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 October 31, 1997

[ ]  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                            10,436,005
(Title of Each Class)                         (Outstanding at November 30, 1997)

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>
                                                                      October 31,
                                                                          1997          April 30,
                                                                      (Unaudited)         1997
                                                                      ------------    ------------
<S>                                                                   <C>             <C>         
ASSETS
CURRENT ASSETS
    Cash                                                              $     24,711    $    654,377
    Accounts receivable, net of allowance for doubtful
       accounts of $252,100 and $200,000 at October 31,
       1997 and April 30, 1997, respectively                             3,390,405       2,195,284
    Inventories                                                            179,760         158,714
    Costs in excess of billings on contracts in progress                   244,200            --
    Due from officer                                                        62,070            --
    Other current assets                                                   212,390         426,220
                                                                      ------------    ------------
            Total current assets                                         4,113,536       3,434,595
                                                                      ------------    ------------

PROPERTY AND EQUIPMENT, net of
    accumulated depreciation and amortization                            3,100,821       2,841,783
                                                                      ------------    ------------

OTHER ASSETS
    Goodwill, net                                                        1,450,077       1,529,320
    Note receivable, net of current portion                                177,237         200,282
    Other assets                                                           233,709         233,271
                                                                      ------------    ------------

    TOTAL ASSETS                                                      $  9,075,380    $  8,239,251
                                                                      ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES

    Note payable to bank                                              $    728,613    $       --
    Accounts payable and accrued expenses                                3,778,380       2,573,708
    Payroll taxes payable                                                  610,618         347,404
    Current portion of long-term debt                                      603,232         765,432
    Billings in excess of cost on contracts in progress                    256,000          18,765
    Obligations of unconsolidated subsidiary, net                          196,112         196,112
                                                                      ------------    ------------
            Total current liabilities                                    6,172,955       3,901,421

OTHER LIABILITIES
    Convertible notes                                                      800,000         800,000
    Long-term debt, net of current portion                                 393,872         454,560
    Other liabilities                                                       75,000            --
                                                                      ------------    ------------

            Total liabilities                                            7,441,827       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
    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;
      10,410,396 shares issued, 10,390,396, outstanding                      1,043             979
    Additional paid-in capital                                          28,043,607      27,318,031
    Treasury stock, 20,000 shares at cost                                  (10,000)        (10,000)
    Accumulated deficit                                                (27,519,292)    (25,379,601)
    Less deferred compensation                                            (181,805)       (146,139)
                                                                      ------------    ------------
            Total stockholders' equity                                     333,553       1,783,270
                                                                      ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $  9,075,380    $  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             Six Months Ended
                                         ------------------             ----------------
                                             October 31,                   October 31,
                                        1997            1996            1997            1996
                                    ------------    ------------    ------------    ------------
<S>                                 <C>             <C>             <C>             <C>         
Revenues                            $  3,601,372    $  3,178,140    $  6,896,735    $  8,251,542

Cost of revenues                       2,913,938       2,211,412       5,953,852       5,540,139
                                    ------------    ------------    ------------    ------------

    Gross profit                         687,434         966,728         942,883       2,711,403

Selling, general and
   administrative expenses             1,261,893       1,176,172       2,583,113       2,629,307
Special charges                             --         1,193,000            --         1,193,000
                                    ------------    ------------    ------------    ------------

 Loss before other
   income(expense)                      (574,459)     (1,402,444)     (1,640,230)     (1,110,904)
                                    ------------    ------------    ------------    ------------

Other income (expense):
 Settlement of legal claims, net            --           296,654            --           296,654
 Losses on investments                      --          (195,068)           --          (295,071)
 Gain on sale of assets, net               1,735         221,710           1,735         221,710
 Interest expense                       (192,959)        (12,527)       (501,196)        (27,583)
                                    ------------    ------------    ------------    ------------
     Total other income (expense)       (191,224)        310,769        (499,461)        195,710
                                    ------------    ------------    ------------    ------------

         Net loss                   $   (765,683)   $ (1,091.675)   $ (2,139,691)   $   (915,194)
                                    ============    ============    ============    ============

Loss per common share               $       (.08)   $       (.12)   $       (.22)   $       (.11)
                                    ============    ============    ============    ============

Weighted average number of
common shares outstanding             10,110,692       9,065,977       9,973,051       8,331,449
                                    ============    ============    ============    ------------
</TABLE>


See Accompanying Notes to Consolidated Financial Statements.

                                        2

<PAGE>



              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    FOR THE SIX MONTHS ENDED OCTOBER 31, 1997
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                Common Stock
                                                ------------           Additional
                                          Number of          Par         Paid-in        Treasury        
                                           Shares           Value        Capital          Stock         
                                         ------------   ------------   ------------    ------------
<S>                                         <C>         <C>            <C>             <C>          
Balance at April 30, 1997                   9,766,074   $        979   $ 27,318,031    $    (10,000)

Issuance of common stock for services         416,146             42        243,838            --   

Issuance of stock options for services           --             --           10,000            --   

Issuance of common stock for
 employee and director compensation           190,286             18        134,434            --   

 Issuance of common stock to settle
   legal obligations                           37,890              4         23,996            --   

Accretion of discount on  convertible
    notes                                        --             --          356,154            --   

Amortization of deferred compensation            --             --             --              --   

Dividends                                        --             --          (42,846)           --   

Net loss                                         --             --             --              --   
                                         ------------   ------------   ------------    ------------

Balance at October 31, 1997                10,410,396   $      1,043   $ 28,043,607    $    (10,000)
                                         ============   ============   ============    ============



<CAPTION>
                                         Accumulated       Deferred             
                                           Deficit       Compensation        Total 
                                         ------------    ------------    ------------
<S>                                      <C>             <C>             <C>         
Balance at April 30, 1997                $(25,379,601)   $   (146,139)   $  1,783,270

Issuance of common stock for services            --           (15,000)        228,880

Issuance of stock options for services           --              --            10,000

Issuance of common stock for
 employee and director compensation              --          (150,000)        (15,548)

 Issuance of common stock to settle
   legal obligations                             --              --            24,000

Accretion of discount on  convertible
    notes                                        --              --           356,154

Amortization of deferred compensation            --           129,334         129,334

Dividends                                        --              --           (42,846)

Net loss                                   (2,139,691)           --        (2,139,691)
                                         ------------    ------------    ------------

Balance at October 31, 1997              $(27,519,292)       (181,805)   $    333,553
                                         ============    ============    ============
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                        3


<PAGE>



              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            FOR THE SIX MONTHS ENDED
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                  October 31,    October 31,
                                                                     1997           1996
                                                                  -----------    -----------
<S>                                                               <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                      $(2,139,691)   $  (915,194)
    Adjustments to reconcile net loss to net cash
    flows from operating activities:
      Depreciation and amortization                                   983,633        321,329
      Provision for doubtful accounts                                  78,097         62,000
      Issuance of common stock and stock options for services         106,346        206,000
      Losses on investment                                               --          295,071
      Special charges                                                    --          211,000
      Gain on sale of assets                                           (1,735)      (221,710)
      Other, net                                                         --           25,000
    Changes in operating assets and liabilities:
      Accounts receivable                                          (1,273,217)      (658,857)
      Other current assets                                            244,623       (227,106)
      Inventories                                                     (21,046)          --
      Due from officer                                                (62,070)          --
      Other assets                                                    (17,538)       (11,616)
      Accounts payable and accrued expenses                         1,401,158        151,608
      Payroll taxes payable                                           263,214       (228,591)
      Costs in excess of billings on contracts in progress, net        (6,965)          --
                                                                  -----------    -----------

NET CASH USED BY OPERATING ACTIVITIES                                (445,191)      (991,066)
                                                                  -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Obligations of unconsolidated subsidiary, net                        --          145,054
    Proceeds from sale of assets                                       14,614        221,710
    Collection of notes receivable                                     23,045           --
    Acquisition of fixed assets and leasehold improvements           (586,974)      (431,909)
                                                                  -----------    -----------

NET CASH USED BY INVESTING ACTIVITIES                                (549,315)       (65,145)
                                                                  -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from note payable                                           --          100,000
    Proceeds from long term debt                                         --          223,000
    Principal payments of long-term debt                             (340,427)      (232,031)
    Proceeds from revolving bank line, net                            728,613           --
    Dividends paid on redeemable preferred stock                      (23,346)          --
    Proceeds from issuance of common stock                               --        1,129,413
                                                                  -----------    -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                             364,840      1,220,382
                                                                  -----------    -----------

NET INCREASE (DECREASE) IN CASH                                      (629,666)       164,171

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

CASH - ENDING                                                     $    24,711    $   447,104
                                                                  ===========    ===========

Cash paid during the period for:

Interest                                                          $    97,093    $    29,131
                                                                  ===========    ===========
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 SIX MONTHS ENDED OCTOBER 31, 1997
                                   (Unaudited)

1.   CONSOLIDATED FINANCIAL STATEMENTS

     The consolidated  balance sheet at April 30, 1997 has been derived from the
     audited  consolidated  balance sheet  contained in Windswept  Environmental
     Group,  Inc.'s (the "Company") Form 10-KSB and is presented for comparative
     purposes. The unaudited interim financial statements of the Company for the
     six and three months ended  October 31, 1997 and 1996 have been prepared by
     management and include all adjustments, consisting only of normal recurring
     adjustments, necessary to present fairly the unaudited interim periods. 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
     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  October  31,  1997  the  Company  has  an  accumulated  deficit  of
     $27,519,292  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 October 31, 1997, the Company
     had $24,711 in cash, and a working capital deficit of $2,059,419 (inclusive
     of the $728,613 note payable to bank). In addition, as of November 30, 1997
     and October 31,  1997,  the Company was in arrears  with respect to certain
     payroll  tax   obligations   of   approxinately   $537,000  and   $611,000,
     respectively.

     In May 1997, the Company  entered into a revolving bank credit  facility to
     obtain  a  revolving  credit  line  of  $1,500,000,  secured  by all of the
     Company's assets not previously  pledged under a debt or lease  obligation.
     The facility  bears interest at the bank's prime rate plus 1.5% and expires
     May 1, 2000. Borrowings shall be limited to the lesser of $1.5 million less
     reserves   determined  by  the  bank  or  80%  of  the  Company's  eligible
     receivables,  as defined.  Said reserves remain at a minimum $750,000.  The
     facility  requires minimum tangible net worth,  working capital,  and other
     restrictive  covenants.  The  Company  is  currently  in  default  of  this
     agreement due to failure to comply with certain of its loan covenants.  The
     Company is working  independently  and in conjunction with its bank to find
     financing  sources  above  the  $750,000  line  which  the  bank  has  made
     available,  using the same collateral provided to the bank. The Company has
     received proposals which it is in the process of evaluating.

     The Company  believes that,  should this financing be made  available,  the
     Company  would have  adequate  capital  resources  to meet its current cash
     requirements  for a period  of at  least  twelve  months.  The  Company  is
     striving 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 successfully bid on construction  contracts (ii) the ability to generate
     positive cash flow from operations, and (iii) general economic conditions.

4.   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  $157,437,  and had an  outstanding  balance  payable  of
     $157,331 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.


                                        5


<PAGE>



              WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE SIX MONTHS ENDED OCTOBER 31, 1997
                                   (Unaudited)


5.   STATEMENT OF CASH FLOWS

     During the six months  ended  October 31,  1997,  the Company  financed the
     acquisition  of certain  machinery  and office  equipment of  approximately
     $87,000   through  various   capital  lease   transactions,   and  recorded
     approximately $31,000 of prepaid insurance premiums which it financed.  The
     Company  utilized  approximately  $231,000  of its  common  stock  to repay
     liabilities of $216,000 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 $19,500 of dividends which are in arrears on the redeemable
     preferred stock.

6.   COMMITMENTS AND CONTINGENCIES

     Litigation

     In October 1996, the United States Attorney for the Eastern District of New
     York obtained a federal grand jury indictment  against,  among others,  the
     former Chief Operating Officer and the former Special Securities Counsel on
     charges  including   violations  of  federal   securities  law,   including
     fraudulent  issuances of 700,000 shares of the Company's  common stock. The
     former Chief Operating Officer and the former Special  Securitites  Counsel
     both subsequently  pleaded guilty to the charges in the Federal indictment.
     The SEC has been  investigating  what  role,  if any,  other  officers  and
     directors,  including the current Chairman and Chief Executive  Officer and
     the former Chief  Financial  Officer,  may have had in connection with such
     activities.  The Company has cooperated and continues to cooperate with the
     SEC by providing  documents in response to subpoenas issued to it. To date,
     no charges have been filed  against the  Company,  it's CEO, or it's former
     CFO, as a result of the investigation. However, the SEC could seek an order
     enjoining the Company from violating the securities laws.

     The Company has reached  certain  short term  agreements  with  federal tax
     authorities on certain of its past due payroll withholding taxes. It is the
     Company's  intent to clear up the  balance of these taxes as soon as it can
     obtain  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.

     The Company is currently in default of its bank agreement due to failure to
     comply with certain of its loan covenants.

     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 consolidated  financial position,  results
     of operations and cash flows of the Company.


7.   SUBSEQUENT EVENTS

     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.


                                        6


<PAGE>



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

The following discussion of the fiscal quarters ended October 31, 1997 and 1996,
should  be  read in  conjunction  with  the  Consolidated  Financial  Statements
contained herein.

RESULTS OF OPERATIONS

Net loss and loss per share for the  quarter  and six months  ended  October 31,
1997 was $765,683 and $.08 and $2,139,691 and $.22, respectively,  compared to a
net loss and loss per share for the  quarter  and six months  ended  October 31,
1996 of $1,091,675 and $.12 and $915,194 and $.11, respectively.

Revenues for the quarter ended October 31, 1997 increased  $423,232,  or 13%, to
$3,601,372  from   $3,178,140.   The  increase  in  revenues  is  reflective  of
approximately  $646,000 revenues  generated during the quarter by North Atlantic
Laboratories  which was purchased by the Company in February 1997 (and therefore
not in the prior comparative quarter). Gross margins declined to 19% from 30% in
the prior comparative quarter.  Revenues for the first six months of fiscal 1998
decreased by  $1,354,807,  or 16%, from  $8,251,542 to  $6,896,735,  while gross
margins declined to 14% compared to 33% for the first six months of fiscal 1997.
In the quarter ended July 31, 1996 the Company generated  revenues of $2,200,000
on a New York City Housing  Authority  paint  removal  project.  The decrease in
gross  margin was a result of the  recognition  of losses in the current  period
related to certain  longer-term  contracts with projected losses,  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 October 31,
1997  increased  by $85,721,  or 7%, to  $1,261,893  from  $1,176,172.  Selling,
general  and  administrative  expenses  for the six  month  period  declined  by
$46,194,  or 2%, from  $2,629,307 to  $2,583,113.  The Company has hired various
engineering,  technical consulting, business development and marketing personnel
which it is paying on a  non-commission  based  salary  structure to develop and
extend  various  strategic  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 offset by a
reduction in promotion,  consulting and legal expenses in the prior  comparative
six month period.  Additionally  selling,  general and  administrative  expenses
include $80,000 of goodwill  amortization  expense related to the North Atlantic
Laboratories acquisition and $60,000 in payroll tax penalties.  These additional
expenses over the prior comparative  quarterly period were primarily responsible
for the  increase  in  selling,  general,  and  administrative  expenses  in the
quarter.

Interest expense reflects the $356,000 accretion of the discount on the $700,000
of  convertible  notes,  approximately  $41,000 of interest  on the  convertible
notes,  and  approximately  $10,000  of  interest  related to late  payroll  tax
withholdings.  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 bank facilty and outstanding equipment loans.

LIQUIDITY AND CAPITAL RESOURCES

As of October 31, 1997 the Company has an accumulated deficit of $27,519,292 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 October 31, 1997, the Company had $24,711 in cash, and a working
capital deficit of $2,059,419  (inclusive of the $728,613 note payable to bank).
In addition,  as of November  30, 1997 and October 31, 1997,  the Company was in
arrears  with  respect to  certain  payroll  tax  obligations  of  approximately
$537,000 and  $611,000,  respectively.  During the six months ended  October 31,
1997, the Company invested approximately $587,000 in its property and equipment.
Of this amount $432,000 was spent on leasehold  improvements relating to the new
Bay  Shore   headquarters   and   central   operations   facility,   $60,000  in
transportation  equipment and $95,000 on various other  machinery and equipment.
The Company also paid down  approximately  $340,000 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  dividend
payment to the holders of the  aforementioned  preferred  stock and is presently
accruing interest on the $19,500 payment which it has also accrued.

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.  The  Company is working
independently  and in conjunction with it's bank to find financing sources above
the $750,000 line which the bank has made  available,  using the same collateral
provided to the bank. The Company has received various  proposals which it is in
the process of evaluating. The Company is currently in default of this agreement
due to failure to comply with certain of its loan covenants.


                                        7


<PAGE>



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

LIQUIDITY AND CAPITAL RESOURCES (CONT.)

The Company believes that, should this financing be made available,  the Company
would have adequate capital  resources to meet its current cash requirements for
a period of at least twelve months. Management believes that should the bank not
make available the additional  financing,  there will be alternative debt and/or
equity  sources  available to the Company.  The Company is currently  engaged in
various   discussions  with  potential   investors   regarding  possible  equity
transactions.  In addition,  the Company is striving 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
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 successfully  bid on  construction  contracts (ii) the ability to
generate  positive  cash  flow  from  operations,  and  (iii)  general  economic
conditions.

The  Company  has  reached  certain  short  term  agreements  with  federal  tax
authorities  on certain of its past due  payroll  withholding  taxes.  It is the
Company's intent to clear up the balance of these taxes as soon as it can obtain
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.

Any forward looking statements  contained in this document reflect  management's
current intentions and expectations. Actual future results could vary materially
depending  on  certain  risks  and  uncertainties,  including  factors  such  as
financing,  operational spending, revenue levels, and the other factors referred
to in this document.


                                        8


<PAGE>



PART II - OTHER INFORMATION

Item 1. Legal Proceedings

     In October 1996, the United States Attorney for the Eastern District of New
     York obtained a federal grand jury indictment  against,  among others,  the
     former Chief Operating Officer and the former Special Securities Counsel on
     charges  including   violations  of  federal   securities  law,   including
     fraudulent  issuances of 700,000 shares of the Company's  common stock. The
     former Chief Operating Officer and the former Special  Securitites  Counsel
     both subsequently  pleaded guilty to the charges in the Federal indictment.
     The SEC has  been  investigating  what  role,if  any,  other  officers  and
     directors,  including the current Chairman and Chief Executive  Officer and
     the former Chief  Financial  Officer,  may have had in connection with such
     activities.  The Company has cooperated and continues to cooperate with the
     SEC by providing  documents in response to subpoenas issued to it. To date,
     no charges have been filed  against the  Company,  it's CEO, or it's former
     CFO, as a result of the investigation. However, the SEC could seek an order
     enjoining the Company from violating the securities laws.

     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.

Item 2. Changes in Securities

     None

Item 3. Defaults Upon Senior Securities

     The Company is  currently in default of its secured  revolving  credit line
     with  North Fork Bank due to  failure  to comply  with  certain of the loan
     covenants.  The  Company  has not paid  its  September  quarterly  dividend
     payment and is in arrears on its mandatorily redeemable preferred stock.


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

     None

Item 5. Other Information

     None

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits: 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.


                                        9


<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: December 12, 1997

               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



                                       10