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

                                   FORM 10-QSB

(Mark One)

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

     For the quarterly period ended January 31, 1998

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

            For the Transition period from __________ to __________.

                        Commission File Number: 0 -17072

                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
        (Exact name of small business issuer as specified in its charter)

           Delaware                                            11-2844247
(State of other jurisdiction of                               (IRS Employer
 incorporation or organization)                           Identification Number)

                100 Sweeneydale Avenue, Bay Shore, New York 11706
                    (Address of principle executive offices)

                                 (516) 694-7060
                           (Issuer's telephone number)

Indicate by check mark  whether the issuer (1) filed all reports  required to be
filed by Section 13 or 15 (d) of the Securities  Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
the past 90 days.

                  Yes _X_     No___

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common equity, as of the latest practicable date.

Common Stock, Par Value $.0001                            10,946,574
    (Title of Each Class)                     (Outstanding at February 28, 1998)

Transitional Small Business Disclosure Format (check one):  Yes___     No _X_


<PAGE>


PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements

              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                       January 31,
                                                                          1998          April 30,
                                                                       (Unaudited)        1997
                                                                      ------------    ------------
<S>                                                                   <C>             <C>         
ASSETS
CURRENT ASSETS
    Cash                                                              $    153,682    $    654,377
    Accounts receivable, net of allowance for doubtful
       accounts of $175,395 and $200,000 at January 31,
       1998 and April 30, 1997, respectively                             2,437,112       2,195,284
    Inventories                                                            163,957         158,714
    Costs in excess of billings on contracts in progress                   118,190            --
    Due from officer                                                        73,455            --
    Other current assets                                                   207,327         426,220
                                                                      ------------    ------------
            Total current assets                                         3,153,723       3,434,595
                                                                      ------------    ------------

PROPERTY AND EQUIPMENT, net of
    accumulated depreciation and amortization                            2,966,353       2,841,783
                                                                      ------------    ------------

OTHER ASSETS
    Goodwill, net                                                        1,411,288       1,529,320
    Notes receivable, net of current portion                               224,056         200,282
    Other assets                                                           196,110         233,271
                                                                      ------------    ------------

    TOTAL ASSETS                                                      $  7,951,530    $  8,239,251
                                                                      ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES

    Note payable to bank                                              $    703,675    $       --
    Accounts payable and accrued expenses                                3,706,785       2,573,708
    Payroll taxes payable                                                  581,014         347,404
    Current portion of long-term debt                                      606,599         765,432
    Billings in excess of cost on contracts in progress                     56,000          18,765
    Obligations of unconsolidated subsidiary, net                          196,112         196,112
                                                                      ------------    ------------
            Total current liabilities                                    5,850,185       3,901,421

OTHER LIABILITIES
    Convertible notes                                                      800,000         800,000
    Long-term debt, net of current portion                                 309,785         454,560
    Other liabilities                                                       75,000            --
                                                                      ------------    ------------

            Total liabilities                                            7,034,970       5,155,981
                                                                      ------------    ------------

SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
 par value $.01; 1,300,000 shares issued and outstanding                 1,300,000       1,300,000

STOCKHOLDERS' EQUITY (DEFICIT)
    Preferred stock, $.01 par value,
      10,000,000 shares authorized; 1,300,000
      Series A redeemable convertible shares issued and outstanding           --              --
    Common stock, $.0001 par value,
      50,000,000 shares authorized;
      10,715,086 shares issued, 10,695,086 outstanding                       1,072             979
    Additional paid-in capital                                          28,057,366      27,318,031
    Treasury stock, 20,000 shares at cost                                  (10,000)        (10,000)
    Accumulated deficit                                                (28,316,240)    (25,379,601)
    Less deferred compensation                                            (115,638)       (146,139)
                                                                      ------------    ------------
            Total stockholders' equity (deficit)                          (383,440)      1,783,270
                                                                      ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                  $  7,951,530    $  8,239,251
                                                                      ============    ============
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                        1


<PAGE>


              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                  Three Months Ended                      Nine Months Ended
                                                                  ------------------                      -----------------
                                                                     January 31,                              January 31,
                                                               1998                1997                1998                1997
                                                           ------------        ------------        ------------        ------------
<S>                                                        <C>                 <C>                 <C>                 <C>         
Revenues                                                   $  2,840,676        $  4,016,481        $  9,737,411        $ 12,268,023

Cost of revenues                                              2,413,511           3,420,747           8,367,363           9,383,515
                                                           ------------        ------------        ------------        ------------

    Gross profit                                                427,165             595,734           1,370,048           2,884,508

Selling, general and administrative                           1,236,740             974,627           3,819,853           3,181,305
Special charges                                                    --               150,000                --             1,343,000
                                                           ------------        ------------        ------------        ------------

 Loss before other
   income(expense)                                             (809,575)           (528,893)         (2,449,805)         (1,639,797)
                                                           ------------        ------------        ------------        ------------

Other income (expense):
 Settlement of legal claims, net                                102,993                --               102,993             296,654
 Losses on investments                                             --                  --                  --              (295,071)
 Gain on sale of assets, net                                       --                  --                 1,735             221,710
 Interest expense                                               (90,366)            (21,138)           (591,562)            (48,721)
                                                           ------------        ------------        ------------        ------------
     Total other income (expense)                                12,627             (21,138)           (486,834)            174,572
                                                           ------------        ------------        ------------        ------------

         Net loss                                          $   (796,948)       $   (550,031)       $ (2,936,639)       $ (1,465,225)
                                                           ============        ============        ============        ============

Loss per common share                                      $       (.08)       $       (.06)       $       (.29)       $       (.16)
                                                           ============        ============        ============        ============

Weighted average number of
common shares outstanding                                    10,475,481           9,727,371          10,147,194           9,125,444
                                                           ============        ============        ============        ============
</TABLE>


See Accompanying Notes to Consolidated Financial Statements.


                                        2



<PAGE>


              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                   FOR THE NINE MONTHS ENDED JANUARY 31, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                             Common Stock  
                                          ------------------    Additional
                                          Number of     Par      Paid-in      Treasury     Accumulated      Deferred
                                           Shares      Value     Capital        Stock        Deficit      Compensation     Total
                                          ---------    -----     -------        -----        -------      ------------     -----
                                                                                                          
<S>                                       <C>         <C>      <C>            <C>         <C>              <C>          <C>        
Balance at April 30, 1997                 9,766,074   $  979   $27,318,031    $(10,000)   $(25,379,601)    $(146,139)   $ 1,783,270
                                                                                                          
Issuance of common stock for services       630,112       63       263,203        --              --         (15,000)       248,266
                                                                                                          
Issuance of stock options for services         --       --          10,000        --              --            --           10,000
                                                                                                          
Issuance of common stock for                                                                              
 employee and director compensation         207,558       21       141,513        --              --        (150,000)        (8,466)
                                                                                                          
 Issuance of common stock to settle                                                                       
   legal obligations                         91,342        9        40,561        --              --            --           40,570
                                                                                                          
Accretion of discount on  convertible                                                                     
    notes                                      --       --         356,154        --              --            --          356,154
                                                                                                          
Amortization of deferred compensation          --       --            --          --              --         195,501        195,501
                                                                                                          
Dividends                                      --       --         (72,096)       --              --            --          (72,096)
                                                                                                          
Net loss                                       --       --            --          --        (2,936,639)         --       (2,936,639)
                                         ----------   ------   -----------    --------    ------------     ---------    -----------
                                                                                                          
Balance at January 31, 1998              10,695,086   $1,072   $28,057,366    $(10,000)   $(28,316,240)    $(115,638)   $  (383,440)
                                         ==========   ======   ===========    ========    ============     =========    ===========
</TABLE>


See Accompanying Notes to Consolidated Financial Statements.


                                        3


<PAGE>


              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            FOR THE NINE MONTHS ENDED
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                January 31,            January 31,
                                                                                   1998                    1997
                                                                                -----------            -----------
<S>                                                                             <C>                    <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                                    $(2,936,639)           $(1,465,225)
    Adjustments to reconcile net loss to net cash
    flows from operating activities:
      Depreciation and amortization                                               1,329,463                529,125
      Provision for doubtful accounts                                                80,187                 93,000
      Issuance of common stock and stock options for services                       138,246                240,945
      Losses on investment                                                             --                  295,071
      Special charges                                                                  --                  251,000
      Gain on settlement of lawsuit                                                (102,993)                  --
      Gain on sale of assets                                                         (1,735)              (221,710)
      Other, net                                                                       --                   25,000
    Changes in operating assets and liabilities:
      Accounts receivable                                                          (322,016)              (369,996)
      Other current assets                                                          360,623               (226,421)
      Inventories                                                                    (5,242)                  --
      Other assets                                                                  (10,181)                22,652
      Accounts payable and accrued expenses                                       1,311,451                560,007
      Payroll taxes payable                                                         233,610               (188,434)
      Costs in excess of billings on contracts in progress, net                     (80,955)                  --
                                                                                -----------            -----------

NET CASH USED BY OPERATING ACTIVITIES                                                (6,181)              (454,986)
                                                                                -----------            -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Obligations of unconsolidated subsidiary, net                                      --                  145,055
    Proceeds from sale of assets                                                     14,614                221,710
    Collection of notes receivable                                                   43,903               (265,000)
    Due from officer                                                                (73,455)                  --
    Acquisition of fixed assets and leasehold improvements                         (623,692)              (774,311)
                                                                                -----------            -----------

NET CASH USED BY INVESTING ACTIVITIES                                              (638,630)              (672,546)
                                                                                -----------            -----------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from note payable                                                         --                  100,000
    Proceeds from long term debt                                                       --                  566,419
    Principal payments of long-term debt                                           (536,213)              (277,662)
    Proceeds from revolving bank line, net                                          703,675                   --
    Dividends paid on redeemable preferred stock                                    (23,346)                  --
    Proceeds from issuance of common stock                                             --                1,129,413
                                                                                -----------            -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                           144,116              1,518,170
                                                                                -----------            -----------

NET INCREASE (DECREASE) IN CASH                                                    (500,695)               390,638

CASH - BEGINNING                                                                    654,377                282,933
                                                                                -----------            -----------

CASH - ENDING                                                                   $   153,682            $   673,571
                                                                                ===========            ===========

Cash paid during the period for:

Interest                                                                        $   142,422            $    50,699
                                                                                ===========            ===========
Taxes                                                                           $      --              $       346
                                                                                ===========            ===========
</TABLE>


See Accompanying Notes to Consolidated Financial Statements.


                                        4


<PAGE>


              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED JANUARY 31, 1998
                                   (Unaudited)

1.   BASIS OF PRESENTATION

     The accompanying  unaudited condensed  consolidated financial statements of
     the Company have been prepared by management in accordance  with  generally
     accepted accounting  principles for interim financial  information and with
     the   instructions   to  Form  10-QSB  and  Item  310  of  Regulation  S-B.
     Accordingly,  they do not  include  all of the  information  and  footnotes
     required by generally accepted accounting principles for complete financial
     statements.  In the opinion of management,  all adjustments  (consisting of
     normal recurring  accruals)  considered  necessary for a fair  presentation
     have been included.  The results of operations for interim  periods are not
     necessarily  indicative  of the results to be  expected  for the full year.
     These  consolidated   interim  financial   statements  should  be  read  in
     conjunction with the financial statements and notes thereto included in the
     Company's Form 10-KSB for the fiscal year ended April 30,1997.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Reclassifications   -  Certain   amounts   included  in  the  prior  year's
     consolidated  financial  statements have been  reclassified to conform with
     the current periods presentation.

3.   LIQUIDITY AND BUSINESS RISKS

     As  of  January  31,  1998  the  Company  has  an  accumulated  deficit  of
     $28,316,240  and has not generated  positive  cash flow from  operations to
     date.  The Company has financed its  operations to date  primarily  through
     issuances of debt and equity  securities.  At January 31, 1998, the Company
     had  $153,682  in cash,  and a working  capital  deficit  of  $2,696,462  (
     inclusive of the $703,675 note payable to bank). In addition, as of January
     31, 1998,  the Company was in arrears  with respect to certain  payroll tax
     obligations  of  approximately  $581,000.  As of February 28, 1998 this was
     amount was reduced to  $556,000,  as part of an  arrangement  with  federal
     payroll tax authorities. See Note 7.

     In May 1997, the Company  entered into a revolving bank credit  facility to
     obtain a  revolving  credit line of  $1,500,000,  secured by certain of the
     Company's assets. Borrowings remain at a maximum of $750,000.

     On February 13, 1998 the Company and its lender,  North Fork Bank,  entered
     into an agreement to amend its current  revolving  credit facility with the
     bank.  Under the  agreement,  the Company agreed to pay off all amounts due
     the bank in excess of $200,000.  The $200,000 balance was then converted to
     a term note over two years at prime plus 3%. The Bank agreed to release its
     lien on the Company's  accounts  receivable  and take a secondary  position
     thereon,  but maintained its lien on all the Company's  equipment and other
     assets.  In  addition,  the  bank  secured  the  personal  guaranty  of the
     Company's chief executive officer. The Company then entered into an initial
     six month factoring arrangement on its accounts receivable and paid off the
     bank  approximately  $550,000.  As of March,  1998 the factor had  advanced
     approximately $1,000,000 to the Company.

     The Company is  presently  in  discussions  to obtain  other  secured  debt
     financing  to satisfy its  outstanding  payroll and other  working  capital
     obligations.  The  Company  has  recently  implemented  major  cost  saving
     measures to improve its gross margin and control its selling,  general, and
     administrative expenses.  There can be no assurance,  however, that changes
     in the Company's plans or other events  effecting the Company's  operations
     will not result in accelerated or unexpected cash requirements,  or that it
     will be  successful  in  obtaining  the  additional  financing  to meet its
     obligations as they become due. The Company's future cash requirements will
     depend on numerous factors,  including,  but no limited to: (I) the ability
     to generate  positive cash flow from operations,  and (ii) general economic
     conditions.

4.   EQUITY TRANSACTIONS

     On December 24, 1997, the Company filed an S-8  Registration  statement for
     its 1997 Incentive Plan ("Plan").  Under the Plan, the Company is permitted
     to grant up to a maximum of 1,000,000 common stock awards,  incentive stock
     options and options not so qualifying. As of February 28, 1998 no incentive
     stock options have been issued.


                                        5


<PAGE>


              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED JANUARY 31, 1998
                                   (Unaudited)

4.   EQUITY TRANSACTIONS (CONT.)

     On December 29, 1997, the Company issued non-qualified stock options to all
     of its employees  (1,341,394  options),  officers  (220,800  options),  and
     directors  (300,000  options),  exercisable at $.22 per share.  The options
     vest after a two year holding period.  In addition,  150,000  non-qualified
     stock  options  exercisable  at $.22 per  share  were  issued  to its Chief
     Financial Officer in connection with his employment. The Board of Directors
     also  authorized  the  repricing of all options  exercisable  above $.22 to
     current officers,  directors,  and employees previous to December 29, 1997,
     to $.22.

     On March 13, 1998  certain  employees  of the Company  were issued  285,000
     non-qualified  stock options exercisable at $.13. These options were issued
     to replace the 262,306 options forfeited in the current fiscal year.

5.   RELATED PARTY TRANSACTIONS

     Due from officer represent  interest bearing (8%) advances to the Company's
     chief executive officer due upon demand.

     The Company  purchased  materials  and  supplies  of $166,232  for the nine
     months ended January 31, 1998,  and had an outstanding  balance  payable of
     $92,884 to Eastco  Industrial  Safety Corp., of which one of it's directors
     is affiliated. The same director is owed $100,000 on a 12% convertible note
     payable in full on December 1999.  Accrued interest of $15,500 on this note
     is included in accrued expenses.

6.   STATEMENTS OF CASH FLOWS

     During the nine months  ended  January 31, 1998,  the Company  financed the
     acquisition  of certain  machinery  and office  equipment of  approximately
     $126,000  through  various capital lease  transactions  and certain vehicle
     financing,   and  recorded  approximately  $106,000  of  prepaid  insurance
     premiums which it financed.

     The  Company  utilized  424,876  shares  of its  common  stock  (valued  at
     approximately  $242,000)  to repay  liabilities  of  $227,000  and  prepaid
     certain public relations expenses in the amount of $15,000.

     In connection with an employment agreement reached during the first quarter
     of fiscal 1998 the Company recorded deferred compensation of $150,000 after
     issuing  100,000 shares of its common stock valued at $75,000 and recording
     an other liability of $75,000 for the shares to be issued on the employment
     anniversary date.  Additionally,  the Company accrued $48,750 of dividends,
     of which $39,000 are in arrears on the redeemable preferred stock.

7.   COMMITMENTS AND CONTINGENCIES

     The United  States  Attorney  for the Eastern  District of New York has not
     concluded the investigation of the Company it began in October 1996.

     The  Company is  awaiting  the  decision  of the  Securities  and  Exchange
     Commission  concluding as to whether it will follow a staff  recommendation
     that an  enforcement  action be filed seeking an injunction  against future
     violations  by  the  Company  of  the  securities  laws.  The  Company  has
     vigorously  opposed this  recommendation  on the grounds that all employees
     accused of wrongdoing  have been  terminated  and other  adequate  remedial
     measures have been taken voluntarily by the Company.

     The Company has previously reached certain short term agreements on certain
     of its past due federal payroll withholding taxes. The Company is presently
     negotiating  to  extend  the  short  term  agreement  into  a  longer  term
     arrangement  covering all past due  withholding  taxes. It is the Company's
     intent to clear up the  balance of these taxes as soon as it can obtain the
     necessary  financing.  No assurance  can be given that the tax  authorities
     will not immediately seek payment of the taxes, or that the tax authorities
     will not  commence an action or file a lien against the Company in order to
     recover the taxes.


                                        6


<PAGE>


              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED JANUARY 31, 1998
                                   (Unaudited)


7.   COMMITMENTS AND CONTINGENCIES (CONT.)

     On December  10, 1997 the  Company  settled a lawsuit  relating to $250,000
     which former  management  advanced  during fiscal 1994 to the Mohave Shores
     Development,  Inc. (Mohave) in anticipation of developing land on an Indian
     reservation in Arizona under a joint venture agreement. The Company expects
     to receive  $120,000 over a four year period under a  non-interest  bearing
     arrangement with payments once a year.

     The  Company is party to other  litigation  matters  and  claims  which are
     normal in the course of its operations, and while the results of litigation
     and claims cannot be predicted with certainty,  management believes,  based
     on advice of counsel,  the final  outcome of such  matters  will not have a
     materially adverse effect on the Company's consolidated financial position,
     results of operations and cash flows of the Company.


                                        7


<PAGE>


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

The following discussion of the fiscal quarters ended January 31, 1998 and 1997,
should  be  read  in  conjunction  with  the  Condensed  Consolidated  Financial
Statements contained herein.

RESULTS OF OPERATIONS

Net loss and loss per share for the quarter and nine  months  ended  January 31,
1998 was $796,948 and $.08 and $2,936,639 and $.29, respectively,  compared to a
net loss and loss per share for the quarter and nine  months  ended  January 31,
1997 of $550,031 and $.06 and $1,465,225 and $.16, respectively.

Revenues for the quarter ended January 31, 1998 decreased $1,175,905, or 29%, to
$2,840,676 from $4,016,481. Gross margins were comparable at 15%. The decline in
quarterly  revenues is reflective of approximately  $1,400,000  generated in the
comparable  quarter in fiscal 1997 on the 60 Broad Street Asbestos Project.  The
current fiscal quarter includes $341,000 of revenues generated by North Atlantic
Laboratories purchased by the Company in February 1997 (and therefore not in the
prior comparative  quarter).  Revenues generated by North Atlantic  Laboratories
for the nine months  ended  January 31, 1998 were  $1,251,000.  Revenues for the
first nine months of fiscal 1998 decreased by $2,530,612,  or 21%, to $9,737,411
from  $12,268,023 , while gross margins  declined to 14% compared to 24% for the
first nine  months of fiscal  1997.  In the  quarters  ended  July 31,  1996 and
October 31, 1996 the Company generated revenues of $2,400,000 on a New York City
Housing  Authority  paint removal  project.  Revenue  generated by New York City
Agencies approximated 20% of total revenues in fiscal 1997. The Company has been
prohibited  from  bidding on these  projects  in fiscal  1998 due to the ongoing
Eastern District Investigation described in Note 7 to the accompanying financial
statements.  This is the most  significant  reason for the decline in revenue in
fiscal  1998.  The decrease in gross margin was a result of the effect of higher
labor and  benefit  (including  worker's  compensation  insurance)  costs due to
unionization  in June 1996,  and cost overruns on certain fixed price  contracts
during the quarter ended July 31, 1997.

Selling,  general and administrative  expenses for the quarter ended January 31,
1998  increased by  $262,113,  or 27%, to  $1,236,740  from  $974,627.  Selling,
general and  administrative  expenses  for the nine month  period  increased  by
$638,548,  or 20%, to $3,819,853 from $3,181,305.  The Company has hired various
engineering,  technical consulting, business development and marketing personnel
to develop and extend  various  lines of business  for which the Company has set
its  strategic  focus.  The  Company  intends  to  provide  various   additional
value-added services to its existing clientele and to significantly  enhance its
service  offering  to  more  profitable  business  areas.  These  expenses  were
partially  offset by a reduction in promotion,  consulting and legal expenses in
the prior  comparative  nine  month  period.  Additional  selling,  general  and
administrative  expenses incurred in the nine month period which exceed those of
the prior  comparative  period are:  $118,000 of goodwill  amortization  expense
related to the North Atlantic Laboratories  acquisition,  $100,000 in additional
occupancy expenses, and $37,000 in additional payroll tax penalties.

On December 10, 1997 the Company  settled a lawsuit  relating to $250,000  which
former management  advanced during fiscal 1994 to the Mohave Shores Development,
Inc.  (Mohave) in anticipation  of developing  land on an Indian  reservation in
Arizona under a joint venture agreement.  The Company will receive $120,000 over
a four year period under a non-interest bearing arrangement with payments once a
year. $102,993 represents the present value of those payments.

Interest expense reflects the $356,000 accretion of the discount on the $700,000
of  convertible  notes,  approximately  $59,000 of interest  on the  convertible
notes, and approximately $53,000 of interest related to the credit line with the
bank.  The  balance  represents  amortization  of  debt  issue  costs  and  fees
associated  with the current bank  facility as well as normal  interest  charges
related to its outstanding equipment loans and insurance obligations.

LIQUIDITY AND CAPITAL RESOURCES

As of January 31, 1998 the Company has an accumulated deficit of $28,316,240 and
has not generated  positive cash flow from  operations to date.  The Company has
financed its operations to date primarily  through  issuances of debt and equity
securities. At January 31, 1998, the Company had $153,682 in cash, and a working
capital deficit of $2,696,462  (inclusive of the $703,675 note payable to bank).
In addition,  as of February  28, 1998 and January 31, 1998,  the Company was in
arrears  with  respect to  certain  payroll  tax  obligations  of  approximately
$556,000 and  $581,000,  respectively.  During the nine months ended January 31,
1998, the Company invested approximately $624,000 in its property and equipment.
Of this amount $460,000 was spent on leasehold  improvements relating to the new
Bay  Shore   headquarters   and   central   operations   facility,   $60,000  in
transportation  equipment and $104,000 on various other machinery and equipment.
The Company also paid down  approximately  $536,000 of equipment  loans and paid
$23,346 in  dividends  to the  holders  of  mandatorily  redeemable  convertible
preferred  stock.  The Company has not paid the  September 15, 1997 and December
15,  1997  dividend   payments,   totaling  $39,000,   to  the  holders  of  the
aforementioned preferred stock and is presently accruing interest on the payment
which it has also accrued.


                                        8


<PAGE>


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations (cont,).

LIQUIDITY AND CAPITAL RESOURCES (CONT.)

In May 1997, the Company entered into a revolving bank credit facility to obtain
a  revolving  credit  line of  $1,500,000,  secured by certain of the  Company's
assets. Borrowings remain at a maximum of $750,000.

On February 13, 1998 the Company and its lender,  North Fork Bank,  entered into
an agreement to amend its current revolving credit facility with the bank. Under
the agreement,  the Company agreed to pay off all amounts due the bank in excess
of  $200,000.The  $200,000  balance was then  converted  to a term note over two
years at prime plus 3%. The bank  agreed to  release  its lien on the  Company's
accounts  receivable and take a secondary  position thereon,  but maintained its
lien on all the  Company's  equipment and other  assets.  In addition,  the bank
secured the personal guaranty of Michael O'Reilly, the Company's chief executive
officer.   The  Company  then  entered  into  an  initial  six  month  factoring
arrangement on its accounts receivable and paid the bank approximately $550,000.
As of March,  1998 the  factor  had  advanced  approximately  $1,000,000  to the
Company.

The Company is  presently in  discussions  to obtain  secured debt  financing to
satisfy  its  outstanding   payroll  and  other  working  capital   obligations.
Management  believes  there  will be  alternative  debt  and/or  equity  sources
available  to the Company.  In addition,  the Company is striving to improve its
gross margin and control its selling,  general,  and  administrative  expenses..
Management has already  reduced health  insurance and  advertising  costs and is
reducing the selling and administrative  workforce.  Cost reductions to date are
expected to save the Company an estimated  $800,000  annually,  and further cost
saving measures are planned. There can be no assurance, however, that changes in
the Company's plans or other events affecting the Company's  operations will not
result  in  accelerated  or  unexpected  cash  requirements,  or that it will be
successful in obtaining the additional financing to meet its obligations as they
become  due.  The  Company's  future cash  requirements  will depend on numerous
factors, including, but no limited to: (I) the ability to generate positive cash
flow from operations, and (ii) general economic conditions.

The Company has previously  reached  certain short term agreements on certain of
its past due  federal  payroll  withholding  taxes.  The  Company  is  presently
negotiating to extend those short term agreements into a longer term arrangement
covering  all of its past due  federal  tax  withholdings.  It is the  Company's
intent  to clear up the  balance  of these  taxes as soon as it can  obtain  the
necessary financing. No assurance can be given that the tax authorities will not
immediately  seek  payment of the taxes,  or that the tax  authorities  will not
commence  an action or file a lien  against  the Company in order to recover the
taxes.

Statements  contained in this Quarterly Report on Form 10-QSB that are not based
upon  historical  fact are "forward  looking  statements"  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements included
in this Form 10-QSB  involve known and unknown  risks,  uncertainties  and other
factors which could cause actual results,  performance  (financial or operating)
or achievements  expressed or implied by such forward looking  statements not to
occur or be realized.  Such forward looking statements  generally are based upon
the best estimates by the Company of future results, performance or achievement,
based upon current conditions and the most recent results of operations. Forward
looking  statements may be identified by the use of forward looking  terminology
such as "may," "will,""expect," "believe," "estimate," "anticipate," "continue,"
or similar  terms,  variations  of those terms or the  negative of those  terms.
Potential risks and uncertainties  include,  among other things, such factors as
the amount of the  Company's  revenues and expenses,  the  Company's  ability to
raise  capital,  the  competitive  environment  within the  Company's  industry,
dependence on key personnel and the other factors and information  disclosed and
discussed  in this "Item 2.  Management's  Discussion  and  Analysis  or Plan of
Operation"  and in other  sections  of this Form  10-QSB.  Readers  of this Form
10-QSB  should   carefully   consider  such  risks,   uncertainties   and  other
information,  disclosures and discussions  which contain  cautionary  statements
identifying  important  factors  that  could  cause  actual  results  to  differ
materially from those provided in the forward looking statements.


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<PAGE>


PART II - OTHER INFORMATION

Item 1. Legal Proceedings

     The United  States  Attorney  for the Eastern  District of New York has not
     concluded the investigation of the Company it began in October 1996.

     The  Company is  awaiting  the  decision  of the  Securities  and  Exchange
     Commission  concluding as to whether it will follow a staff  recommendation
     that an  enforcement  action be filed seeking an injunction  against future
     violations of the securities laws. The Company has vigorously  opposed this
     recommendation on the grounds that all employees accused of wrongdoing have
     been  terminated  and other  adequate  remedial  measures  have been  taken
     voluntarily by the Company.

     On December  10, 1997 the  Company  settled a lawsuit  relating to $250,000
     which former  management  advanced  during fiscal 1994 to the Mohave Shores
     Development,  Inc. (Mohave) in anticipation of developing land on an Indian
     reservation in Arizona under a joint venture agreement. The Company expects
     to receive  $120,000 over a four year period under a  non-interest  bearing
     arrangement with payments once a year.

Item 2. Changes in Securities

     Under Delaware law the Company is restricted  from the payment of dividends
     to the holders of the Series A redeemable convertible preferred stock until
     it has the  sufficient  surplus (as defined by Delaware law) or net profits
     in the year the dividend is declared or the preceding year.

Item 3. Defaults Upon Senior Securities

     The Company has not paid its  September  and  December  quarterly  dividend
     payments and is in arrears on its Series A redeemable convertible preferred
     stock in the amount of $39,000 plus accrued interest thereon.

Item 4. Submission of Matters to a Vote of Security Holders

     None

Item 5. Other Information

     Kevin J.  Phillips,  P.E.,  Ph.D.,  has joined the Board of Directors.  Dr.
     Phillips  is a  Principal  in Fanning,  Phillips,  and Molnar,  a prominent
     engineering firm located in Long Island,  New York. Dr. Phillips has a M.S.
     degree from the  Massachusett  Institute of Technology and a Ph.D. from the
     Polytechnic  Institute of New York. Dr. Phillips is a licensed professional
     engineer with over 21 years  experience in geohydrology  and  environmental
     engineering.

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibit 10.04 - Purchase and Sale Agreement  between  Prestige Capital
                          Corporation and Trade-Winds Environmental  Restoration
                          Inc.

          Exhibit 10.05 - Purchase and Sale Agreement  between  Prestige Capital
                          Corporation and North Atlantic Laboratories Inc.

          Exhibit 10.06 - Purchase and Sale Agreement  between  Prestige Capital
                          Corporation and New York Testing Inc.

          Exhibit 10.07 - Amendment  No.1 to Revolving  Credit  Agreement  dated
                          February  6,  1998  between  Windswept   Environmental
                          Group, Inc.

          Exhibit 10.08 - Promissory  Note for $200,000  dated  February 6, 1998
                          between Windswept  Environmental  Group Inc. and North
                          Fork Bank.

          Exhibit 10.09 - Personal  Guaranty of all  Liability  between  Michael
                          O'Reilly and North Fork Bank.

          Exhibit 27    - Financial Data Schedule

     (b)  Reports on Form 8-K

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


                                       10


<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities  and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

Dated: March 13, 1998


                                       WINDSWEPT ENVIRONMENTAL GROUP, INC.


                                       By: /s/  Michael O'Reilly
                                                MICHAEL O'REILLY, Chairman and
                                                Chief Executive Officer


                                       By: /s/  Alan W. Schoenbart
                                                ALAN W. SCHOENBART, CPA
                                                Chief Financial Officer



                                       11