)       (619)
                                                --------   --------     --------    --------
Balances, March 31, 2000                          36,304   $ 23,994     $(23,775)   $    219
                                                ========   ========     ========    ========
</TABLE>

                 See accompanying notes to financial statements

                                        4
<PAGE>
                            EMPYREAN BIOSCIENCE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


                                                            Three Months Ended
                                                           --------------------
                                                          March 31,    March 31,
                                                            2000         1999
                                                           -------      -------
Cash flows from operating activities:
  Net cash used by operating activities                    $  (647)     $  (992)

Cash flows from investing activities:
  Proceeds from sales of fixed assets                            5           --
  Purchase of fixed assets                                      (6)          (2)
                                                           -------      -------
     Net cash used by investing activities                      (1)          (2)
                                                           -------      -------
Cash flows from financing activities:
  Issuance of common stock                                   1,857          212
  Proceeds of short-term notes payable                         250          800
  Payments of short-term notes payable                        (150)          --
                                                           -------      -------
     Net cash provided by financing activities               1,957        1,012
                                                           -------      -------
     Net increase in cash and cash equivalents               1,309           18

Cash and cash equivalents at beginning of period               286           63
                                                           -------      -------
Cash and cash equivalents at end of period                 $ 1,595      $    81
                                                           =======      =======
Noncash financing and investing activities:
  Issuance of common stock for debt and royalties          $   571      $    --

                 See accompanying notes to financial statements

                                        5
<PAGE>
                            EMPYREAN BIOSCIENCE, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)


NOTE 1 - BASIS OF PRESENTATION

     The financial  information included herein for the three months ended March
     31, 2000 and 1999,  and the financial  information as of March 31, 2000, is
     unaudited;  however, such information reflects all adjustments,  consisting
     of normal recurring  adjustments,  which are, in the opinion of management,
     necessary for the fair presentation of the financial  position,  results of
     operations and cash flows for the interim  periods.  The interim  financial
     statements  and the notes thereto  should be read in  conjunction  with the
     annual audited financial statements as of December 31, 1999. The results of
     operations for the interim periods presented are not necessarily indicative
     of the results to be expected for the full year.

     The  accompanying   condensed  consolidated  financial  statements  include
     Empyrean  Bioscience,  Inc.,  and  its  wholly-owned  subsidiary,  Empyrean
     Diagnostics,  Inc. All significant  intercompany  balances and transactions
     have been eliminated in consolidation.

NOTE 2 - GOING CONCERN

     We  incurred  net losses in 1998 and 1999 and expect to incur net losses at
     least  through 2000.  We expect  operations to generate  negative cash flow
     through at least 2000 and we currently have no credit line available to us.
     We do not have existing  capital  resources or credit lines  available that
     are sufficient to fund our operations and capital requirements as presently
     planned over the next twelve  months.  We plan to pursue a working  capital
     line of credit to be secured by our accounts  receivable and inventory.  We
     plan to  raise  funds  through  the  issuance  of  either  debt  or  equity
     instruments. However, such funds may not be available on favorable terms or
     at all. These factors raise doubts about our ability to continue as a going
     concern and our audit report  contained  in our 1999 annual  report on Form
     10-KSB filed with the U.S.  Securities and Exchange Commission on March 30,
     2000 contains an explanatory paragraph with respect to this matter.

NOTE 3 - SHORT-TERM NOTES PAYABLE

     In February 2000, the Company  entered into  promissory  note agreements in
     the  aggregate  amount of $250 with  various  officers and  directors.  The
     promissory notes were due and payable six months from the loan date and had
     a fixed  interest  rate of 10%,  payable  monthly.  On February  23,  2000,
     promissory  notes in the amount of $298,  including $198 due and payable as
     of December 31, 1999,  were  converted into 596,000 shares of common stock.
     The  remaining  promissory  note in the  amount of $150 was paid in full in
     March 2000. The Company has no promissory notes due and payable as of March
     31, 2000.

NOTE 4 - LEGAL PROCEEDINGS

     We are a defendant in an action which was filed by Optima Holding Co., Ltd.
     and Mercury  Technology  Corp. on July 28, 1998 in the Circuit Court of the
     Eleventh Judicial District,  Dade County, Florida. This action alleges that
     we tortiously interfered with Optima and Mercury's contractual relationship
     with International Bioscience Corporation ("IBC"). Optima and Mercury claim
     that they had prior rights to the IBC  formulation and products and that we
     induced IBC to breach that agreement.  Optima and Mercury have requested an
     unspecified amount of damages against us. In a separate action that has now
     been  consolidated  with  the  first  action  in the  same  court,  IBC has
     requested  a  declaratory   judgment  that  IBC  properly   terminated  its
     development and distribution  contract with Optima and Mercury.  Plaintiffs
     also seek  injunctive  relief to prevent IBC and its managers and directors
     from  allowing  IBC to  have  further  dealings  with  us.  If we  are  not
     successful  in this  action,  we could  lose the right to  market,  sell or
     manufacture  worldwide  our  hand  sanitizer  product  and  other  products
     currently under development. This would materially and adversely affect the
     Company. The discovery in this action is proceeding.

     On April 10, 2000,  we filed suit in U.S.  District  Court for the Southern
     District of Florida against  International  Bioscience Corp. (IBC) alleging
     breach and default on its exclusive licensing agreement with us and seeking
     a  declaration  that the exclusive  license  agreement is in full force and

                                        6
<PAGE>
     effect as well as compensatory damages. Additionally, we asked the Court to
     issue an injunction  which would,  if granted,  require IBC to maintain the
     status quo while the discovery process and litigation  proceeds.  Following
     our request for a  preliminary  injunction,  IBC purported to terminate the
     exclusive license agreement.  Through our licensing agreement,  we have the
     exclusive  right to  manufacture,  sell and distribute  products based on a
     formula  developed by IBC. We believe IBC has disregarded key provisions in
     our exclusive licensing agreement.

     On  May  2,  2000,  the  U.S.  District  Court  denied  our  request  for a
     preliminary injunction.  The Court's decision does not affect the merits of
     the case nor our claim for money damages  against IBC, but defers them to a
     full trial,  which we expect to be held later this year.  Our claim for the
     full rights accorded to us under the exclusive license agreement,  which is
     the center of our dispute with IBC, will not impact our current operations.
     The Court  observed in its Order,  and IBC  acknowledged  in its  pleadings
     filed with the court, that our rights to sell the hand lotion in the United
     States and Canada arise from  different and separate  agreements  with IBC,
     and such rights are not affected by this lawsuit.

     If an  unfavorable  decision  were to be  rendered  against  us at the full
     trial, our business could be materially and adversely  affected.  The trial
     date has not yet been set.

NOTE 5 - REVENUES

     Net revenues are comprised of the following:

                                                         Three months ended
                                                          -----------------
                                                          Mar 31,    Mar 31,
                                                           2000       1999
                                                          ------     ------
     Distribution rights                                  $   --     $   --
     Product sales                                           352         53
                                                          ------     ------
           Net revenues                                      352         53
                                                          ======     ======

NOTE 6 - STOCKHOLDERS' EQUITY

     The Company has granted options to employees,  directors and others as well
     as  warrants  to  debt  holders  and   investors.   For  option  grants  to
     non-employees,  the Company recognizes consulting expense equal to the fair
     value of the grant.  Warrants in the  Company's  common stock are issued to
     investors,  lenders and consultants.  At March 31, 2000,  8,147,000 options
     and warrants  were  exerciseable  at a weighted  average price of $0.62 per
     share.

     A summary of the status of stock options and warrants as of March 31, 2000,
     and changes during the three months ended on that date is presented below.

                                           Options               Warrants
                                     -------------------    -------------------
                                                 Weighted               Weighted
                                                 Average                Average
                                                 Exercise               Exercise
                                       Number     Price       Number     Price
                                     ----------   ------    ----------   ------
     Outstanding at January 1, 2000   6,633,000   $  .71     2,405,000   $  .48
       Granted                          540,000      .57     1,538,000      .50
       Exercised                       (285,000)     .54      (455,000)     .55
       Expired                               --       --            --       --
                                     ----------   ------    ----------   ------
     Outstanding at March 31, 2000    6,888,000   $  .70     3,488,000   $  .48
                                     ==========   ======    ==========   ======

     Stock options and warrants were not included in the  computation of diluted
     loss per share for the periods  presented  because to do so would have been
     antidilutive.

                                        7
<PAGE>
NOTE 7 - RESTRUCTURING CHARGE

     The Company  recorded a restructuring  charge of $345 in 1999 consisting of
     involuntary  termination benefits of $263 and other related  reorganization
     costs of $82. This charge resulted from a business  reorganization approved
     by the Board of  Directors  in  December  1999  that  included  a  facility
     closure,  relocation  of  the  corporate  headquarters  into  a  more  cost
     effective location, severance costs for two Arizona based personnel and the
     write down of abandoned  fixed assets to estimated  fair value less cost to
     sell.  As of December 31, 1999,  both  employees  had been  terminated  and
     severance  payments and  benefits  are payable to December 31, 2000.  As of
     March 31,  2000,  $94 in  reorganization  costs have been paid and  applied
     against the  restructuring  accrual.  The  remaining  reorganization  costs
     consist of severance payments and are expected to be paid prior to December
     31, 2000.

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

SPECIAL NOTE CONCERNING FORWARD LOOKING STATEMENTS

     THIS  FORM  10-QSB,  INCLUDING  THE  NOTES  TO THE  CONDENSED  CONSOLIDATED
FINANCIAL STATEMENTS AND THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS,"  CONTAINS FORWARD LOOKING  STATEMENTS.  WE
MAY MAKE  ADDITIONAL  WRITTEN AND ORAL FORWARD  LOOKING  STATEMENTS FROM TIME TO
TIME IN  FILINGS  WITH THE  SECURITIES  AND  EXCHANGE  COMMISSION,  IN OUR PRESS
RELEASES, OR OTHERWISE.  THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "INTENDS,"
"FORECAST,"   "PROJECT,"  AND  SIMILAR  EXPRESSIONS   IDENTIFY  FORWARD  LOOKING
STATEMENTS.   THESE  STATEMENTS  MAY  INCLUDE,  BUT  ARE  NOT  LIMITED  TO,  THE
ANTICIPATED  OUTCOME OF  CONTINGENT  EVENTS,  INCLUDING  LITIGATION,  REGULATORY
PROCEEDINGS OR RULEMAKING,  PROJECTIONS  OF REVENUES,  INCOME,  LOSS, OR CAPITAL
EXPENDITURES,  PLANS FOR FUTURE OPERATIONS,  GROWTH AND ACQUISITIONS,  FINANCING
NEEDS OR PLANS AND THE AVAILABILITY OF FINANCING, AND PLANS RELATING TO PRODUCTS
OR PRODUCT DEVELOPMENT AS WELL AS ASSUMPTIONS RELATING TO THE ABOVE SUBJECTS.

FORWARD LOOKING  STATEMENTS  REFLECT OUR CURRENT VIEWS CONCERNING  FUTURE EVENTS
AND FINANCIAL PERFORMANCE AND SPEAK ONLY AS OF THE DATE THE STATEMENTS ARE MADE.
THESE FORWARD LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES, SOME OF
WHICH  CANNOT BE  PREDICTED OR  QUANTIFIED,  THAT COULD CAUSE ACTUAL  RESULTS TO
DIFFER  MATERIALLY FROM THOSE SET FORTH IN,  CONTEMPLATED  BY, OR UNDERLYING THE
FORWARD LOOKING STATEMENTS.  STATEMENTS IN THIS QUARTERLY REPORT,  INCLUDING THE
NOTES TO THE CONDENSED  CONSOLIDATED FINANCIAL STATEMENTS AND THIS "MANAGEMENT'S
DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF  OPERATIONS,"
DESCRIBE  FACTORS,  AMONG  OTHERS,  THAT  COULD  CONTRIBUTE  TO  OR  CAUSE  SUCH
DIFFERENCES.  SUCH FACTORS INCLUDE,  AMONG OTHER FACTORS,  THE  ACCEPTABILITY OF
EXISTING  AND  POTENTIAL  PRODUCTS  IN THE  MARKETPLACE,  THE  ABILITY TO OBTAIN
SUFFICIENT  CAPITAL TO FUND  OPERATIONS  AND THE OUTCOME OF PENDING  LITIGATION.
ADDITIONAL  FACTORS THAT COULD CAUSE ACTUAL  RESULTS TO DIFFER  MATERIALLY  FROM
THOSE EXPRESSED IN SUCH FORWARD  LOOKING  STATEMENTS ARE PRESENTED IN OUR ANNUAL
REPORT ON FORM 10-KSB FILED WITH THE SEC ON MARCH 30, 2000.

     The  following  discussion  and  analysis  provides  information  regarding
Empyrean's  financial  position  and its results of  operations  for the periods
shown. This discussion  should be read in conjunction with Empyrean's  Unaudited
Condensed  Consolidated  Financial Statements and related Notes thereto included
elsewhere in this document.

INTRODUCTION

     In 1998, we discontinued  the distribution and marketing of our Trichomonas
diagnostic  test kit.  This shift in focus  coincided  with our  acquisition  of
certain rights to use a microbicide  formulation from  International  Bioscience
Corporation  utilized in our Preventx(R)  hand sanitizer and proposed  products.
Since that time, we no longer  actively  market any of our diagnostic  products.
The decision to  discontinue  active  marketing of our prior line of  diagnostic
products and the limited revenues and substantial start-up costs associated with
introducing our new line of preventative  products have  significantly  affected
our current financial condition and operations.

     We have had limited  revenues and have  sustained  substantial  losses from
operations in recent years and have an accumulated deficit.

                                        8
<PAGE>
     We  incurred  net losses in 1998 and 1999 and expect to incur net losses at
least through 2000. We expect  operations to generate negative cash flow through
at least  2000 and we  currently  have no credit  line  available  to us.  These
factors  raise doubts  about our ability to continue as a going  concern and our
audit report contained in our annual report on Form 10-KSB filed with the SEC on
March 30, 2000 contains an explanatory paragraph with respect to this matter.

     We expect to generate  substantially all of our revenues in the future from
increased  sales of our  current  line of  preventative  products.  Prior to the
initiation  of our suit  against IBC on April 10, 2000 for breach and default on
its exclusive  licensing agreement with us, we had intended on relying on IBC to
develop  additional  preventative  products.  Now, with our suit pending against
IBC, we intend to develop  additional  preventative  products that we can market
utilizing the formulation used in our hand sanitizer product.  See Note 4. Legal
Proceedings in our notes to condensed consolidated financial statements.

     In  addition  to cost of goods  sold,  which  we  expect  to vary  somewhat
proportionately  over time,  significant cost and expense items include salaries
and  benefits,  consulting  fees,  royalties,  distribution  rights,  office and
administration,  advertising,  and legal and accounting, all of which, in total,
significantly  exceeded Empyrean's total revenues for 1999 and the first quarter
of 2000.  Accordingly,  we do not believe  comparing  costs as a  percentage  of
revenues from year to year is meaningful.

RESULTS OF OPERATIONS

COMPARISON OF QUARTERS ENDED MARCH 31, 2000 AND 1999

     Our total  revenues  in the  quarter  ended  March 31,  2000 were  $352,000
compared with $53,000 in the quarter ended March 31, 1999. Revenues increased in
the  quarter  ended  March 31,  2000 due to initial  and  reorder  shipments  to
Wal-Mart Stores, Inc., which represented approximately 97% of total revenues for
the quarter then ended.

     Our gross  margin  decreased  to 45.7% in the quarter  ended March 31, 2000
from 67.9% in the quarter  ended March 31, 1999  primarily  due to lower selling
prices of the hand  sanitizer in a higher volume retail  environment  during the
quarter ended March 31, 2000.

     We  incurred a net loss in the  quarter  ended  March 31,  2000 of $619,000
compared to a net loss of $1,108,000  in the quarter  ended March 31, 1999.  The
losses  in the first  quarter  of 2000 and 1999 were due  primarily  to  limited
revenues that were  substantially  exceeded by our costs of  operation.  Our net
loss per share for the quarter ended March 31, 2000 was $0.02  compared to a net
loss per share of $0.04 in the quarter ended March 31, 1999.  The loss per share
decreased  primarily  as a result  of the  increase  in sales  and  decrease  in
selling,  general and  administrative  expenses  and an increase in the weighted
average  number of shares  outstanding  to 35,587,000 in the quarter ended March
31, 2000 from 26,812,000 in the quarter ended March 31, 1999.

     Selling,  general and administrative  expenses decreased to $756,000 in the
quarter ended March 31, 2000 from $1,107,000 in the quarter ended March 31, 1999
primarily due to the following:

     *    Salaries and benefits decreased to $143,000 in the quarter ended March
          31, 2000 from  $196,000  in the quarter  ended March 31, 1999 due to a
          temporary reduction in our work force resulting from our relocation to
          Ohio in January 2000.
     *    Consulting  expenses  decreased to $82,000 in the quarter  ended March
          31, 2000 from $245,000 in the quarter  ended March 31, 1999  primarily
          due to less expense  recorded for stock option  grants to  consultants
          and less reliance on paid  consultants  in the quarter ended March 31,
          2000.
     *    Fees  relating to third party  distribution  of our  Preventx  product
          decreased to $58,000 in the quarter ended March 31, 2000 compared with
          $160,000 in the quarter ended March 31, 1999. We reduced  distribution
          costs by changing to an Ohio based  third party  distributor  in March
          2000,   which  also   provides   infrastructure   services   including
          distribution,  order entry, warehousing,  customer service and billing
          services.

                                        9
<PAGE>
     *    Expenses  for  royalties  increased  to $211,000 in the quarter  ended
          March 31,  2000 from  $125,000  in the  quarter  ended  March 31, 1999
          primarily  due to a  guaranteed  minimum  royalty of  $184,000  in the
          quarter  ended March 31, 2000  compared  with  $122,000 in 1999 and an
          increase in sub-license  royalty  expenses  associated  with increased
          sales of  Preventx  in the  quarter  ended  March 31,  2000 versus the
          quarter  ended  March  31,  1999.  Our  agreement  with  International
          Bioscience  Corporation,  under which we acquired the rights to market
          and distribute our current line of preventative products, provides for
          future minimum guaranteed payments that increase significantly in each
          year of the contract.  See Note 9 to our Annual Consolidated Financial
          Statements  contained  in our 1999 annual  report on Form 10-KSB filed
          with the SEC on March 30,  2000.  As a result,  we expect our expenses
          for royalties to increase  significantly on an annual basis. Unless we
          are  successful  in  generating  substantial  additional  sales of our
          preventative  products,  we are also  likely to  continue  to generate
          substantial losses from operations.  Our agreement with IBC is subject
          to significant  litigation risk. See Note 4. Legal  Proceedings in our
          notes  to  condensed   consolidated   financial   statements  included
          elsewhere in this document.
     *    Expenses for distribution  rights decreased to $0 in the quarter ended
          March 31, 2000 from $70,000 in the quarter ended March 31, 1999 due to
          the 1999  payment  for the  Canadian  distribution  rights  to the IBC
          formulation.
     *    We  incurred  advertising  and  promotion  expenses  of $41,000 in the
          quarter ended March 31, 2000 compared to $139,000 in the quarter ended
          March 31, 1999. The decrease was due primarily to a gain on settlement
          of outstanding invoices with our former advertising agency.

     Interest  expense  decreased to $6,000 in the quarter  ended March 31, 2000
from $33,000 in the quarter ended March 31, 1999 due to greater  amortization of
the fair value of warrants issued to promissory note holders in 1999.

LIQUIDITY AND FINANCIAL POSITION

     To date,  we have been unable to generate  significant  cash flows from our
business operations. As a result, we have funded our operations through investor
financing,  including sales of common stock and convertible debentures,  and the
exercise of  warrants  and  options.  Until such time as we are able to generate
significant cash flow from operations through increased sales of our products or
secure a line of  credit,  we will be  required  to  continue  our  reliance  on
investor  financing to fund our  operations.  At March 31,  2000,  cash and cash
equivalents totaled  $1,595,000,  an increase of $1,514,000 from March 31, 1999.
Also  as of  March  31,  2000,  current  assets  exceeded  current  liabilities,
consisting primarily of accounts payable and accrued liabilities, by $184,000.

     During  the  quarter  ended  March 31,  2000,  net cash  used in  operating
activities was $647,000  primarily due to a net loss from continuing  operations
of $595,000.

     In the  quarter  ended  March  31,  2000,  net  cash  flow  from  financing
activities  increased by 93%, from the comparable quarter in 1999, to $1,957,000
resulting from the sale of common stock and the exercise of options and warrants
in the amount of $1,857,000 and from the issuance of short-term promissory notes
totaling  $250,000,  with  offsetting  payments  of the  notes in the  amount of
$150,000.

     On February 23, 2000, we completed a private  placement of 6,151,050 shares
that generated gross proceeds of $3,076,000, of which $1,452,000 was received in
the  quarter  ended  March 31,  2000.  These  funds were used for the payment of
royalties, minimum license fees, outstanding short-term promissory notes and for
working  capital.  As of May 14, 2000,  we have  satisfied all of our debts with
cash or by converting  promissory notes into the Company's common stock and have
reduced past due accounts payable.

     Our  future  minimum  royalty   requirements  will   significantly   effect
liquidity.  For example,  the minimum  guaranteed royalty of $735,000 for fiscal
year 2000 is due to IBC by January  2001.  Additionally,  we are required to pay
royalties  to various  licensors  including  IBC,  depending  on the product and
country of sale, of up to 14% of net sales.

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     As of May  12,  2000,  we  have  no debt  service  or  capital  expenditure
obligations.

     We  anticipate  a  substantial  increase in cash  outlays  associated  with
increased  marketing  and  sales  of our  Preventx  preventative  product  line.
Further, we will incur additional  expenditures  associated with the development
of additional preventative products that we can market utilizing the formulation
used in our hand  sanitizer.  These  cash  outlays  could  include,  but are not
limited to, product testing, product registration costs, advertising,  inventory
purchases and a sales and marketing  campaign.  To maintain our current expenses
of approximately $3 million to $4 million per year and meet the costs associated
with our increased  marketing,  sales and development  efforts,  we will need to
raise additional capital during fiscal year 2000 or secure a line of credit.

     We do not have existing  capital  resources or credit lines  available that
are  sufficient to fund our  operations  and capital  requirements  as presently
planned over the next twelve months. We plan to pursue a working capital line of
credit to be secured by our accounts receivable and inventory. We may also raise
funds through the issuance of either debt or equity instruments.  However,  such
funds may not be  available on favorable  terms or at all.  Given the  Company's
history of  successfully  attracting  investors to fund  operations,  management
believes  that seeking  additional  equity and debt  financing is a viable plan.
Additionally,  we believe our  relationship  with  Wal-Mart  Stores,  Inc.  will
provide a more stable foundation on which to promote and obtain future funding.

     Recently,  funds have been raised from the  exercise of  outstanding  stock
options and warrants.  We have raised in excess of $400,000 in the quarter ended
March 31, 2000 from these capital raising efforts. However, this will not negate
the  need  to  raise  additional  funds  through  issuance  of debt  and  equity
instruments or with credit lines.

YEAR 2000 COMPLIANCE

     As of May 1, 2000,  the Company did not experience  material  disruption or
other significant  problems in its information  technology systems. In addition,
as of the same  date,  we are not aware of any  material  year  2000  compliance
issues  relating to  information  technology  systems of third parties which the
Company maintains material  relationships  including our contract  manufacturer,
independent warehouse and third party billing provider.

                            PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are a defendant in an action which was filed by Optima  Holding Co., Ltd. and
Mercury  Technology  Corp. on July 28, 1998 in the Circuit Court of the Eleventh
Judicial District,  Dade County, Florida. This action alleges that we tortiously
interfered with Optima and Mercury's contractual relationship with International
Bioscience  Corporation  ("IBC").  Optima and Mercury  claim that they had prior
rights to the IBC  formulation  and  products  and that we induced IBC to breach
that  agreement.  Optima and Mercury  have  requested an  unspecified  amount of
damages against us. In a separate action that has now been consolidated with the
first action in the same court,  IBC has requested a  declaratory  judgment that
IBC properly  terminated its development and  distribution  contract with Optima
and  Mercury.  Plaintiffs  also seek  injunctive  relief to prevent  IBC and its
managers and directors from allowing IBC to have further dealings with us. If we
are not  successful in this action,  we could lose the right to market,  sell or
manufacture  worldwide our hand sanitizer  product and other products  currently
under development.  This would materially and adversely affect the Company.  The
discovery in this action is proceeding.

On April  10,  2000,  we filed  suit in U.S.  District  Court  for the  Southern
District of Florida against International Bioscience Corp. (IBC) alleging breach
and  default  on  its  exclusive  licensing  agreement  with  us and  seeking  a
declaration that the exclusive  license agreement is in full force and effect as
well as  compensatory  damages.  Additionally,  we asked  the  Court to issue an
injunction which would, if granted, require IBC to maintain the status quo while
the  discovery  process and  litigation  proceeds.  Following  our request for a
preliminary  injunction,  IBC  purported  to  terminate  the  exclusive  license
agreement.  Through our  licensing  agreement,  we have the  exclusive  right to
manufacture,  sell and distribute  products based on a formula developed by IBC.
We  believe  IBC has  disregarded  key  provisions  in our  exclusive  licensing
agreement.

On May 2, 2000,  the U.S.  District  Court denied our request for a  preliminary
injunction.  The Court's decision does not affect the merits of the case nor our
claim for money damages  against IBC, but defers them to a full trial,  which we
expect to be held later this year. Our claim for the full rights  accorded to us
under the exclusive license  agreement,  which is the center of our dispute with
IBC, will not impact our current  operations.  The Court  observed in its Order,
and IBC  acknowledged in its pleadings filed with the court,  that our rights to
sell the hand lotion in the United  States and Canada arise from  different  and
separate agreements with IBC, and such rights are not affected by this lawsuit.

If an unfavorable decision were to be rendered against us at the full trial, our
business could be materially and adversely  affected.  While no assurance can be
given on the ultimate  outcome,  we believe we will be successful  should a full
trial occur. The trial date has not yet been set.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(b)  A report  on Form 8-K was filed on April  18,  2000 to  report  the suit we
     filed against International  Bioscience  Corporation for breach and default
     on its exclusive license agreement with us.

     A report on Form 8-K was filed on May 10,  2000 to report  that our lawsuit
     against International  Bioscience  Corporation (IBC) in U.S. District Court
     for the  Southern  District of Florida  will  continue  despite the Court's
     denial of its request for a preliminary injunction that would have enjoined
     IBC from certain anticipatory breaches of its exclusive licensing agreement
     with Empyrean.

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                                   SIGNATURES

     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

EMPYREAN BIOSCIENCE, INC.
     (Registrant)

5/12/00                                 /s/ Richard C. Adamany
-------                                 ----------------------------------------
(Date)                                  (Signature)

                                        Richard C. Adamany
                                        President, Chief Executive Officer
                                        And Chief Financial Officer

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