================================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


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


                                    FORM 10-Q


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


                  For the Quarter Period Ended March 31, 1998


                           Commission File No. 0-29664


                            SOLUCORP INDUSTRIES LTD.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)


                 YUKON                                              N/A
     ------------------------------                          -------------------
       (State or jurisdiction of                               (IRS Employer
     incorporation or organization)                          Identification No.)


  250 WEST NYACK ROAD, WEST NYACK, NY                               10994
---------------------------------------                          ----------
(Address of Principal Executive Office)                          (Zip Code)


               Registrant's telephone number, including area code:
               ---------------------------------------------------
                                 (914) 623-2333


              Former name, former address and former fiscal year,
                       if changed since last report:
              ---------------------------------------------------
                                      None


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for a 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 19, 1998, there were 18,847,521 shares of Common Stock, no par value
outstanding.

================================================================================

<PAGE>



BASIS OF PRESENTATION

     The following unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information without audit. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. These unaudited statements should be read in
conjunction with the audited financial statements of the Company and notes
thereto included in the Company's Transition Report for the six month period
ended December 31, 1997. The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of the results which may be
expected for the full year ending December 31, 1998.

FORWARD LOOKING STATEMENTS

     Certain matters discussed herein may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
as such may involve risks and uncertainties. These forward-looking statements
relate to, among other things, expectations of the business environment in which
the company operates, projections of future performance, perceived opportunities
in the market and statements regarding the Company's mission and vision. The
Company's actual results, performance, or achievements may differ significantly
from the results, performances or achievements expressed or implied on such
forward-looking statements. For discussion of the factors that might cause such
a difference, see "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations."



<PAGE>




                          PART I-FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS


                            SOLUCORP INDUSTRIES LTD
                CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
                      (UNAUDITED - PREPARED BY MANAGEMENT)
                               (IN U.S. DOLLARS)

                                                         Three Months Ended
                                                              March 31,
                                                   ----------------------------
                                                       1998            1997
                                                   ------------    ------------

Revenues
   Environmental clean-up and waste disposal       $    505,151    $    279,191
   Training Institute                                     7,716           5,830
                                                   ------------    ------------
                                                        512,867         285,021
                                                   ------------    ------------
Cost of Sales and Revenue
   Environmental clean-up and waste disposal            445,122         266,078
   Training Institute                                     2,964           2,230
   Inventory storage costs                               96,815          17,255
                                                   ------------    ------------
                                                        544,901         285,563
                                                   ------------    ------------
Gross Margin                                            (32,034)           (542)
Investment and Other Income                              63,546           1,500
License fees                                            545,454               0
                                                   ------------    ------------
                                                        576,966             958
                                                   ------------    ------------
Expenses
   Administrative and general                           652,904         609,607
   Corporate development and marketing                  114,026         101,067
   Depreciation and amortization                         69,516          81,723
   Research and development                                                  52
                                                   ------------    ------------
                                                        836,446         792,449
                                                   ------------    ------------
Earnings (loss) from operations                        (259,480)       (791,491)
                                                   ------------    ------------
Earnings (loss) for the period                         (259,480)       (791,491)
Deficit, beginning of period                        (13,247,738)    (10,599,949)
                                                   ------------    ------------
Deficit, end of period                             ($13,507,218)   ($11,391,440)
                                                   ============    ============
Earnings (loss) per share                                ($0.01)         ($0.17)
                                                   ============    ============

The accompanying notes are an integral part of this statement.


<PAGE>

                            SOLUCORP INDUSTRIES LTD
                           CONSOLIDATED BALANCE SHEET
                               (IN U.S. DOLLARS)

                                                      March          December
                                                    31, 1998         31, 1997
                                                  ------------     ------------
                                                  (Unaudited)

ASSETS
Current Assets
   Cash                                           $    134,825     $     26,646
   Accounts receivable                               1,587,097          672,791
   License fees                                        136,364          490,910
   Loan receivable                                      25,000           50,000
   Due from related parties                          1,687,761        1,981,377
   Other receivables                                    51,232          100,872
   Inventories                                       1,194,894          784,815
   Prepaid expenses                                    494,778          816,495
                                                  ------------     ------------
                                                     5,311,951        4,923,906
Long Term Investments                                  373,939          368,844
Capital Assets                                         341,648          350,663
Waste Disposal Rights                                1,570,078        1,624,219
                                                  ------------     ------------
TOTAL ASSETS                                      $  7,597,616     $  7,267,632
                                                  ============     ============

LIABILITIES
Current Liabilities
   Accounts payable & accrued liabilities         $    981,679     $    868,198
   Loans payable                                       271,180          270,722
                                                  ------------     ------------
                                                     1,252,859        1,138,920
Due on waste disposal rights                         1,265,625        1,265,625
                                                  ------------     ------------
                                                     2,518,484        2,404,545
                                                  ------------     ------------
SHAREHOLDERS EQUITY
Share capital                                       18,610,765       18,135,240
Deficit                                            (13,507,218)     (13,247,738)
                                                  ------------     ------------
                                                     5,103,547        4,887,502
   Less: Cost of 8,000 shares held by
        company's subsidiary                           (24,415)         (24,415)
                                                  ------------     ------------
                                                     5,079,132        4,863,087
                                                  ------------     ------------
TOTAL LIABILITIES AND
   SHAREHOLDERS EQUITY                            $  7,597,616     $  7,267,632
                                                  ============     ============

The accompanying notes are an integral part of this statement.

<PAGE>


                            SOLUCORP INDUSTRIES LTD
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      (UNAUDITED - PREPARED BY MANAGEMENT)
                               (IN U.S. DOLLARS)

                                                           Three Months Ended
                                                                March 31,
                                                         ----------------------
                                                            1998         1997
                                                         ---------    ---------

CASH PROVIDED BY (USED IN)
  Operating activities
     Net profit (loss) for the period                    ($259,480)   ($791,491)
     Items not involving cash:
        Depreciation & amortization                         69,516       81,723
                                                         ---------    ---------
     Funds provided (used) from operations                (189,964)    (709,768)
     Non-cash working capital changes                     (485,002)     (22,777)
                                                         ---------    ---------
       Cash provided by (used in) operating activities    (674,966)    (732,545)
                                                         ---------    ---------
  Financing activities
     Issue of common shares                                475,525      709,837
     Due from related parties                              293,616      (50,035)
     Loans receivable                                       25,000
     Loans payable                                             458
                                                         ---------    ---------
       Cash provided by (used in) financing activities     794,599      659,802
                                                         ---------    ---------
  Investment activities
     (Increase) decrease in capital assets                  (6,360)      (3,487)
     (Increase) decrease in long-term investments           (5,094)      (3,212)
                                                         ---------    ---------
       Cash provided by (used in) investment
         activities                                        (11,454)      (6,699)
                                                         ---------    ---------
  Increase (decrease) in cash position                     108,179      (79,442)
  Cash position, beginning of period                        26,646       10,451
                                                         ---------    ---------
  Cash position, end of period                           $ 134,825    ($ 68,991)
                                                         =========    =========

The accompanying notes are an integral part of this statement.

<PAGE>


SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

1.    Significant Accounting Policies

         a)    Generally Accepted Accounting Principles

               The consolidated financial statements have been prepared in
               accordance with accounting principles generally accepted in
               Canada, which differ in some respects from those in the United
               States. Except as disclosed in note 21, no differences have been
               reported as they are not considered significant.

         b)    Basis of Consolidation

               The consolidated financial statements include the accounts of the
               Company and its subsidiaries. At March 31, 1998 the Company's
               subsidiaries and its percentage equity interest in each are as
               follows:

                  ESM Industries (Canada) Inc.                      100%
                  World Travel Plazas Inc.                          100%
                  World Tec Equities Inc.                           100%
                  EPS Environmental, Inc.                           100%
                  Environmental Training Institute Inc. 
                    (incorporated in the US)                        100%

         c)    Cash and Cash Equivalents

               For purposes of balance sheet classification and the statements
               of cash flows, the Company considers all highly liquid
               investments purchased with an original maturity of three months
               or less to be cash equivalents.

         d)    Estimates

               The preparation of financial statements in conformity with
               generally accepted accounting principles requires management to
               make estimates and assumptions that affect the reported amount of
               assets and liabilities at the date of the financial statements
               and the reported amounts of revenue and expenses during the
               reporting period. Actual results could differ from those
               estimates.

         e)    Fair Value of Financial Instruments

               The carrying amounts reported in the balance sheets for cash and
               cash equivalents, accounts receivable, loans and other
               receivables, accounts payable and accrued liabilities and loans
               payable approximate fair market value because of the immediate or
               short-term maturity of these financial accounts. The fair values
               of the long-term investments are not readily determinable due to
               uncertainties in their realization; however, where available, the
               quoted market prices have been disclosed. The fair value of the
               amount due on the waste disposal rights is not determinable due
               to uncertainty regarding payment.

<PAGE>


SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

         f)    Inventory

               Inventory is valued at the lower of cost or net realizable value.
               Cost is determined on a first-in, first-out basis.

         g)    Long-term Investments

               Investments are recorded at cost less a provision for permanent
               impairment in value.

         h)    Capital Assets

               Capital assets are recorded at cost. Amortization is provided
               over the estimated useful lives of the assets on the following
               bases:

                  Computer                              30% declining balance
                  Furniture and office equipment        20% declining balance
                  Leasehold improvements                 5 years straight-line
                  Remediation equipment                 30% declining balance
                  Patent costs                          10 years straight-line

         i)    Waste Disposal Rights

               Waste disposal rights are recorded at cost net of amortization.
               These rights are being amortized at the greater of $10 per ton of
               waste delivered or $216,500 per year. The Company conducts an
               annual review of the carrying value to ensure it is not in excess
               of the estimated recoverable amount of this asset (see note 10).
               Any excess amount identified as a result of this review is
               charged to income in that year as a write-down of the carrying
               value.

         j)    Reporting Currency and Translation of Foreign Currency

               The Company has adopted the United States dollar as its reporting
               currency for its financial statements prepared after March 31,
               1996. The United States dollar is the currency of the primary
               economic environment in which the Company conducts its business,
               and is considered the appropriate functional currency for its
               operations. Accordingly, the financial statements of the Company
               have been translated using the temporal method with translation
               gains and losses included in earnings. Under this method the
               operations of the Company have been converted into U.S. dollars
               at the following rates of exchange:

                  (i) Monetary assets and liabilities - at the rate of exchange
                      prevailing at the balance sheet date.

                 (ii) All other assets and liabilities - at the exchange rate
                      prevailing at the time of the transactions.


<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

                (iii) Revenue and expenses - at the average exchange rates
                      prevailing during the period.

         k)    Share Issue Costs

               Share issue costs are charged directly to the deficit.

         l)    Revenue Recognition

               Revenue from on-site remediation projects is recognized using the
               percentage of completion method of accounting. Under this method
               contract revenue is determined by applying to the total estimated
               income on each contract, a percentage which is equal to the ratio
               of contract costs incurred to date, to the most recent estimate
               of total costs which will have to be incurred upon the completion
               of the contract. Costs and estimated earnings in excess of
               billings represents additional earnings over billings, based upon
               the percentage completed, as outlined above. Similarly, billings
               in excess of costs and estimated earnings represent excess of
               amounts billed over income recognized. Provision for estimated
               losses on uncompleted contracts are made in the period in which
               such losses are determined. At March 31, 1998 there were no
               on-site projects in process.

               Revenue from in-line remediation projects is recognized using the
               completed contract method. Under this method revenue is
               recognized when work is completed and invoiced.

               Revenue from license fees, option payments and royalties are
               recognized as the accrue in accordance with the terms of the
               relevant agreements.

          m)   Research and Development

               Research and development expenditures less related government
               grants are charged to operations.

          n)   Earnings (Loss) Per Share

               The earnings (loss) per share is computed using the
               weighted-average number of common shares outstanding during the
               year.

          o)   Accounting for Stock-Based Compensation

               In October 1995 the FASB issued SFAS No. 123 "Accounting for
               Stock-Based Compensation". The statement encourages all entities
               to adopt a new method of accounting to measure compensation cost
               of all employee stock compensation plans based on the estimated
               fair value of the award at the date it is granted. Companies are,
               however, allowed to continue to measure compensation cost for
               those plans using the intrinsic value based method of accounting,
               which generally does not result in compensation expense
               recognition for most

<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

               plans. Companies that elect to remain with the existing
               accounting are required to disclose in a footnote to the
               financial statement pro forma net income and,

               if presented, earnings per share, as if SFAS No. 123 had been
               adopted. The accounting requirements of SFAS No. 123 are
               effective for transactions entered into in fiscal years that
               begin after December 15, 1995; however, companies are required to
               disclose information for awards granted in their first fiscal
               year beginning after December 15, 1995. Currently, the Company's
               stock-based compensation plan is accounted for using Canadian
               generally accepted accounting principles similar to the intrinsic
               value method prescribed by APB No. 25. The Company is in the
               process of computing the effect of adopting SFAS No. 123 and has
               not yet made a decision on whether to adopt the U.S. accounting
               policy for the fiscal period March 31, 1998. Management believes
               the financial impact of adopting SFAS No. 123 would be
               immaterial.


         2.    Accounts Receivable

                                                       March 31,    December 31,
                                                         1998          1997
                                                      ----------     --------
              Tristate Restoration Company, 
                Inc. (note 7)                         $  299,665     $293,361
              Smart International Ltd.                 1,125,734      203,796


              Other                                      202,805      216,741
                                                      ----------     --------
                                                       1,628,204      713,898

              Allowance for bad debts                    (41,107)     (41,107)
                                                      ----------     --------
                                                      $1,587,097     $672,791
                                                      ==========     ========
                                                     
         3.    License Fees

               By a letter of intent dated June 4, 1997 and an agreement dated
               September 15, 1997 the Company granted to Smart International
               Ltd. (Smart) the right to manufacture chemicals for the Company
               and the right to exclusively engage in remediation projects in
               China using the Company's technology. The agreement is for a
               ten-year term commencing from June 1, 1997 with an option to
               renew for a further 10 years. As consideration, Smart has agreed
               to pay an annual license fee of $2,000,000 per year plus a
               royalty of $5 per ton for each ton of processed material in
               excess of 100,000 tons per contract year. At March 31, 1998 the
               Company has received $500,000 of the $1,500,000 billed towards
               the license fee and has accrued an amount receivable of $136,364
               for license fees earned. No royalties were payable.


<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

          4.   Loan Receivable

                                                       March 31,    December 31,
                                                         1998           1997
                                                        -------       -------
               Loan receivable, 5% per annum, due
               November 30, 1997                        $50,000       $50,000
                                                        =======       =======


               Management expects the balance plus interest to be repaid in full
               in 1998.

          5.   Due From Related Parties

               Advances, primarily to directors, and employees related to
               directors in the amount of $1,687,761 (December, 1997 -
               $1,981,377) bear interest at 8.50%, are secured with marketable
               securities (market value at March 31, 1998 - $ 880,416) and have
               no specific terms of repayment.

          6.   Inventories

                                                         March 31,  December 31,
                                                           1998        1997
                                                        ----------   --------
              Raw Chemicals                             $1,137,515   $731,576
              Blended chemicals                             53,562     13,626
              Goods for resale                               3,817     39,613
                                                        ----------   --------
                                                        $1,194,894   $784,815
                                                        ==========   ========

          7.   Prepaid Expenses

                                                         March 31,  December 31,
                                                           1998        1997
                                                        ----------   --------
              Employment agreement (note 7a)              $250,000   $250,000
              Deposit on inventory purchase (note 7b)          --     244,250
              Consulting agreements (note 7c)              199,646    283,911
              Rental expense                                45,132     28,334
              Other                                            --      10,000
                                                        ----------   --------
                                                        $  494,778   $816,495
                                                        ==========   ========

<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

          a)   Employment agreement

               During the fiscal year ended June 30, 1997 the Company was
               negotiating with the shareholders of Tristate Restoration
               Company, Inc. (Tristate) regarding the possible acquisition of
               Tristate. Tristate is a New Jersey company specializing in the
               removal of hazardous asbestos materials. As part of the
               negotiations, the Company advanced 100,000 shares of its capital
               stock. During the six months ended December 31, 1997 and
               subsequent, negotiations continued resulting in the following:

               (i)  The Company made advances and provided other assistance to
                    Tristate to help it with its ongoing operations. These
                    advances are repayable on demand with interest at prime plus
                    1% and are secured by personal guarantees of the two
                    shareholders of Tristate and the assets of Tristate. As
                    further consideration, by an agreement dated November 7,
                    1997, Tristate agreed to pay the Company a portion of the
                    revenue collected from jobs for a period of two years from
                    June 1, 1997. As noted below, the agreement relating to the
                    revenue sharing was superseded after December 31, 1997.
                    However, Tristate has agreed to pay the Company $90,090 for
                    its share of the revenue which was included in operations
                    for that period. Subsequent to December 31, 1997, Tristate
                    made a direct assignment of one of its outstanding accounts
                    in the amount of $166,000 as further security for the
                    advances.

               (ii) The Company entered into separate employment agreements with
                    each of the two shareholders of Tristate for a minimum term
                    of five years with an option to renew for another five
                    years. The 100,000 shares originally issued prior to June
                    30,1997, as noted above, are construed as part of the
                    compensation included under the terms of the employment
                    agreements. These employment agreements were dated April 8,
                    1998. The value of the shares issued ($250,000) will be
                    amortized over the five-year term commencing on April 8,
                    1998.

          b)   Deposits on Inventory Purchase

               Subsequent to December 31, 1997 the $244,250 deposit was applied
               to purchases of raw chemicals totaling $ 415,250.

          c)   Consulting Agreements

               (i)  The Company issued 50,000 shares at $4.50 per share related
                    to a consulting agreement which has a two-year term ending
                    November 19, 1999.

               (ii) The Company issued 58,000 shares at a value of $101,000
                    related to a consulting agreement. The payment is for the
                    period June 1, 1997 to May 31, 1998.


<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

8.    Long-term Investments

                                                                                         March 31,       December 31,
                                                                                           1998              1997
                                                                                         --------          --------
          <S>                                                                           <C>               <C>
          (a)  100,500 shares of Earthworks Industries Inc. plus accrued shares
               of 40,259 (December 31, 1997 - 36,165) (note 11 and 18(d))
               (Market value $66,438)                                                    $104,382          $ 99,287
                                                                                   

          (b)  Convertible debenture from Travel Plaza Developments Inc. (Travel
               Plaza). The Company elected on December 28, 1994 to convert the
               Can $50,000 debenture into 250,000 shares of Travel Plaza. Final
               regulatory approval for this conversion from the Alberta Stock
               Exchange is still pending subject to their acceptance of a
               financing arrangement and the approval of minority shareholders.
               On August 21, 1996, pending the finalization of the required
               financing to compute the project, construction has been
               temporarily suspended and the stock of Travel Plaza has been
               halted from trading. Due to these uncertainties, the Company has
               written this investment down to a nominal value.                                 1                 1

         (c)   Convertible loan to Cortina Integrated Waste Management Inc., a
               subsidiary of Earthworks industries inc. (public company), due
               September 5, 2000 with interest at 15% per annum. The Company is
               entitled to convert all or a portion of the loan into shares of
               Earthworks Industries Inc. at any time. During the term of this
               loan, the Company has the right to offset royalty payments due to
               Earthworks Industries Inc. against the loan balance.                       208,821           208,821

          (d) A 25% interest in John Beech Remediation
              Limited (no market value).                                                        1                 1

          (e) 70,000 shares of Global Technologies Inc.
              (note 11).                                                                   60,734            60,734
                                                                                         --------          --------
                                                                                         $373,939          $368,844
                                                                                         ========          ========
</TABLE>


<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

9.   Capital Assets

                                                       March 31,    December 31,
                                                         1998           1997
                                                       --------       --------  
             Computers                                 $ 24,047       $ 24,047
             Furniture and office equipment             100,940        100,940
             Remediation equipment                      426,630        426,630
             Leasehold improvements                      15,927         15,927
             Incorporation costs                            688            688
             Patent costs                                53,177         53,177
                                                       --------       --------  
                                                        621,409        621,409

             Less: Accumulated amortization             279,761        270,746
                                                       --------       --------
                                                       $341,648       $350,663
                                                       ========       ========


10.  Waste Disposal Rights

     During the year ended June 30, 1995, the Company entered into a one-year
     agreement effective from August 1, 1994 with a non-related public company,
     Thermo Tech Technologies inc. (Thermo Tech), to deliver 3,500 tons per
     month of suitable organic waste to a bio-conversion facility located in
     Corinth, New York at $55 per ton on a put or pay basis. The Company
     delivered only approximately 5% of the waste contemplated under the
     one-year agreement. The Corinth facility experienced technical start-up
     problems and was shut down in July 1995 to correct an engineering design
     problem. On September 14, 1995 and January 17, 1996 the Company and Thermo
     Tech signed confirmation agreements which resulted in a ten-year extension
     from the put or pay agreement to commence when either the Corinth facility
     became operational, or as an alternative, when organic waste was delivered
     to another Thermo Tech facility. The agreements obligated the Company to
     pay an initial amount of $2,165,625 for the right to deliver 216,500 tons
     of acceptable organic waste ($10 per ton) plus an additional $45 per ton
     during the ten (10) year term of the agreement.

     The Company paid Thermo Tech $900,000 of the initial amount leaving
     $1,265,625 still to be paid. Thermo Tech was not able to renegotiate
     acceptable lease terms with the landlord of the Corinth facility and is
     currently planning to relocate the plant to a nearby site. The relocation
     is not expected to be completed within the next year and as a result,
     Thermo Tech has agreed that the unpaid amount of $1,265,625 is not due
     until the relocated plant is operational. Accordingly the balance due is
     reflected as a non-current payable. However, the Company expects to fully
     recover the invested amount in waste disposal rights over the ten-year
     contractual period by delivering waste to either the Corinth facility or an
     alternative Thermo Tech facility.

     The carrying value for the waste disposal rights represents a significant
     portion of the Company's assets. Measurement of the recoverability of the
     carrying value is based on an assessment of the waste disposal rates
     currently existing in the New York and New Jersey areas, and at other areas
     where Thermo Tech plants are located, and on the assumption that the
     Corinth plant will be

<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

     successfully relocated and in operation in the near future. As of March 31,
     1998, the Company has determined that no write-down is necessary. However,
     it is reasonably possible, based on existing knowledge, that changes in
     future conditions in the near term could require a material change in the
     estimated recoverable amount.

11.   Loans Payable
<TABLE>
<CAPTION>
                                                                                      March 31,        December 31,
                                                                                         1998              1997
                                                                                       --------          --------
                                                                                     (Unaudited)
             <S>                                                                       <C>                <C>
             IDM Environmental Corp., 10.25%, payable in monthly installments of
             $22,008 including principal and interest, maturing on July 1, 1998,
             secured by the Company's treasury stock, 100,500 shares of
             Earthworks Industries Ltd. (note 8a) and 70,000 shares of Global
             Technologies Inc. (note 8a) held as investments by the Company.
                                                                                       $200,748           $200,748

             Global Technologies Inc., due on demand ($100,000 Cdn).                     70,432             69,974
                                                                                       --------           --------
                                                                                       $271,180           $270,722
                                                                                       ========           ========
</TABLE>


<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

12.  Share Capital

         a)    Authorized:

          200,000,000 common shares of no par value

         b)    Issued:
<TABLE>
<CAPTION>
                                                        Three Months Ended                         Three Months Ended
                                                          March 31, 1998                             March 31, 1997
                                                           (Unaudited)                                (Unaudited)
                                                 -------------------------------            --------------------------------
                                                   Shares               Amount                Shares                Amount
                                                 ----------          -----------            ----------           -----------
<S>                                              <C>                 <C>                    <C>                  <C>        
Balance, beginning                               18,652,497          $18,135,240            15,062,463           $11,472,295
Issued pursuant to
     Stock options                                  195,500              419,525               375,000               652,140
     Warrants                                          --                   --                  51,516                57,697
                                                 ----------          -----------            ----------           -----------
                                                                         419,525               426,516               709,837

Allotted for cash                                    32,000               56,000                  --                    --
Balance, ending                                  18,879,997          $18,610,765            15,488,979           $12,182,132
                                                 ==========          ===========            ==========           ===========
</TABLE>


<TABLE>
<CAPTION>

         c)   During the three-month period ended March 31, 1998 the Company
              granted employees, directors and other individuals associated with
              Company stock options to acquire up to 465,000 shares at $3.50 per
              share. At March 31, 1998 stock options were outstanding as
              follows:

                    Shares                      Exercise Price                     Expiration Date
                --------------                 ---------------                      --------------
<S>                                                  <C>                         <C>
                   250,000                           $1.38                         December 21, 1999
                    57,500                           $1.75                             July 13, 2000
                    83,500                           $1.75                        September 12, 2000
                    53,500                           $1.75                           January 6, 2002
                 1,889,329                           $1.75                              June 9, 2002
                   882,210                           $3.47                          November 4, 2002
                   465,000                           $3.50                         February 19, 2003
<CAPTION>
         d)   At March 31, 1998 warrants were outstanding as follows:

                  Shares                         Exercise Price                     Expiration Date
              --------------                   ---------------                      --------------
<S>                                              <C>                             <C> 
                 160,000                         $1.75 - $2.00                         June 25, 1999
                 750,000                             $2.75                        September 10, 2000
                  25,000                             $4.00                             April 4, 2001
                 300,000                             $7.50                              June 3, 2001
</TABLE>

<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------
         e)   At March 31, 1998, 1,675,000 (March 31, 1997 - 1,675,000) common
              shares were held in escrow.

13.  Income Taxes

     At December 31, 1997, the Company had accumulated tax losses aggregating
     $9,636,000, which may be carried forward and applied against taxable income
     in future years up to 2003. The Company does not record the income tax
     benefit of these losses.

14.  Subsequent Events

     (a) On April 8, 1998, as part of a employment agreement (see note 7 (ii)),
the Company gave one of the shareholders of Tristate Restoration Company, Inc.
(Tristate) 300,000 Solucorp options at a price(s) to be determined.

     (b) On May 1, 1998 the Company was informed by the Securities and Exchange
Commission (SEC) that it had temporarily suspended the over the counter trading
in the securities of the Company from May 1, 1998 through May 14, 1998. The
suspension was based upon questions that were raised concerning the accuracy and
adequacy of the public information about various aspects of the Company's
business. The Company is confident that it will demonstrate to the satisfaction
of the SEC that it acted properly.

 <PAGE>

<TABLE>
<CAPTION>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
------------------------------------------------------------------------------------------------------------------------------------

15.  Segmented Information
                                                                         US Services &                        Consolidated Totals
                                                                            Products            Canada               Total
                                                                         -------------         --------        -----------------
<S>                                                                      <C>                  <C>               <C> 
     (a) Three Months Ended March 31, 1998:
                 (Unaudited)
        Revenue                                                            $512,867             $     --           $ 512,867
        License Fees                                                        545,454                   --             545,454
        Cost of sales                                                       544,901                   --             544,901
        Operating earnings (loss)
                                                                            513,420                   --             513,420
        Administrative and general                                          610,353                42,551            652,904
        Corporate development and marketing                                 100,665                13,361            114,026
        Amortization                                                         63,156                 6,360             69,516

        Segmented loss                                                    $(260,754)             $(62,272)          (323,026
                                                                         ----------              --------
        Unallocated:                                                                
        Investment and other income                                                                                   63,546
                                                                                                                  ----------
        LOSS FOR THE PERIOD                                                                                       $ (259,480)
                                                                                                                  ========== 
        IDENTIFIABLE ASSETS                                              $6,799,095              $798,521         $7,597,616
                                                                         ==========              ========         ==========
     (b) Three Months Ended March 31, 1997:
                 (Unaudited)
        Revenue                                                            $285,021              $    --            $285,021
        Cost of sales                                                       285,563                   --             285,563
                                                                         ----------              --------         ----------
        Operating earnings (loss)                                              (542)                  --                (542)

        Administrative and general                                          562,171                47,436            609,607
        Corporate development and marketing                                  95,939                 5,128            101,067
        Research and development                                               --                      52                 52
        Amortization                                                         81,723                   --              81,723
                                                                         ----------              --------         ----------
        Segmented loss                                                    $(740,375)             $(52,616)          (792,991)
                                                                         ----------              --------
        Unallocated:
        Investment and other income                                                                                    1,500
                                                                                                                  ----------
        LOSS FOR THE PERIOD                                                                                        $(791,491)
                                                                                                                  ========== 
        IDENTIFIABLE ASSETS                                              $2,817,389              $407,796         $3,225,185
                                                                         ==========              ========         ==========
</TABLE>

<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

16.  Contingencies

          a) Pending Litigation

          During May, 1998, the Company and two of its officers were served with
          a putative class action complaint alleging purported violations of the
          federal securities laws [GESTEN v. SOLUCORP INDUSTRIES LTD., et al.,
          98 Civ. 3248 (LMM) (SDNY)]. The substantive allegations of the
          complaint consist of no more than extensive quotations from prior
          statements purportedly made by the Company and general allegations
          that such statements were false and misleading. The Company has
          reviewed its prior statements and is convinced that none of such
          statements are false or misleading. The Company and the officers named
          in the complaint, after consultation with their attorneys, believe
          that the action filed against them has no merit and have determined to
          vigorously defend the action.

          b) Waste Disposal Rights

          Recoverability of the waste disposal rights is subject to the
     realization of management's assumptions as discussed in note 10.

17.  Related party Transactions

     During the three months ended March 31, 1998, the Company paid consulting
     fees and salaries of $94,920 (March 31, 1997 - $ 89,673) to directors,
     former directors and/or private companies controlled by directors and/or
     individuals related to directors.

18.  Commitments

     a)   The Company has a lease for the building it presently occupies in New
          York which requires the following payments:

                           1998                          $144,000
                           1999                          $144,000
                           2000                          $144,000
                           2001                          $144,000
                           2002 and subsequent           $ 24,000

     b)   The Company has entered into numerous non-exclusive finder's
          agreements with third parties to promote the company's soil
          remediation process. The company will pay between 1% and 7% for
          commissions on gross revenues generated by the third parties. These
          agreements expire between one and two years.

     c)   The Company entered into a finder's agreement with a third party to
          raise capital for the Company through private placements. The Company
          will pay a 5% commission on private placements raised directly or
          indirectly by the third party. The agreement expires on September 27,
          2000, with an option to renew for another five years.

<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

     d)   The Company has agreed to pay royalties to Earthworks Industries Inc.
          (Earthworks) (a Canadian public company) based on Cdn $1/ton of soil
          remediated in Canada or the United States ($1/ton will be U.S. dollars
          if soil is remediated in the United States). The Company will receive
          one share for each $1 of royalty paid, to a maximum of 200,000 shares,
          in minimum blocks of 50,000. These shares are accrued as the soil is
          remediated. An additional $1 (Cdn or US) will be paid for each ton
          remediated on contracts resulting from the efforts of Earthworks. The
          Company has the right to offset royalty payments against the
          convertible loan from Cortina Integrated Waste Management, Inc. (note
          8(c)).

     e)   The Company entered into a consulting agreement with a third party to
          provide business development and operational support. The Company will
          pay the third party $3,000 per month plus any costs over and above the
          monthly consulting fee. The agreement expires on October 1, 1998 with
          an annual renewal option.

     f)   In October 1995 the Company entered into an exclusive licensing
          agreement with a United Kingdom company for the U.K. company to
          utilize the Company's soil remediation process and to market the
          company's soil remediation technology in the U.K. The agreement
          required an annual licensing fee and a royalty per ton of soil
          remediated. This agreement will be superseded by a new agreement dated
          August 1, 1997, when the U.K. company obtains an official listing on
          the Alternative Investment Market. The Company also granted an option
          for a twelve month period to the U.K. company for a similar licensing
          agreement related to various European territories. Consideration
          received for granting the option was $200,000. On December 10, 1997
          the U.K. company advised its intention to exercise the option and to
          proceed with agreements for France, Poland, Hungary and Portugal.

19.  Comparative Figures

     The Company changed its year-end to December 31. In accordance with SEC
     guidelines the consolidated statement of operations and the consolidated
     statement of cash flow for the three month period ended March 31, 1998 was
     compared to the comparable period in 1997, whereas the consolidated balance
     sheet at March 31, 1998 was compared to the previous year ended date of
     December 31, 1997.

20.  Economic Dependence

     During the three months ended March 31, 1998, revenues of $ 183,355 and $
     131,367 were earned from two customers, of which $51,638 and $Nil is
     included in accounts receivable respectively.

     License fees of $545,454 were recognized as disclosed in note 3.

21.  Reconciliation to United States Generally Accepted Accounting Principles

     As discussed in Significant Accounting Policies, these consolidated
     financial statements are prepared in accordance with accounting principles
     generally accepted in Canada.

<PAGE>

SOLUCORP INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 & 1997
--------------------------------------------------------------------------------

     Differences in accounting principles as they pertain to these consolidated
     financial statements are as follows:

     Marketable Securities

     Under GAAP, the accounting for marketable securities depends on the
     classification of securities as held to maturity, trading or available for
     sale. The classification would be based on management's intent. Marketable
     securities included in long-term investments (note 8) would be classified
     as being available for sale. Under U.S. GAAP, such securities would be
     recorded at fair value with any changes recorded in a separate component of
     shareholder's equity. Realized gains or losses would be recorded on the
     income statements. At March 31, 1998 the effect on the presentation of
     long-term investment for U.S. GAAP purposes would not be material.


<PAGE>


SOLUCORP INDUSTRIES LTD.
Schedule of Administrative and General Expenses (US Dollars)
Three Month Periods Ended March 31, 1998 & 1997


                                                March 31,              March 31,
                                                  1998                   1997
                                     ------------------------------    --------
                                       U.S.      Canada      Total       Total
                                    --------    -------    --------    --------
Automobile                          $ 11,009    $     0    $ 11,009    $  9,343
Bad Debts                                  0          0           0           0
Bank charges and interest              3,795         78       3,873      11,560
Consulting and management fees       109,107          0     109,107      46,406
Foreign exchange (gain) loss          77,419          0      77,419      28,322
Insurance                             15,864          0      15,864      11,258
Legal, accounting and audit           77,226      5,944      83,170      34,683
Office, printing and related          38,833      3,794      42,627      32,373
Rent                                  26,670      1,783      28,453      61,426
Salaries and wages                   224,131     19,840     243,971     317,713
Telephone                             18,153      2,801      20,954      30,460
Transfer and filing fees                   0        403         403         529
Travel                                15,721        333      16,054      25,534
                                    --------    -------    --------    --------
                                    $617,928    $34,976    $652,904    $609,607
                                    ========    =======    ========    ========



<PAGE>

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


The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto.

RESULTS OF OPERATIONS

     THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS 
     ENDED MARCH 31, 1997.

Aggregate revenue (environmental clean-ups and waste disposal projects, Training
Institute fees and license fees) increased to $1,058,321 from $285,021; an
increase of $773,300 or 271% for the three months ended March 31, 1998. This
resulted primarily from increased remediation activity and from the licensing
revenue for China.

Cost of sales increased $259,338 or 91%. Part of this increase was due to the
abnormally high inventory storage costs which increased from $17,255 to $96,815
or $79,560 due to the build-up in inventory for the anticipated increased
remediation activity in 1998. The remaining increase was essentially in line
with the volume related increases from environmental cleanups.

Gross Margin reflected losses of $32,034 and $542 for the three months ended
March 31, 1998 and 1997, respectively. At this point in the Company's
development, its project costs do not yet reflect the economy of scale needed
for a normal operation. In addition, the abnormal inventory storage costs and
non-billable treatability work at the current revenue level has hindered
profitability.

Investment and other income increased to $63,546 from $1,500; an increase of
$62,046. This increase resulted primarily from interest charged on related party
loans and from the Company's advances to Tristate for a joint venture project.

Selling, general and administrative expenses ("SG&A") increased $43,997 or 6% in
the three months ended March 31, 1998 when compared to the comparable period in
1997. This increase occurred primarily from increased legal activity related to
the Company's operations, and an increased foreign exchange loss; partially
offset by lower rent costs. The shift from in-house labor to outside consultants
essentially offset.

For the three months ended March 31, 1998 the Company reported a loss of
$259,480. However, this was $532,011 or 67% lower than the $791,491 loss
experienced in the comparable period in 1997. This reduced loss essentially
reflects the Company's attempt to bring its unit costs and other costs in line
with a more normal level of activity.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1998, the Company had working capital of $4,059,092, an increase of
$274,106 or 7% from the $3,784,986 reflected at December 31, 1997. Within the
current 



<PAGE>


assets significant increases occurred in cash, accounts receivable, and
inventories; whereas significant decreases occurred in unbilled license fees,
due from related parties and prepaid expenses. Within the current liabilities,
accounts payable reflected the only significant increase.

CASH FLOWS

During the three months ended March 31, 1998, the Company increased its cash
position $108,179 versus a decreased cash position of $79,442 in the comparable
period in 1997. In the current period, cash was provided mainly from the
issuance of the Company's capital stock and the repayment of related party
loans. This was used primarily to fund the current loss and the other operating
activities.

OTHER

The carrying value of the waste disposal rights ($1,570,078) at March 31, 1998,
represented a significant portion of the Company's assets. Measurement of the
recoverability of the carrying value was based on an assessment of the waste
disposal rates currently existing in the New York and New Jersey areas, and at
other areas where Thermo Tech plants are located, and on the assumption that the
relocation of the Corinth plant and/or some other Thermo Tech plants will be in
operation in the near future. However, it is reasonably possible, based upon
existing knowledge, that changes in future conditions in the near term could
require a material change in the estimated recoverable amount. Accordingly, the
Company is currently amortizing these rights $216,500 per year, which has left a
net amount of $304,453 at March 31, 1998.

In anticipation of significantly increased remediation activity in 1998, and due
to the relatively long lead time required to purchase one of the main chemical
ingredients in MBS, the Company continued to increase its inventory of this
chemical in the three months ended March 31, 1998. This was the primary reason
for the inventory increasing $410,079 from the $784,079 at December 31, 1997.

On May 1, 1998, the Company was informed by the Securities and Exchange
Commission (SEC) that it had temporarily suspended the over the counter trading
in the securities of the Company from May 1, 1998 through May 14, 1998. The
suspension was based upon questions that were raised concerning the accuracy and
adequacy of the public information about various aspects of the Company's
business. The Company is confident that it will demonstrate to the satisfaction
of the SEC that it acted properly.

PENDING LITIGATION

During May 1998 the Company and two of its officers were served with a putative
class action complaint alleging purported violations of the securities laws
[GERSTEN v SOLUCORP INDUSTRIES LTD, et al., 98 Civ. 3248 (LMM)(SDNY)]. The
substantive allegations of the complaint consist of no more than extensive
quotations from prior statements purportedly made by the Company and general
allegations that such statements were false and misleading. The Company has
reviewed its prior statements and is convinced that none of the statements are
false or misleading. The Company and the officers named in the complaint, after
consultation with their attorneys, believe that the action filed against them
has no merit and have determined to vigorously defend the action.



<PAGE>




                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During May 1998 the Company and two of its officers were served with a putative
class action complaint alleging purported violations of the securities laws
[GERSTEN v SOLUCORP INDUSTRIES LTD, et al., 98 Civ. 3248 (LMM)(SDNY)]. The
substantive allegations of the complaint consist of no more than extensive
quotations from prior statements purportedly made by the Company and general
allegations that such statements were false and misleading. The Company has
reviewed its prior statements and is convinced that none of such statements are
false or misleading. The Company and the officers named in the complaint, after
consultation with their attorneys, believe that the action filed against them
has no merit and have determined to vigorously defend the action.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     (a) None

     (b) None

     (c) During the period covered by this report, the Company sold an aggregate
of 195,500 shares of common stock to officers, directors, employees and
consultants for cash consideration of $419,525.00 upon the exercise of stock
options which were granted before the Company was subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended. No commission was paid upon the exercise of the options nor was any
person acting as underwriter with respect to the sales. The offers and sales are
claimed to be exempt pursuant to Rule 781 under the Securities Act of 1933, as
amended in that such sales were offered and sold:

          (1) pursuant to written option agreements issued prior to the time the
     Company was subject to reporting obligations under the Exchange Act;

          (2) the compensation options were granted for bona fide services
     rendered not related to capital raising transactions; and

          (3) the number of shares issued does not exceed 15% of the shares of
     the Company's common stock outstanding nor does the amount received upon
     the exercise of the options exceed $5,000,000 during the preceding 12
     months.

     (d) Not Applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None

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

     None

ITEM 5. OTHER

On May 1, 1998, the Company was informed by the Securities and Exchange
Commission (SEC) that it had temporarily suspended the over the counter trading
in the securities of the Company from May 1, 1998 through May 14, 1998. The
suspension was based upon questions that were raised concerning the accuracy and
adequacy of the public information about various aspects of the Company's
business, The Company is confident that it will demonstrate to the satisfaction
of the SEC that it acted properly.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) The following exhibits are filed as part of this report:


                                       4



<PAGE>
         11    Statement Re: Computation of Earnings Per Share

         27    Financial Data Schedule
               
         99.1  Licensing Agreement dated March 20, 1998 between KBF Pollution
               Management, Inc. and EPS Environmental, Inc. d/b/a Solucorp
               Industries.
               
         99.2  Agreement dated April 8, 1998 between M.H. Meyerson & Co., Inc.
               and Solucorp Industries Ltd.
               
         99.3  Finders Agreement dated April 22, 1998 between EPS Environmental,
               Inc. d/b/a Solucorp Industries and Scopus Evaluation Services,
               Inc.
               
         99.4  Letter Agreement dated May 18, 1998 between KBF Pollution
               Management, Inc. and Solucorp Industries Ltd. and Sommer &
               Schneider LLP

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


                                       5


<PAGE>


                                   SIGNATURES

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


Dated: May 21, 1998

                                          SOLUCORP INDUSTRIES LTD.


                                          By: /s/ PETER MANTIA
                                              ----------------------------------
                                                  Peter Mantia, President

                                          By: /s/ VICTOR HERMAN
                                              ----------------------------------
                                                  Victor Herman, CFO
                                                  (Principal Accounting Officer)


                                       6

<PAGE>

                                 EXHIBIT INDEX
                                 -------------

Exhibit No.                         Description
-----------                         -----------

    11            Statement Re: Computation of Earnings Per Share

  99.1            Licensing Agreement dated March 20, 1998 between KBF Pollution
                  Management, Inc. and EPS Environmental, Inc. d/b/a Solucorp
                  Industries

  99.2            Agreement dated April 8, 1998 between M.H. Meyerson & Co.,
                  Inc. and Solucorp Industries Ltd.

  99.3            Finders Agreement dated April 22, 1998 between EPS
                  Environmental, Inc. d/b/a Solucorp Industries and Scopus 
                  Evaluation Services, Inc.

  99.4            Letter Agreement dated May 18, 1998 between KBF Pollution
                  Management, Inc. and Solucorp Industries Ltd. and Sommer &
                  Schneider LLP

    27            Financial Data Schedule