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 December 31, 1997
                                               -----------------

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                         Commission File Number 0-16322
                                                -------
                                ECOS GROUP, INC.
           (Name of small business issuer as specified in its charter)

                   Colorado                                      84-1061207
                   --------                                      ----------
         (State or other jurisdiction of                     (I.R.S. Employer
          incorporation or organization)                     Identification No.)

         99 SE Fifth Street, Fourth Floor
         Miami, Florida                                            33131
         --------------                                            -----
         (Address of principal executive offices)               (Zip Code)

                    Issuer's telephone number: (305) 374-8300
                                               --------------

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days: Yes X No
                                                                      --   --

As of December 31, 1997,  the Company had a total of  22,156,493  common  stock,
$.012 par value, outstanding.

Transitional Small Business Disclosure format (check one):  Yes     No X
                                                               --     --

                                       1
<PAGE>

                                ECOS GROUP, INC.

                                      INDEX

                                                                            Page

Part I.  Financial information

Item 1.  Financial statements:

                  Consolidated balance sheets
                  -  December 31, 1997 and March 31, 1997                      3

                  Consolidated statements of operations
                  - Three & Nine months Ended December 31, 1997 and 1996       4

                  Consolidated statements of cash flows
                  -  Nine months Ended December 31, 1997 and 1996              5

                        Notes to financial statements                       6-10

Item 2.  Management's Discussion and Analysis or
                  Plan of Operation                                        10-12

II: Other Information                                                         12

Signatures

                                       2
<PAGE>
                
                                ECOS GROUP, INC.

                          CONSOLIDATED BALANCE SHEETS

                                  (Unaudited)
<TABLE>
<CAPTION>

                                                       ASSETS

                                                                          December 31, 1997         March 31, 1997
                                                                          -----------------         --------------
<S>                                                                       <C>                       <C>                       
Current Assets
    Cash  and equivalents                                                    $ 119,113                  $ 45,778
    Restricted cash                                                             10,039                     9,080
    Marketable securities                                                      140,000                   140,000
    Accounts receivable net of allowance of $324,711 and $320,106              777,176                   814,772
    Note receivable                                                             93,878                   250,000
    Net assets of discontinued operations                                            -                 1,433,606
    Prepaid expenses & other                                                    81,408                   131,911
                                                                    -------------------           ---------------
              Total current assets                                           1,221,614                 2,825,147

Amounts due under state reimbursement program                                  580,419                   650,158
Property and equipment, net                                                    331,871                   587,304
Goodwill, net of amortization of $1,571,754 and $869,295                       358,211                 6,509,328
Other assets                                                                    21,350                    22,477
                                                                    -------------------           ---------------
              Total assets                                                 $ 2,513,465              $ 10,594,414
                                                                    ===================           ===============

                                      LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities:
    Accounts payable                                                       $ 1,125,787                 $ 876,818
    Accrued expenses                                                           361,742                   477,614
    Related party notes payable and advances                                   216,664                 1,075,000
    Current portion of capital lease obligation & notes payable                 40,961                   262,929
                                                                    -------------------           ---------------
    Deferred revenues                                                                -                         -
              Total current liabilities                                      1,745,154                 2,692,361

Notes payable, net of current portion                                        1,021,983                   605,680

Commitments and contingencies

Stockholders equity:
    Preferred stock:
    Series A $.001 par value, 5,000,000 authorized,
      none issued and outstanding
    Series B convertible, $.01 par value, 1,000,000 authorized,
       issued and outstanding
    Common stock, $.012 par value, 75,000,000 authorized,
    22,156,493 and 17,597,626 issued and outstanding; respectively             265,878                   211,172
    Additional paid - in - capital                                          16,951,017                16,125,228
    Net unrealized loss on marketable securities                               (10,000)                  (10,000)
    Accumulated deficit                                                    (17,460,567)               (9,030,027)
    Total stockholders equity                                                 (253,672)                7,296,373
                                                                    -------------------           ---------------

    Total liabilities & stockholders equity                                $ 2,513,465              $ 10,594,414
                                                                    ===================           ===============
</TABLE>

                                       3
<PAGE>
                                ECOS GROUP, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS
             Three and Nine Months Ended December 31, 1997 and 1996
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                         Three months ended                        Nine months ended
                                                         ------------------                        -----------------
                                                      1997                1996                  1997                1996
                                                      ----                ----                  ----                ----
<S>                                              <C>                  <C>                  <C>                  <C>       
Revenue
           Environmental Consulting              $ 1,193,070          $2,063,071           $ 3,679,843          $4,590,606

Cost of Environmental Services

           Direct labor and employee benefits        329,755             598,805             1,179,418           1,600,692

           Other direct costs and expenses           383,157             513,395               951,708           1,002,028
                                                 ------------        ------------         -------------        ------------
           Total direct costs and expenses           712,912           1,112,200             2,131,126           2,602,720

           Gross profit                              480,158             950,871             1,548,717           1,987,886
                                                 ------------        ------------         -------------        ------------

General, adminstrative and other operating costs   1,191,430             848,429             2,751,405           2,412,999

Reserve for restructuring                                  -                   -                     -             350,000

           Total other costs and expenses          1,191,430             848,429             2,751,405           2,762,999
                                                 ------------        ------------         -------------        ------------

Operating Income (Loss)                             (711,272)            102,442            (1,202,688)           (775,113)
                                                 ------------        ------------         -------------        ------------

Other income (expense)

           Interest, net                             (28,172)                  -               (97,968)            (23,049)

           Other income, net                         (86,419)              4,376               (56,858)             18,507
                                                 ------------        ------------         -------------        ------------
                                                    (114,591)              4,376              (154,826)             (4,542)

Net Income (loss) before taxes                      (825,863)            106,818            (1,357,514)           (779,655)
Provision for income taxes                                 -                   -                     -                   -
                                                 ------------        ------------         -------------        ------------
Loss from continuing operations                     (825,863)            106,818            (1,357,514)           (779,655)
                                                 ------------        ------------         -------------        ------------

Discontinued operations

           Loss - discontinued operations                  -            (397,240)             (666,240)           (644,443)
           Gain (loss) on disposal                         -                   -            (6,406,786)            509,037
                                                 ------------        ------------         -------------        ------------
Income (loss) before extraordinary items            (825,863)           (290,422)           (8,430,540)           (915,061)
                                                 ------------        ------------         -------------        ------------

Loss before extraordinary items

           Net gain on vendor settlements                  -                   -                     -             280,981
           Net gain on payroll tax settlement              -                   -                     -             934,091
                                                 ------------        ------------         -------------        ------------
Net income (loss)                                 $ (825,863)         $ (290,422)         $ (8,430,540)          $ 300,011
                                                 ============        ============         =============        ============

Income (loss) per share from:
           Continuing operations                       (0.04)              (0.02)                (0.07)              (0.04)
           Discontinued operations                      -                                        (0.43)               0.03
           Extraordinary items                          -                                                             0.07
</TABLE>

                                       4
<PAGE>
                                ECOS GROUP, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                  Nine Months Ended December 31, 1997 and 1996
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                                     1997                1996

<S>                                                                              <C>                   <C>      
Operating Activities
      Net income (loss)                                                          $ (8,430,540)         $ 300,011
                                                                                --------------       ------------
      Adjustments  to reconcile  net income (loss) to net cash 
      provided by (used in) operating activities:
           Depreciation and amortization                                              413,741            449,858
           Gain on sale of equipment                                                        -             (1,000)
           Loss on write down of equipment                                            138,787                  -
           Other                                                                            -             22,875
           Discontinued operations                                                          -           (509,036)
           Write down of goodwill                                                   5,862,777                  -
           Extraordinary items                                                              -         (1,228,203)
           Write down of net assets of discontinued operations                      1,433,606                  -

      Changes in operating assets and liabilities:
           Increase (decrease) in accounts receivable                                  37,596           (192,472)
           Increase (decrease) in prepaid expenses and other assets                   206,625            (69,361)
           Increase (decrease) in amounts due from state reimbursement program         69,739            (71,065)
           Increase (decrease) in other non-current assets                              1,127            219,164
           Increase (decrease) in accounts payable                                    248,969           (567,231)
           Increase (decrease) in accrued liabilities                                (115,871)            76,421
           Increase (decrease) in payroll taxes                                             -           (446,547)
                                                                               ---------------       ------------
                                                                                    8,297,096         (2,316,597)
      Net cash provided by (used in) continuing operations                           (133,444)        (2,016,586)
                                                                               ---------------       ------------


      Investing activities:
           Restricted cash                                                               (959)           136,901
           Payment for purchase of American Remedial Technologies, Inc.
           net of cash acquired                                                             -         (5,968,827)
           Proceeds from disposal of discontinued
           operations, net of expenses                                                      -          1,047,007
           Purchases of equipment                                                      (8,756)          (130,426)
           Proceeds from disposal of equipment                                              -              1,000
                                                                               ---------------       ------------

      Net cash provided by (used in) investing activities                              (9,715)        (4,914,345)
                                                                               ---------------       ------------


      Financing activities:
           Proceeds from original issuance of stock                                   879,798          8,100,000
           Proceeds from warrant exercise                                                 696            337,500
           Costs associated with issuance of stock                                                      (805,758)
           Proceeds from notes payable                                                185,125            562,800
           Proceeds from related party notes payable                                                   1,158,048
           Payments on capital lease obligations                                                      (1,271,943)
           and notes payable                                                         (360,125)          (328,780)
           Payments on related party notes payable                                   (489,000)                 -

      Net cash provided by (used in ) financing activities                            216,494          7,751,867
                                                                               ---------------       ------------

      Net increase (decrease) in cash                                                  73,335            820,936

      Cash, beginning of period                                                        45,778            178,121
                                                                               ---------------       ------------

      Cash, end of period                                                           $ 119,113          $ 999,057
                                                                               ===============       ============

      Cash paid during the period for interest                                       $ 20,453          $ 135,805
                                                                               ===============       ============
</TABLE>

                                       5
<PAGE>

                                ECOS GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                                     

1.      BUSINESS AND ORGANIZATION

        The  Company  is  a  holding  company  whose  sole  subsidiary  provides
        environmental consulting services.

 2.     SIGNIFICANT ACCOUNTING POLICIES

        Interim  Financial  Statements:  The  accompanying  unaudited  financial
        statements  have been prepared in accordance  with the  instructions  to
        Form  10-QSB and do not  include all of the  information  and  footnotes
        required  by  generally  accepted  accounting  principles  for  complete
        financial  statements.  The  consolidated  balance sheet as of March 31,
        1997 has been derived from the audited  financial  statements  as of the
        period  ended  March 31,  1997,  but does not  include  all  disclosures
        required by generally accepted accounting principles. These balances are
        reclassified to show the effect of the discontinued  operations.  In the
        opinion  of  management,   these  statements  reflect  all  adjustments,
        consisting of normal recurring  adjustments,  considered necessary for a
        fair presentation for the periods  presented.  Operating results for the
        nine months ended  December 31, 1997 are not  necessarily  indicative of
        the  results  that may be expected  for the year ended  March 31,  1998.
        These  statements  should  be read in  conjunction  with  the  financial
        statements and notes thereto  included in the Company's Annual Report on
        Form 10-KSB for the period ended March 31, 1997.

        Principles of Consolidation:  The consolidated  financial  statements  
        include the accounts of the Company and its wholly-owned subsidiaries.
        All intercompany balances and transactions have been eliminated.

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

        Revenue Recognition:  Consulting revenue is recognized as services are
        performed.

        Per share data:  Per share data is based on the weighted  average number
        of shares of common stock,  22,156,493  and  19,138,718 for the quarters
        ended  December 31, 1997 and December  31, 1996,  respectively.  For the
        period ended December 31, 1997,  common stock  equivalents have not been
        included  in  the  weighted   average  number  of  shares  as  they  are
        anti-dilutive. For the quarter ended December 31, 1996, 4,085,101 common
        stock  options and  warrants  which are common  stock  equivalents  were
        assumed to be exercised for computation of earnings per share.

                                       6
<PAGE>
                                ECOS GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

        Discontinued  Operations:  In October 1997,  the Company  entered into a
        settlement of a default of a $500,000 loan to its  subsidiary,  American
        Remedial  Technologies Inc. ("ART"). The Company conveyed all the common
        stock of ART to the holder of the loan as part of this  settlement.  The
        Company  has  treated  ART as  discontinued  operations  for all periods
        presented.

        Costs of Closing Corporate Offices:  In December 1997 the Company closed
        it's  corporate  offices  in  West  Palm  Beach  and  consolidated  it's
        operations  with  Evans   Environmental  and  Geological   Sciences  and
        Management,  Inc. in Miami,  Florida.  The Company wrote off $146,543 in
        leasehold  improvements  and software  development  costs as a result of
        this closure.

        Evaluation of Goodwill:  The Company  evaluated the goodwill  associated
        with the acquisition of Enviropact Consultants, Inc. and other goodwill.
        The  analysis   determined   that  the  goodwill   associated  with  the
        acquisition  of Enviropact  Consultants,  Inc. could not be supported by
        the cash flow from the sole surviving operation in Clearwater,  Florida.
        The Company has chosen to write off this  goodwill in the quarter  ended
        December 31, 1997.  In addition,  goodwill from the  acquisition  of the
        Company in 1992 remained.  Present  operating  performance and cash flow
        analysis  showed that this  goodwill was not  supported by the operating
        cash flow.  This  goodwill  is also  written  off in the  quarter  ended
        December 31, 1997. After these  evaluations the total amount of goodwill
        written off is $414,120.

        Accounts  Receivable  Allowance:  The Company performed an evaluation of
        the reserves for bad debt.  The evaluation  determined  that the Company
        needed to increase it's allowance for questionable  accounts receivable.
        The amount of the increase was $67,230.  The increase is attributable to
        the  accounts  receivables  from the  Florida  Inland  Protection  Trust
        Program.

3.      COMMITMENTS AND CONTINGENCIES

        Contingent   Liability:   The  Company  has  been  involved  in  various
        discussions  with a former  private  senior  lender to the Company.  The
        purpose  of  these  discussions  has  been  to  settle  all  outstanding
        differences  between  the former  lender  and the  Company  regarding  a
        variety of matters, including, without limitation, the exercise price of
        the former lender's outstanding warrants,  amounts claimed to be owed to
        the former lender for legal and financial  advisory fees, shares claimed
        to be owed to the  former  lender  for the  loan of funds  and  services
        rendered,  and  claimed  rights to  additional  shares of the  Company's
        stock. Although all cash amounts owed to the former lender for principal
        and  interest  were paid in full in July  1996,  the  former  lender has
        continued  to make  further  demands on the Company as well as asserting
        enforceability of claimed agreements.  Although the Company has rejected
        the validity of all such claims it has agreed to reach an  accommodation
        with the former lender on some of these claims solely for the purpose of
        reaching a definitive settlement of all outstanding differences. To date

                                       7
<PAGE>
                                ECOS GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)


        the former lender has not agreed to any settlement.  The Company is 
        unable to foresee the ultimate outcome of this matter.

4.      RELATED PARTY DEBT

        In June 1995, the Company  borrowed  $85,000 from Lisa Robbins,  the
        spouse of Dr. Charles Evans,  the Chairman of the Board of  Directors. 
        The note is due upon demand and bears interest at 12% per annum. 
        Dr. Evans  disclaims any  beneficial  interest in the loan. The present
        balance of this note is $50,000.

        On December 31, 1996 the Company  borrowed  $1,000,000  from Mr. Michael
        Klein, a shareholder and director of the Company  pursuant to a one year
        promissory note bearing  interest at 14% per annum.  For the first three
        months  of the note,  while the  Company  sought  alternative  long-term
        financing,  the note was unsecured  with interest only payable  monthly.
        Commencing  March 1997,  monthly payments of principal and interest were
        required  until maturity in December 1997, and the note was secured with
        all trade  accounts  receivable of the Company.  This note was repaid on
        May 5, 1997 from  proceeds of a $1,000,000  loan  received  from Mr. Sam
        Klein, the father of Michael Klein.  This latter was modified to a three
        month  promissory note maturing on August 5, 1997, with monthly interest
        only  payable  at 12% per  annum.  The note  was  secured  by all  trade
        receivables of the Company.  On September 23, 1997, the Company received
        a notice of its default on this note for  nonpayment  of  principal  and
        interest.  The  Company  settled its  default by  delivering  a $608,000
        promissory  note  dated  October  29,  1997 in favor of Mr.  Sam  Klein,
        bearing interest at 12% per annum with quarterly  principal and interest
        payments,  and issuing 2,666,667 shares of the Company's Common Stock to
        Mr.  Klein.  The  new  note  and  issuance  of  stock  extinguishes  the
        $1,000,000 promissory note dated May 5, 1997.


5.      GOING CONCERN CONSIDERATION

        The accompanying  consolidated  financial  statements have been prepared
        assuming the Company will continue as a going  concern.  The Company has
        suffered  significant  net losses for the years ended March 31, 1997 and
        1996.  At December 31, 1997 its current  liabilities  exceed its current
        assets.  These  conditions raise  substantial  doubt about the Company's
        ability to continue as a going concern.  Management is  instituting  the
        following measures to improve this situation:

           1. Continue cost reduction  measures at all operating  divisions. 
           2. Engage various parties to raise capital for the company.

        Management is implementing its plans. These measures,  if successful are
        expected to result in positive  working capital for the year ended March
        31, 1998; however,

                                       8
<PAGE>
                                ECOS GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

        actual  results may differ and there can be no assurance that such plans
        will be effective.

        In the absence of profitable  operations or obtaining additional debt or
        equity financing,  the Company may not have sufficient funds to continue
        operations through the fiscal year ended March 31, 1998.

6.      CHANGE IN ACCOUNTING STANDARDS

        In February,  1997, the Financial Accounting Standards Board (the FASB)
        issued Statement of Financial  Accounting  Standards No. 128,  Earnings
        Per Share  (FAS 128).  FAS 128  specifies  new  standards  designed  to
        improve  the  EPS  information  provided  in  financial  statements  by
        simplifying  the  existing  computational   guidelines,   revising  the
        disclosure  requirements,  and increasing the comparability of EPS data
        on an international basis. Some of the changes made to simplify the EPS
        computations  include:  (a) eliminating the presentation of primary EPS
        and replacing it with basic EPS, with the  principal  difference  being
        that common stock  equivalents  (CSEs) are not  considered in computing
        basic EPS, (b) eliminating  the modified  treasury stock method and the
        three percent materiality  provision,  and ( c) revising the contingent
        share provisions and the supplemental  EPS data  requirements.  FAS 128
        also makes a number of changes to existing disclosure requirements. FAS
        128 is effective for  financial  statements  issued for periods  ending
        after December 15, 1997,  including  interim periods.  The Company does
        not believe  that the impact from the  implementation  of FAS 128 to be
        significant on EPS presentation for the periods presented herein.

        Forward Looking  Statements:  From time to time, the Company may publish
        forward-looking  statements  relating  to such  matters  as  anticipated
        financial performance,  business prospects,  technological developments,
        new products,  research and development  activities and similar matters.
        With  respect  to  this  Quarterly   report,   statements   included  in
        Management's  Discussion  and Analysis or Plan of  Operation  and in the
        Notes to the Consolidated Financial Statements, which are not historical
        in nature,  are  intended  to be and are hereby  identified  as "forward
        looking  statements"  for  purposes  of the safe  harbor by the  Private
        Securities  Litigation  Reform Act of 1995.  In order to comply with the
        terms of the safe  harbor,  the Company  notes that a variety of factors
        could  cause the  Company's  actual  results  and  experience  to differ
        materially from the anticipated results or other expectations  expressed
        in the Company's forward-looking statements. The risks and uncertainties
        that may affect the operations, performance,  development and results of
        the Company's business include the following: (I) changes in legislative
        enforcement and direction, (II) unusually bad weather conditions,  (III)
        unanticipated  delays in  contract  execution,  (IV)  sudden loss of key
        personnel, (V) abrupt changes in competition,  and (VI) decisions by the
        Company's lenders to demand the Company's indebtedness.


                                       9
<PAGE>
                                ECOS GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

        Results of  Operations:  Total  comparable  revenues  for  environmental
        consulting decreased $910,763 or 19.8% from $4,590,606 to $3,679,843 for
        the nine months ended December 31, 1996 and 1997, respectively.  For the
        quarter ended December 31, 1996 and 1997,  comparable  revenues  dropped
        from  $2,063,071  to  $1,193,070  respectively.  This 42.2%  decrease in
        revenues  represents  an $870,001  change.  This decrease is a result of
        environmental consulting revenue provided in the quarter ending December
        31, 1996 related to Hurricane Fran, this revenue totaled $900,000.

        Direct costs decreased  $471,594 or 18.1 % from $2,602,720 to $2,131,126
        for the nine months ended December 31, 1996 and 1997, respectively.  For
        the quarter  ended  December 31, 1996 and 1997,  direct costs  decreased
        over 35.9% from $1,112,200 to $712,912,  respectively.  This decrease in
        direct costs amounts $399,288.  Direct costs consist of all professional
        and technical  labor,  employee  benefits,  subcontractor,  supplies and
        other revenue generating expenses. The decreases in direct costs for the
        nine months  ended as well as for the quarter  ended  December 31, 1997,
        compared to December 31, 1996, are  attributable  to decreased labor and
        operating costs related to the restructuring undertaken in August 1996.

        Gross profit  decreased  $439,169 or 22.1% from $1,987,886 to $1,548,717
        for  the  nine  months   period  ended   December  31,  1996  and  1997,
        respectively. Gross profit as a percentage of revenue decreased from 43%
        to 42% for the nine  month  period  ended  December  31,  1996 and 1997,
        respectively.  This  decrease is  worthwhile to note as the 1996 numbers
        contain  revenues  from  Hurricane  Fran.  Gross profit fell $470,713 or
        49.5% from $950,871 to $480,158 for the quarter ended  December 31, 1996
        and  1997,  respectively.  Gross  profit  as  a  percentage  of  revenue
        decreased  from just over 46% to 40% for the quarter ended  December 31,
        1996 and  1997,  respectively.  The  decrease  in gross  profit  for the
        quarter is  attributable  to the project work related to Hurricane  Fran
        and it's $900,000 impact on revenues in the same quarter of 1996.

        Comparable  general  administrative  and other operating costs increased
        $338,406 or 14% from  $2,412,999 to $2,751,405 for the nine months ended
        December 31, 1996 and 1997, respectively.  This increase is attributable
        to the write off of  goodwill  and assets in the parent  company.  These
        write offs totaled $560,663.  The comparable  quarter adjusted for these
        impacts would  provide for a decrease of $222,257 or 9% from  $2,412,999
        to  $2,190,742.  For the  quarter  ended  December  31,  1997,  general,
        administrative  and other  operating  costs  rose  $343,001  or 40.4% to
        $1,191,430  as compared to $848,429 for the quarter  ended  December 31,
        1996.  The comparable  quarter  adjusted for the impacts of goodwill and
        corporate  office closing reflects  general and  administrative  expense
        declining by $217,662  from  $848,429 to $630,767 for the quarter  ended
        December 31, 1996 and 1997,  respectively.  This reflects a 25% decrease
        in general and administrative expense.

                                       10
<PAGE>
                                ECOS GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)


        The nine months ended December 31, 1996 includes  several  non-recurring
        operating  transactions and  extraordinary  items totaling a net gain of
        approximately  $865,000.  One of these non-recurring  transactions was a
        charge to earnings of $350,000  for the  Company's  restructuring  plans
        initiated in the First Quarter ended June 30, 1996, for the streamlining
        of  functions  and  integration  with ART.  During the 96  Quarter,  the
        Company settled with certain creditors who accepted a payout of $.20 for
        each $1.00 of their allowed  claim.  This  settlement  resulted in a net
        gain of $280,981. In addition, on June 28, 1996, the Consulting Division
        completed  an Offer in  Compromise  Agreement  with the IRS settling all
        disputes  related  to  delinquent  payroll  taxes.  As a result  of this
        settlement, the Company reported a gain of $934,091, net of professional
        fees and costs.

        The net loss of $8,430,540  for the nine months ended  December 31, 1997
        is a $8,730,551  increase  from the net income of $300,011  reported for
        the same  period  at  December  31,  1996.  The loss  from  discontinued
        operations of $666,240  combined with the loss on disposal of $6,406,786
        which is attributable  to the  disposition of ART,  reported in the nine
        months ended  December 31, 1997 accounts for  $7,073,026 of the net loss
        for the period and for over 81 % of the change from December 31, 1996 to
        December  31,  1997.  The net  loss  increased  $535,441  from a loss of
        $290,422 to a loss of $825,863 for the quarter  ended  December 31, 1996
        and 1997, respectively. The loss for the quarter taking into account the
        write off of goodwill,  assets and  increasing  the accounts  receivable
        reserves  would be $197,170  or a decrease  in net loss of $92,452.  The
        quarter  ending  December  31,  1996 had  project  revenues  related  to
        Hurricane Fran of $900,000.

        Liquidity  and Capital  Resources:  The  Company  had a working  capital
        deficit of $523,541 at December 31, 1997  compared to a working  capital
        deficit of $132,786 at March 31, 1997.  This reflects a working  capital
        decrease of $390,755.  Historically the Company has experienced  capital
        and  liquidity  problems  and no  assurances  can be given  that for the
        future the Company will not continue to have these shortages.

        Cash flow used in operating activities was $133,444.

        Net cash used in investing activities of $9,715 consisted mainly of 
        purchases of equipment of $8,795.  The net cash provided by financing 
        activities of  $216,494, includes $879,798 from the conversion of the
        promissory note of Mr. Sam Klein. into 2,666,667 shares of ECOS Group,
        Inc. Common Stock.  The cash and equivalents at December 31, 1997 was
        $119,113.

        The Company has no material commitments for capital expenditures.


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<PAGE>
                                ECOS GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

        The Company intends to fund its current  operations from the combination
        of cash on hand,  cash  generated  from  operations,  potential  sale of
        equity  and/or  assets,  as well as  costs  savings  generated  from its
        continued cost reduction measures. These sources of capital are expected
        to largely fund the Company's current operations through March 31, 1998.
        Management expects a return to profitability in Fiscal 1999; however, if
        the Company  does not return to  profitability,  and absent  alternative
        sources of financing,  there would be a material  adverse  effect on the
        financial  condition,  operations and business prospects of the Company.
        The  Company has no  arrangements  in place for  alternative  sources of
        financing, and there can be no assurance that any such financing will be
        available at all or on terms acceptable to the Company.

Part II: Other Information

        The Company  has  negotiated  the  default of the May 5, 1997,  note for
        $1,000,000 to a five year  promissory  note for $608,000 and the balance
        converted  to shares of Common  Stock of ECOS Group,  Inc.  (see related
        party debt for further details.)

        This settles all instances of default for ECOS Group, Inc.

        NASDAQ Delisting: The Company shares were delisted from the NASDAQ Small
        Cap Market  effective  January 2, 1998.  The Company did not meet NASDAQ
        requirements for total capital and surplus of $2,000,000.  The Company's
        plan for  maintaining  compliance with NASDAQ listing  requirements  was
        rejected and the Company received notification of delisting December 17,
        1997.

ITEM 6. REPORTS ON FORM 8-K

        One report was filed on Form 8-K  reporting  the sale of the  Company's
        subsidiary American Remedial Technologies, Inc..

        SIGNATURES

                                                         /s/ Michael Baker
                                                         Chief Financial Officer
                                                         ECOS Group, Inc.



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