<PAGE>

                   U.S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549
                   ---------------------------------------
                                 FORM 10-QSB
                                       
(Mark One)
 X  Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
---
1934.
For the quarterly period ended September 30, 1998

    Transition report under Section 13 or 15(d) of the Exchange Act.
---
For the transition period from ___________ to ___________

Commission File Number:  0-21975

                            ECO SOIL SYSTEMS, INC.
      (Exact Name of Small Business Issuer as Specified in its Charter)

                NEBRASKA                              47-0709577
     -------------------------------              ------------------
     (State or Other Jurisdiction of              (I.R.S. Employer
     Incorporation or Organization)               Identification No.)

                             10890 THORNMINT ROAD
                         SAN DIEGO, CALIFORNIA  92127
        (Address, Including Zip Code, of Principal Executive Offices)
                                       
                                (619) 675-1660
             (Registrant's Telephone Number, Including Area Code)
                                       
      Securities registered pursuant to Section 12(b) of the Act:  None
         Securities registered pursuant to Section 12(g) of the Act:
                        COMMON STOCK, $.005 PAR VALUE
                        -----------------------------
                               (Title of Class)

Check whether the Registrant (1) has filed all reports required to be filed 
by Section 13 or 15(d) of the Securities 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
    -----       -----

State the number of shares outstanding of each of the issuer's classes of 
common equity, as of the latest practicable date: As of November 9, 1998, 
16,696,463 shares of the Registrant's Common Stock, $.005 par value per 
share, were outstanding.

Transitional Small Business Disclosure Format (check one):

YES          NO   X
    -----       -----

<PAGE>
                            ECO SOIL SYSTEMS, INC.
                              FORM 10-QSB INDEX
                                       

<TABLE>
<CAPTION>
                                                                                 PAGE
                                                                                 ----
<S>       <C>                                                                    <C>
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

          Condensed Consolidated Balance Sheets as of September 30, 1998
          (unaudited) and December 31, 1997                                         3

          Condensed Consolidated Statements of Operations (unaudited) for the
          Three Months and Nine Months Ended September 30, 1998 and 1997            4

          Consolidated Statements of Cash Flows (unaudited) for the Nine
          Months Ended September 30, 1998 and 1997                                  5

          Notes to Condensed Consolidated Financial Statements                      6

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                                 8

PART II.  OTHER INFORMATION

Item 2.   Changes in Securities and Use of Proceeds                                12

Item 5.   Other Information                                                        12

Item 6.   Exhibits and Reports on Form 8-K                                         15
</TABLE>



                                       2
<PAGE>

                                       
                                    PART I
                                       
                            FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                            Eco Soil Systems, Inc.
                                       
                    Condensed Consolidated Balance Sheets
                      (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                      September 30,      December 31,
                                                                          1998              1997     
                                                                      -------------      ------------
                                                                       (unaudited)                   
<S>                                                                    <C>                <C>        
ASSETS                                                                                               
                                                                                                     
Current assets:                                                                                      
     Cash and cash equivalents                                          $  1,850             $  3,125
     Short-term investments, available-for-sale                                -                3,000
     Accounts receivable, net                                             24,892               10,148
     Inventories                                                          15,947                5,587
     Prepaid expenses and other current assets                             5,442                  536
                                                                        --------             --------
Total current assets                                                      48,131               22,396
Property and equipment, net                                                4,424                1,150
Equipment under operating leases, net                                      5,796                6,735
Intangible assets, net                                                    15,362                6,515
Other assets                                                               3,410                  312
                                                                        --------             --------
Total assets                                                            $ 77,123             $ 37,108
                                                                        --------             --------
                                                                        --------             --------
LIABILITIES AND SHAREHOLDERS' EQUITY                                                                 
Current liabilities:                                                                                 
     Accounts payable                                                   $ 12,878             $  2,492
     Accrued expenses                                                      6,470                2,151
     Current portion of long-term obligations                                520                1,273
                                                                        --------             --------
Total current liabilities                                                 19,868                5,916
Subordinated notes                                                        15,000                    -
Long-term obligations, net of current portion                              3,599                1,412
                                                                                                     
Shareholders' equity:                                                                                
     Preferred stock                                                                                 
          $.005 par value; 5,000,000 shares authorized;                        -                    -
          none issued and outstanding                                                                
     Common stock                                                                                    
          $.005 par value; 50,000,000 and 25,000,000 shares                   83                   77
          authorized at September 30, 1998 and December 31, 1997,                                    
          respectively; 16,631,296 and 15,320,923 issued and                                         
          outstanding at September 30, 1998 and December 31, 1997,                                   
          respectively                                                                               
     Additional paid-in capital                                           49,370               43,708
     Warrants                                                              1,020                  242
     Notes receivable from shareholders                                      (15)                (282)
     Accumulated deficit                                                 (11,802)             (13,965)
                                                                        --------             --------
Total shareholders' equity                                                38,656               29,780
                                                                        --------             --------
Total liabilities and shareholders' equity                              $ 77,123               37,108
                                                                        --------             --------
                                                                        --------             --------
</TABLE>

SEE ACCOMPANYING NOTES.

Note:  The Balance Sheet at December 31, 1997 is derived from the audited 
financial statements at that date but does not include all of the disclosures 
required by generally accepted accounting principles.


                                       3
<PAGE>

                             Eco Soil Systems, Inc.
                                       
               Condensed Consolidated Statements of Operations
                    (in thousands, except per share data)
                                       
<TABLE>
<CAPTION>
                                                           Three Months           Nine Months
                                                        Ended September 30,   Ended September 30,
                                                        -------------------   -------------------
                                                          1998        1997      1998      1997
                                                          ----        ----      ----      ----
                                                            (unaudited)           (unaudited)
<S>                                                      <C>         <C>       <C>       <C>   
Revenues:
  Turf/Golf                                              $21,678     $13,824   $50,808   $28,872
  Agriculture                                              8,311          89    14,474       269
                                                         -------     -------   -------   -------
Total revenues                                            29,989      13,913    65,282    29,141
                                                                                                
Cost of revenues:                                                                               
  Turf/Golf                                               14,798       9,790    35,057    19,000
  Agriculture                                              5,323          13     9,857        59
                                                         -------     -------   -------   -------
Total cost of revenues                                    20,121       9,803    44,914    19,059
                                                                                                
Gross profit                                               9,868       4,110    20,368    10,082
                                                                                                
Operating expenses:                                                                             
  Selling, general and administrative                      6,228       2,772    15,394     7,857
  Research and development                                   145          42       313       189
                                                         -------     -------   -------   -------
Income before interest, depreciation and amortization      3,495       1,296     4,661     2,036
  Depreciation                                               510         234     1,218       376
  Amortization of intangibles                                395          56       852       401
                                                         -------     -------   -------   -------
                                                                                                
Income from operations                                     2,590       1,006     2,591     1,259
Interest expense                                             439         179       779       430
Interest income                                              147           -       353         -
                                                         -------     -------   -------   -------
Net income                                               $ 2,298     $   827   $ 2,165   $   829
                                                         -------     -------   -------   -------
                                                         -------     -------   -------   -------
                                                                                                
Net income per share of common stock - basic             $   .14     $   .07   $   .13   $   .07
                                                         -------     -------   -------   -------
Net income per share of common stock - diluted           $   .12     $   .05   $   .11   $   .06
                                                         -------     -------   -------   -------
                                                                                                
Average number of common shares outstanding:                                                    
  Basic                                                   16,598      11,840    16,214    11,266
                                                         -------     -------   -------   -------
                                                         -------     -------   -------   -------
  Diluted                                                 19,488      15,045    19,546    14,786
                                                         -------     -------   -------   -------
                                                         -------     -------   -------   -------
</TABLE>

SEE ACCOMPANYING NOTES.


                                       4
<PAGE>

                              Eco Soil Systems, Inc.
                                       
                     Consolidated Statements of Cash Flows
                                (in thousands)

<TABLE>
<CAPTION>
                                                                              Nine Months      
                                                                          Ended September 30,  
                                                                          -------------------  
                                                                           1998        1997    
                                                                           ----        ----    
                                                                              (unaudited)      
<S>                                                                      <C>          <C>      
OPERATING ACTIVITIES
Net income                                                               $  2,165      $   829 
Adjustments to reconcile net income to net cash used in                                        
 operating activities:                                                                         
  Depreciation and amortization                                             2,070          777 
  Deferred gain on sale leaseback                                               -          210 
  Gain on sale of fixed assets                                                (12)           - 
  Changes in operating assets and liabilities, net of effect                                   
   of acquired businesses:                                                                     
    Accounts receivable                                                    (6,420)      (8,359)
    Inventories                                                            (5,161)      (1,630)
    Prepaid expenses and other assets                                      (5,180)          42 
    Accounts payable                                                          224        1,941 
    Accrued liabilities                                                       (74)       1,244 
                                                                         --------      ------- 
Net cash used in operating activities                                     (12,388)      (4,946)
                                                                         --------      ------- 
                                                                                               
INVESTING ACTIVITIES
Sale of short term investments                                              3,000            - 
Payments related to acquired businesses                                    (2,452)      (1,424)
Proceeds from disposition of equipment under operating leases                   -        1,325 
Purchase of equipment under operating leases                                    -       (5,063)
Purchase of property and equipment                                         (1,311)        (715)
Purchase of patents and licenses                                              (25)           - 
                                                                         --------      ------- 
Net cash used in investing activities                                        (788)      (5,877)
                                                                         --------      ------- 
                                                                                               
                                                                                               
FINANCING ACTIVITIES                                                                           
Repayments to shareholders                                                 (1,068)        (356)
Proceeds from subordinated debt                                            15,000            - 
Proceeds from long-term debt                                               14,719         4,489
Repayments of long-term debt                                              (17,204)      (7,297)
Debt issuance costs                                                        (1,532)           - 
Repayments on capital lease obligations                                       (13)         (22)
Net proceeds from sale of common stock                                      1,999       14,071 
                                                                         --------      ------- 
Net cash provided by financing activities                                  11,901       10,885 
                                                                         --------      ------- 
                                                                                               
Net increase/(decrease) in cash and cash equivalents                       (1,275)          62 
Cash and cash equivalents at beginning of period                            3,125          150 
                                                                         --------      ------- 
Cash and cash equivalents at end of period                               $  1,850      $   212 
                                                                         --------      ------- 
                                                                         --------      ------- 
</TABLE>

SEE ACCOMPANYING NOTES.


                                       5
<PAGE>

                             ECO SOIL SYSTEMS, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.   BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements 
have been prepared in accordance with generally accepted accounting 
principles for interim financial information and with the instructions to 
Form 10-QSB and Article 10 of Regulation S-X.  Accordingly, they do not 
include all information and footnotes required by generally accepted 
accounting principles for complete financial statements.

     In the opinion of Eco Soil Systems, Inc. the ("Company"), all 
adjustments, consisting only of normal recurring adjustments, necessary for 
the fair statement of the results for the three-month and nine-month periods 
ended September 30, 1998 and 1997 have been made.  The results of operations 
for the nine-month period ended September 30, 1998 are not necessarily 
indicative of the results to be expected for the full fiscal year.

     The accompanying consolidated financial 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 
December 31, 1997.

2.   NET INCOME PER SHARE

     In accordance with Financial Accounting Standards Board Statement No. 
128, "Earnings per share" ("SFAS 128"), basic earnings per share is 
calculated by dividing net income by the weighted average number of common 
shares outstanding for the period.  Diluted earnings per share reflects the 
potential dilution of securities that could share in the earnings of the 
Company such as common stock which may be issuable upon exercise of 
outstanding common stock options, warrants and preferred stock.  These shares 
are excluded when their effects are antidilutive.  As required by SFAS 128, 
the Company has restated prior periods to be presented consistently with the 
current year.

3.   INVENTORIES 

     Inventories consist of the following, (in thousands):     

<TABLE>
<CAPTION>
                                       September 30,     December 31,
                                          1998              1997
                                       -------------     ------------
           <S>                           <C>                <C>
           Work in process               $ 6,058            $1,072 
           Finished goods                 10,071             4,645 
           Reserve                          (182)             (130)
                                         -------            ------ 
                                         $15,947            $5,587 
                                         -------            ------ 
                                         -------            ------ 
</TABLE>


                                       6
<PAGE>

                            ECO SOIL SYSTEMS, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (UNAUDITED)
                                       

4.   COMPREHENSIVE INCOME

     Effective January 1, 1998, the Company adopted Statement of Financial 
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). 
SFAS 130 requires that all items that are required to be recognized under 
accounting standards as components of comprehensive income be reported in a 
financial statement that is displayed with the same prominence as other 
financial statements.  The Company has no components of comprehensive income, 
other than net income or loss, to report.




                                       7
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS
 
     Certain statements contained in this Management's Discussion and 
Analysis that are not related to historical results are forward looking 
statements. Actual results may differ materially from those projected or 
implied in the forward-looking statements.  Further, certain forward-looking 
statements are based upon assumptions of future events, which may not prove 
to be accurate. These forward-looking statements involve risks and 
uncertainties including but not limited to those referred to in "Item 5.  
Other Information.  Factors That Could Affect Future Performance."

     This information should be read in conjunction with the financial 
statements and notes thereto included in Item 1 of this report for the 
quarter ended September 30, 1998.  Additionally, the financial statements and 
notes thereto and Management's Discussion and Analysis in the Company's 
Annual Report on Form 10-KSB for the year ended December 31, 1997 will 
provide additional information.

     In addition to other endeavors, the Company develops, markets and sells 
proprietary biological and traditional chemical products and distributes 
certain other biological and traditional chemical products to two principal 
markets: the turf and golf management market ("Turf/Golf") and the 
agricultural and crop market ("Agriculture").  


THIRD QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO THIRD QUARTER ENDED 
SEPTEMBER 30, 1997

REVENUES

     For the third quarter of 1998, revenues were $30 million, an increase of 
116% versus $13.9 million for the third quarter of 1997. The increase in 
revenues reflects an increase in both Turf/Golf and Agriculture revenues. 

     For the third quarter of 1998, Turf/Golf revenues were $21.7 million, an 
increase of 57% versus $13.8 million for the third quarter of 1997. The 
increase in Turf/Golf sales occurred in all three operating regions of the 
U.S. primarily as a result of the Company's acquisitions, in the first 
quarter of 1998, of Cannon Turf Supply, Inc. and Benham Chemical Corporation 
in the Midwest, the opening of warehouses in the West and stronger sales in 
the East. Turf/Golf revenues included royalty fees under a distribution 
agreement of $450,000.

     For the third quarter of 1998, Agriculture revenues were $8.3 million, 
compared to $89,000 for the third quarter of 1997.  Agriculture revenues 
increased as a result of the acquisitions of Agricultural Supply, Inc. in 
April 1998 and Yuma Sprinkler & Pipe Supply and Riegomex S.A. de C.V. in June 
1998.
          
GROSS PROFIT

     For the third quarter of 1998, the Company's gross profit was $9.9 
million, an increase of 140% vesus $4.1 million for the third quarter of 
1997. The increase in gross profit was due to the increase in both Turf/Golf 
and Agriculture revenues. Included in Turf/Golf revenues during the third 
quarter of 1997 were $2.4 million in revenues from a sale leaseback 
transaction, at zero margin. For the third quarter of 1998, the Company's 
gross margin was 33% versus 30% during the third quarter of 1997. The gross 
margin for the third quarter of 1997, excluding the sale leaseback 
transaction, was 36%. The 3% decrease in gross margin, net of the sale 
leaseback transaction, is a function of the product mix associated with the 
various distribution businesses acquired during 1998.

     For the third quarter 1998, the gross profit on Turf/Golf sales was $6.9 
million, an increase of 71% versus $4.0 million during the third quarter of 
1997. The increase in gross profit on Turf/Golf sales is directly related to 
the increase in Turf/Golf revenue, as previously discussed. For the third 
quarter of 1998, the gross margin on Turf/Golf products was 32% versus 29% 
during the third quarter of 1997. The gross margin of Turf/Golf products for 
the third quarter of 1997, excluding the sale leaseback transaction, was 35%. 
The 3% decrease in gross margin, net of the sale leaseback transaction, is a 
function of the product mix associated with the various distribution 
businesses acquired during 1998.

                                       8
<PAGE>

sales is directly related to the increase in Turf/Golf revenue, as previously 
discussed. For the third quarter of 1998, the gross margin on Turf/Golf 
products was 32% versus 29% during the third quarter of 1997.  The increase 
in gross margin on Turf/Golf sales was due to a change in product mix.  
     
     For the third quarter of 1998, the gross profit on Agriculture sales was 
$3.0 million, compared to $76,000 during the third quarter of 1997.  The 
increase in gross profit on Agriculture sales was directly related to the 
increase in Agriculture revenue, as previously discussed. For the third 
quarter of 1998, the gross margin on Agriculture products was 36% versus 85% 
during the third quarter of 1997.  The increase in gross margin on 
Agriculture sales was due to a change in product mix.  
     
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

     For the third quarter of 1998, selling, general and administrative 
("SG&A") expense was $6.2 million, an increase of 125% versus $2.8 million 
during the third quarter of 1997.  The increase in SG&A expense was primarily 
due to additional overhead costs associated with the previously discussed 
acquisitions partially offset by an adjustment of approximately $400,000 
related to the burden rate applied to work in process inventory.
     
RESEARCH AND DEVELOPMENT EXPENSE

     For the third quarter of 1998, research and development ("R&D") expense 
was $145,000, an increase of 245% versus $42,000 during the third quarter of 
1997. The increase in R&D expense was due to ongoing analysis and testing of 
products for the Agriculture and Turf/Golf markets.

INTEREST EXPENSE

     For the third quarter of 1998, interest expense was $439,000, an 
increase of 145% versus $179,000 for the third quarter of 1997. The increase 
in interest expense reflects an increase in the amount of debt outstanding.  
In addition, amortization of debt offering cost and warrant value of 
approximately $41,000 contributed to this increase.
     
AMORTIZATION EXPENSE
     
     For the third quarter of 1998, amortization expense was $395,000, 
compared to $56,000 for the third quarter of 1997.  The increase in 
amortization expense is due to an increase in goodwill directly related to 
the Company's recent acquisitions.

NET INCOME

     For the third quarter of 1998, net income was $2.3 million or $.12 per 
share versus net income of $827,000 or $.05 per share during the third 
quarter of 1997.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 
30, 1997

REVENUES
     
     For the first nine months of 1998, revenues were $65.3 million, an 
increase of 124% versus $29.1 million for the first nine months of 1997. The 
increase in revenues reflects an increase in both Turf/Golf and Agriculture 
revenues. 


                                       9
<PAGE>

     For the first nine months of 1998, Turf/Golf revenues were $50.8 
million, an increase of 76% versus $28.9 million for the first nine months of 
1997. The increase in Turf/Golf revenues occurred in all three operating 
regions of the U.S. as a result of the Company's acquisitions, in the first 
quarter, of Cannon Turf Supply, Inc. and Benham Chemical Corporation in the 
midwest, and the opening of warehouses in the West and East. Turf/Golf 
revenues included royalty fees under a distribution agreement of $450,000.

     For the first nine months of 1998, Agriculture revenues were $14.5 
million, compared to $269,000 for the first nine months of 1997. Agriculture 
revenues were affected favorably by the acquisitions of Agricultural Supply, 
Inc. in April 1998 and Yuma Sprinkler & Pipe Supply and Riegomex S.A. de C.V. 
in June 1998. 

GROSS PROFIT

    For the first nine months of 1998, the Company's gross profit was $20.4 
million, an increase of 102% versus $10.1 million for the first nine months 
of 1997. The increase in gross profit was due to the increase in both 
Turf/Golf and Agriculture revenues. Included in Turf/Golf revenues during the 
first nine months of 1997, were $2.4 million in revenues from a sale lease 
back transaction, at zero margin. For the first nine months of 1998, the 
Company's gross margin was 31% versus 35% for the first nine months of 1997. 
The gross margin for the first nine months of 1997, excluding the sale 
leaseback transaction, was 38%. The 7% decrease in gross margin, net of the 
sale leaseback transaction, is a function of the product mix associated with 
the various distribution businesses acquired during 1998.

     For the first nine months of 1998, the gross profit on Turf/Golf sales 
was $15.8 million, an increase of 60% versus $9.9 million during the first 
nine months of 1997. The increase in the gross profit on Turf/Golf sales is 
directly related to the increase in revenue. For the first nine months of 
1998, the gross margin on Turf/Golf products was 31% versus 34% during first 
nine months of 1997. The gross margin for the first nine months of 1997, 
excluding the sale leaseback transaction, was 37%. The 6% decrease in gross 
margin, net of the sale leaseback transaction, is a function of the product 
mix associated with the various distribution businesses acquired during 1998.

     For the first nine months of 1998, the gross profit on Agriculture sales 
was $4.6 million, compared to $210,000 during the first nine months of 1997. 
The increase in the gross profit on Agriculture sales is directly related to 
the increase in Agriculture revenue, as previously discussed. For the first 
nine months of 1998, the gross margin on Agriculture products was 32% versus 
78% during the first nine months of 1997.  The decrease in gross margin on 
Agriculture sales was due to a change in product mix.  

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 

     For the first nine months of 1998, SG&A expense was $15.4 million, an 
increase of 96% versus $7.9 million during the first nine months of 1997. The 
increase in SG&A expense was primarily due to additional overhead costs 
associated with the previously discussed acquisitions partially offset by an 
adjustment of approximately $400,000 related to the burden rate applied to 
work in process inventory.

RESEARCH AND DEVELOPMENT

     For the first nine months of 1998, R&D expense was $313,000, an increase 
of 66% versus $189,000 during the first nine months of 1997. The increase in 
R&D expense was due to ongoing analysis and testing of products for the 
Agriculture and Turf/Golf markets.

INTEREST EXPENSE

     For the first nine months of 1998, interest expense was $779,000, an 
increase of 81% versus $430,000 during the first nine months of 1997.  The 
increase in interest expense reflects an increase in 


                                      10
<PAGE>

the amount of debt outstanding.  In addition, amortization of debt offering 
cost and warrant value of approximately $41,000 contributed to this increase.

AMORTIZATION EXPENSE

     For the first nine months of 1998, amortization expense was $852,000, an 
increase of 112% versus $401,000 during the first nine months of 1997.  The 
increase in amortization expense is due to an increase in the Company's 
goodwill directly related to the previously discussed acquisitions.

NET INCOME

     For the nine months ended September 30, 1998 net income was $2.2 million 
or $.11 per share versus net income of $829,000 or $.06 per share for the 
nine months ended September 30, 1997.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has financed its operations from revenues from sales of its 
products, sales of its Common Stock, borrowing from its principal 
shareholders and bank financing.  The Company's operating and investing 
activities used cash of $5.3 million during the third quarter of 1998 and 
$13.2 million during the first nine months of 1998.

     On August 25, 1998, the Company completed two transactions providing the 
Company with $15 million in gross proceeds and the right to borrow up to an 
additional $20 million. First, the Company issued an aggregate of $15 million 
principal amount of the Company's 12.00% Senior Subordinated Notes due 2003 
(the "Notes") and warrants to purchase 262,500 shares of the Company's common 
stock (the "Warrants") pursuant to Note and Warrant Purchase Agreements dated 
as of August 25, 1998 between the Company and Albion Alliance Mezzanine Fund 
and between the Company and Paribas Capital Funding LLC. The Notes are due in 
2003 and bear interest at a rate of 12% per annum, which is due quarterly 
beginning November 25, 1998. The Warrants may be exercised on or after 
February 25, 2000 and on or prior to August 25, 2003. The Warrants have an 
exercise price of $.01 per share and carry piggyback registration rights. The 
Company has applied the proceeds from the sale of Notes and Warrants to (i) 
the repayment in full of the Company's revolving credit facility with 
Imperial Bank, term loan and other bank debt and certain promissory notes, in 
the aggregate amount of approximately $12.1 million, (ii) the payment of fees 
and expenses incurred in connection with the offering and sale of the Notes 
and Warrants and the establishment of the Credit Facility and (iii) working 
capital.

     Second, the Company entered into a Credit Agreement dated as of August 
25, 1998 with The Provident Bank, which provides for a $20 million secured 
revolving line of credit (the "Line of Credit"). The Line of Credit provides 
for advances equal to the sum of 80% of eligible accounts receivable plus 65% 
of eligible inventory. The Line of Credit has a three-year term during which 
borrowings will bear interest at a rate equal to, at the Company's option, the
adjusted prime rate (prime rate plus 1%) or adjusted LIBOR rate (LIBOR plus 
3%). Borrowings under the Line of Credit are secured by all of the Company's 
and certain of its subsidiaries' tangible and intangible assets.

     On October 9, 1998, the Company entered into the First Amendment to 
Credit Agreement (the "First Amendment") with The Provident Bank which, among 
other things, provides for a $3.5 million term construction of loan to be used
to the purchase of certain real property and the construction of improvements 
on the property. The term loan bears interest at the bank's prime rate plus 
2% and matures on the earlier of March 9, 1999 or date of the sale of the 
subject property.

     The foregoing summary of the terms of the Credit Agreement, the Purchase 
Agreement, the Notes, the Warrants and the First Amendment does not purport 
to be complete and is qualified in its entirety by reference to the full text 
of such agreements. Copies of the Credit Agreement, the Purchase Agreement, 
the Notes and the Warrants are attached to the Company's Current Report on 
Form 8-K filed on September 11, 1998 as Exhibits 10.1, 10.2, 10.3 and 10.4 
and are incorporated herein by reference. A copy of the First Amendment is 
attached hereto as Exhibit 10.5 and is incorporated herein by reference.
     
     The Company intends to fund its future operations and growth through a 
combination of product revenues, borrowings available under the line of 
credit, and public or private debt or equity financing.  However, there can 
be no assurance that such financing alternatives will be available under 
favorable terms, if at all. The Company believes that it has sufficient 
resources to finance its operations and future growth for at least the next 
twelve months.

YEAR 2000

     Many currently installed computer systems are coded to accept only two 
digit entries in the date code field. These date code fields need to be 
modified or upgraded to accept four digit entries to distinguish 21st century 
dates from 20th century dates. Many organizations are expending significant 
resources to modify or upgrade their computer systems for such "Year 2000" 
compliance. The Company presently believes that, with modifications to 
existing software and conversions to new software, the Year 2000 Problem can 
be mitigated. However, if such modifications and conversions are not made or 
are not completed timely, the Year 2000 Problem could have a material impact 
on the operations of the Company.

    The Year 2000 issue affects the Company's internal systems, including 
information technology ("IT") and non-IT systems. The Company is in the 
process of upgrading its existing computer software and IT systems and 
recognizes the need to ensure its operations will not be adversely impacted 
by Year 2000 software failures. The Company relies upon microprocessor-based 
personal computers and commercially available applications software. The 
Company also is reviewing its utility systems (heat, light, telephones, etc.) 
and other non-IT systems for the impact of Year 2000. Additionally, should 
the Company undertake future acquisitions, the Year 2000 risks that affect 
the Company can be expected to similarly affect such potential acquisition 
candidates. The Company intends to review the systems of all potential 
acquisitions for Year 2000 compliance. However, the failure to correct a 
material Year 2000 problem either within the Company, within a vendor or 
supplier or within a potential acquisition candidate could result in an 
interruption in, or a failure of, certain normal business activities or 
operations of the Company. Such interruptions or failures could materially 
adversely affect the Company's business, operating results and financial 
condition.

     The Company depends on smooth and timely interactions with its vendors, 
customers and other third parties. Any unexpected costs or disruption in the 
operations or activities of such vendors, customers or other third parties as 
a result of Year 2000 compliance issues within such entities could materially 
adversely affect the Company's business, operating results or financial 
condition. The Company intends to take continuous steps to identify Year 2000 
problems related to its vendors and to formulate a system of working with key 
third-parties, including financial institutions and utility-providers, to 
understand their ability to continue providing services and products through 
the change to Year 2000.

     The cost of the Company's Year 2000 compliance assessment and upgrade 
is being funded from current operations. The cost to the Company of its Year 
2000 identification, assessment, remediation and testing efforts, as well as 
currently anticipated costs to be incurred by the Company with respect to 
Year 2000 issues of third parties, is expected to be approximately $20,000. 
However, because of the uncertainty associated with Year 2000 failures, it is 
not possible at present to quantify the cost of corrective actions. The 
Company will continue to consider the likelihood of a material business 
interruption due to the Year 2000 issue, and, if necessary, implement 
appropriate contingency plans. A contingency plan has not been developed for 
dealing with the most reasonably likely worst case scenario, and such 
scenario has not yet been clearly identified. Since the Company has adopted a 
plan to address these Year 2000 issues, it has not developed a comprehensive 
contingency plan should Year 2000 issues fail to be addressed successfully or 
in their entirety. However, if the Company identifies significant risks or is 
unable to meet its anticipated timeline, the Company will develop contingency 
plans as deemed necessary at that time.

                                      11
<PAGE>

                                    PART II

                               OTHER INFORMATION



ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

RECENT SALES OF UNREGISTERED SECURITIES

     On June 1, 1998, the Company issued 66,667 shares of the Company's 
common stock to the shareholders of Controlled Irrigation International, Inc. 
dba Yuma Sprinkler & Pipe Supply  ("Yuma"), pursuant to an Agreement and Plan 
of Merger dated as of August 21, 1998 (the "Yuma Merger Agreement") by and 
among the Company, Yuma Acquisition Sub, Inc., a wholly owned subsidiary of 
the Company ("Yuma Merger Sub"), Yuma Sprinkler and the shareholders of Yuma 
Sprinkler (the "Yuma Shareholders").  Pursuant to the Yuma Merger Agreement, 
the Company issued to the Yuma Shareholders an aggregate of 66,667 shares of 
the Company's common stock and $279,000 in cash in exchange for all the 
outstanding common stock of Yuma.  The issuance of the Company's common stock 
in connection with the Yuma Merger Agreement was effected pursuant to the 
exemption from registration provided by Section 4(2) of the Securities Act of 
1933, as amended (the "Securities Act"), taking into account the 
representations of the Yuma Shareholders that they are accredited investors, 
they acquired the common stock of the Company for their own account and not 
with a view to any distribution thereof to the public and the absence of 
general solicitation or advertising. The Company has also agreed to make 
certain earn-out payments in cash and the Company's common stock based on the 
earnings before interest, taxes, depreciation and amortization (EBITDA) of 
the acquired company for the years ending December 31, 1998 and 1999.  The 
maximum aggregate dollar value of the 1998 and 1999 earn-out payments will be 
$400,000 and $300,000, respectively. The cost of the acquired company will be 
up to $1.5 million, which includes the fair value of the consideration given 
and direct costs. 

     On August 25, 1998, the Company issued $15 million of 12% senior 
subordinated notes due in the year 2003.  In connection with the notes, the 
Company issued the lenders warrants to purchase 262,500 shares of the 
Company's common stock.  The issuance of the warrants was made in reliance 
upon the exception from registration provided by Section 4(2) of the 
Securities Act of 1933 as amended.  The purchasers have represented to the 
Company that they are accredited investors, the warrants were acquired for 
their own account and not with a view to any distribution thereof to the 
public and the absence of general solicitation or advertising.

ITEM 5.   OTHER INFORMATION


FACTORS THAT COULD AFFECT FUTURE PERFORMANCE 

     This report contains certain forward looking statements about the 
business and financial condition of the Company, including various statements 
contained in "Management's Discussion and Analysis of Financial Condition and 
Results of Operations."  The actual results of the Company could differ 
materially from any forward looking statements contained herein.  The 
following information sets forth certain factors that could cause the actual 
results to differ materially from those contained in the forward looking 


                                      12
<PAGE>

statements.  For a more detailed discussion of the factors that could cause 
actual results to differ, see "Item 1: Business -- Factors That Could Affect 
Future Performance" in the Company's Form 10-KSB for the fiscal year ended 
December 31, 1997.

     At September 30, 1998, the Company had an accumulated deficit of $11.8 
million.  The Company has evolved from an organizational activities and 
research and development focus to a company emphasizing product introductions 
and sales and marketing.  The Company's recent losses have resulted due to 
the seasonal nature of its business as well as cost associated with its 
recent dealer acquisitions.

     In order to expand its business and achieve significant growth in sales, 
the Company must continue to broaden its sales and marketing capability and 
increase the size of its customer base, in part through the acquisition of 
independent dealers and distributors. Although sales of certain of the 
Company's products are growing, the Company's products and operations remain 
in the early stages of market introduction and are subject to the risks 
inherent in the commercialization of new product concepts. These risks 
include unforeseen problems, delays, expenses and complications frequently 
encountered in the early phases of research, development and 
commercialization of products, and expenses associated with hiring and 
training additional sales, marketing and customer service personnel.

     Distribution and sales of the Company's products have historically 
occurred through direct sales efforts and independent dealers and 
distributors. The Company has initiated a strategy of attempting to establish 
a nationwide distribution system for its products through the acquisition of 
various independent dealers and distributors. Any failure to identify 
acquisition candidates properly, any large expenditures on acquisitions that 
prove to be unprofitable, or any inability to sell the Company's proprietary 
products through the acquired distribution system could have a material 
adverse effect on the Company's business, financial position and results of 
operations.

     The Company's success will be dependent in large measure upon its 
ability to obtain and enforce patent protection for its products, maintain 
confidentiality of its trade secrets and know-how and operate without 
infringing upon the proprietary rights of third parties.  Despite precautions 
taken by the Company, it may be possible for a third party to copy or 
otherwise obtain or use the Company's products or technology without 
authorization, or to develop similar products or technology independently.

     The Company plans to acquire the rights to additional microbial 
products. The Company does not engage in its own research and development 
with respect to microbial products. Although the Company is actively seeking 
to obtain licenses for additional microbial products, there can be no 
assurance that the Company will be successful in obtaining any such licenses 
on terms acceptable to the Company, if at all.

     The Company may be exposed to liability resulting from the commercial 
use of its products. Such liability might result from claims made directly by 
customers or others manufacturing such products on behalf of the Company. The 
Company currently carries a product liability insurance policy with an 
aggregate limit of $17 million. There can be no assurance, however, that such 
product liability insurance will adequately protect the Company against any 
product liability claim. A product liability or other claim with respect to 
uninsured liabilities or in excess of insured liabilities could have a 
material adverse effect on the business and prospects of the Company.

     Some states have laws imposing liability on certain parties for the 
release of fertilizers and other agents into the environment in certain 
manners or concentrations. Such liability could include, among other things, 
responsibility for cleaning up the damage resulting from such a release. In 
addition, the federal Comprehensive Environmental Response, Compensation and 
Liability Act (CERCLA), commonly known as the "Superfund" law, and other 
applicable laws impose liability on certain parties for the release into the 
environment of hazardous substances, which might include fertilizers and 
water treatment chemicals. The Company is also subject to certain other 
environmental laws, including the Environmental Protection Act, 


                                      13
<PAGE>

the Toxic Substance Control Act, the Resource Conservation and Recovery Act, 
the Clean Air Act and the Clean Water Act and may be subject to other present 
and potential future federal, state or local regulations. The Company does 
not currently maintain insurance for any environmental claims which might 
result from the release of its products into the environment in a manner or 
in concentrations not permitted by law.  Thus, a claim for environmental 
liability could have a material adverse effect on the Company.

     The Company competes for market share with a number of companies that 
manufacture and market chemical compounds. In addition, a number of companies 
are developing biological and organic products for turf maintenance. Many of 
these competitors have substantially greater capital resources, research and 
development staffs and facilities than the Company, and many of these 
competitors have extensive experience in turf maintenance.  The fields of 
biotechnology and related technologies in which the Company is engaged have 
undergone rapid and significant technological changes. The Company expects 
that the technologies associated with its research and development will 
continue to develop rapidly. There can be no assurance that the Company will 
be able to establish itself in such fields or, if established, that it will 
be able to maintain a competitive position. Further, there can be no 
assurance that the development by others of new or improved processes or 
products will not make the Company's products and processes less competitive 
or obsolete.

     The Company is dependent upon the active participation of William B. 
Adams, its Chairman of the Board and Chief Executive Officer, and Douglas M. 
Gloff, its President and Chief Operating Officer. The loss of the services of 
either of these individuals could have a material adverse effect upon the 
Company's future operations.  The Company's success depends in large part on 
its ability to attract and retain qualified scientific, financial and 
management personnel. The Company faces competition for such persons from 
other companies, academic institutions, government entities and other 
organizations. There can be no assurance that the Company will be successful 
in recruiting or retaining personnel of the requisite caliber or in adequate 
numbers to enable it to conduct its business as proposed.


RECENT ACQUISITIONS

     In June 1998, the Company entered into a binding letter of intent to 
purchase all of the outstanding capital stock (the "Riegomex Merger") of 
Riegomex, S.A. de C.V. ("Riegomex") from the Riegomex Shareholders. Pursuant 
to a Stock Purchase Agreement dated as of  September 18, 1998 (the "Purchase 
Agreement") by and among the Company, Agricultural Adquisiciones de Mexico 
("Agricultural Sub"), Riegomex and the Riegomex Shareholders, the Company 
issued to the Riegomex Shareholders $45,943 in cash in exchange for all the 
outstanding common stock of  Riegomex. 
     
     
RECENT DEVELOPMENTS

     In October 1998, the Company purchased property in San Diego, California 
for $2.5 million in cash and intends to relocate its corporate headquarters 
to the property.  The Company financed the purchase under a $3.5 million term 
construction loan obtained from the Provident Bank.  The term loan bears 
interest at the bank's prime rate plus 2% and matures on the earlier of March 
9, 1999 or the date of the sale of the property.  The Company intends to sell 
and leaseback this property.

                                      14
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits:

<TABLE>
     <S>     <C>
     10.1(1)  Credit Agreement dated as of August 25, 1998.
     10.2(1)  Note and Warrant Purchase Agreement dated as of August 25, 1998.*
     10.3(1)  12.00% Senior Subordinated Note Due August 25, 2003.*
     10.4(1)  Common Stock Purchase Warrant Expiring August 25, 2003.*
     10.5     First Amendment to Credit Agreement dated as of October 9, 1998.
     27.1     Financial Data Schedule  
</TABLE>

     ---------------
     (1)  Incorporated by reference to the Company's Current Report on Form 8-K
          (File No. 001-12653) filed with the Commission on September 11, 1998.
      *   Includes Schedule 1 showing additional party to and differing terms
          of substantially identical document.

(b)  Reports on Form 8-K

         The Company filed a Current Report on Form 8-K under Item 5 thereof on
     September 11, 1998, relating to two transactions:  First, the Company
     issued an aggregate of $15 million principal amount of the Company's 12.00%
     Senior Subordinated Notes due 2003 and warrants to purchase 262,500 shares
     of the Company's common stock pursuant to Note and Warrant Purchase
     Agreements dated as of August 25, 1998 between the Company and Albion
     Alliance Mezzanine Fund and between the Company and Paribas Capital Funding
     LLC.  Second, the Company entered into a Credit Agreement dated as of
     August 25, 1998 with The Provident Bank, which provides for  a $20 million
     secured revolving line of credit.




                                      15
<PAGE>

SIGNATURES

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

                                         Eco Soil Systems, Inc.
 
Date: NOVEMBER 16, 1998                  By: /s/ William B. Adams
                                         ------------------------------
                                         William B. Adams
                                         Chairman and Chief Executive
                                         Officer

Date: NOVEMBER 16, 1998                  By: /s/ L. Jean Dunn, Jr.
                                         ------------------------------
                                         L. Jean Dunn, Jr.
                                         Chief Financial Officer 




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