<PAGE>
                    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 JUNE 30, 1999

                                                             OR

( )        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 0-11472

                           BIOMUNE SYSTEMS, INC.
     (Exact name of small business issuer as specified in its charter)



      Nevada                                           87-0380088
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)



2401 South Foothill Drive
Salt Lake City, Utah                                           84109-1405
(Address of principal executive offices)                       (Zip Code)

                         (801) 466-3441
                      (Issuer's telephone number)





Check whether the issuer:  (1) 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 August 10, 1999, the issuer had issued and outstanding 2,388,787 shares of
common stock, par value $.0001.

Transitional Small Business Disclosure Format
(Check One):

Yes                  No X
   ---                 ---

                                       -1-

<PAGE>



                               TABLE OF CONTENTS



PART I.              FINANCIAL INFORMATION
                                                                            Page
                                                                             No.
    1.        Financial Statements

              Unaudited Condensed Consolidated Balance Sheets as of June
              30, 1999 and September 30, 1998..................................3

              Unaudited Condensed Consolidated Statements of Operations for
              the three and nine months ended June 30, 1999 and 1998...........4

              Unaudited Condensed Consolidated Statements of Cash Flows for
              the nine months ended June 30, 1999 and 1998.....................5

              Notes to Unaudited Condensed Consolidated Financial Statements...7

    2.        Management's Discussion and Analysis or Plan of Operation.......11


PART II.             OTHER INFORMATION........................................13

                                       -2-

<PAGE>



                                      PART I

 ITEM 1 - Financial Statements

                       BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (Unaudited)

<TABLE>
<CAPTION>
ASSETS


                                                                                                 June 30,         Sep. 30,
                                                                                                  1999             1998
                                                                                                  ----             ----
<S>                                                                                         <C>              <C>
Current assets:
  Cash and cash equivalents                                                                 $      40,660    $      27,701
  Receivables, net                                                                                904,761        2,147,249
  Inventories, net                                                                                399,310          661,243
  Prepaids                                                                                      1,502,650           19,032
                                                                                            --------------   --------------
 Total current assets                                                                           2,847,381        2,855,225

Long-term Receivables, net                                                                        500,000        1,391,260
Property and equipment, net                                                                        87,642          150,544
Investment in Rockwood                                                                          1,681,377               -
Investments                                                                                       761,016          425,000
Intangibles, net                                                                                  568,955          814,009
Other assets, net                                                                                  11,346           14,437
                                                                                            --------------   --------------
       Total assets                                                                         $   6,457,717    $   5,650,475
                                                                                            ==============   ==============

LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:
  Accounts payable and accrued expenses                                                     $     710,777    $     798,968
  Notes Payable                                                                                   150,000        1,074,500
                                                                                            --------------   --------------
           Total current liabilities                                                              860,777        1,873,468
 Minority Interest                                                                                                  31,281
Shareholders' equity:
    Preferred stock, $.0001 par value; 50,000,000 shares authorized 1,360,430 shares and
        1,428,388 shares issued and outstanding respectively                                    2,146,747        2,573,015
   Common stock, $.0001 par value; 500,000,000 shares authorized 2,008,142 shares and
        2,388,787 shares outstanding respectively                                                     239              128
   Additional paid-in capital                                                                  40,867,686       39,042,910
   Stock subscriptions receivable                                                                 (55,192)         (55,192)
   Warrants                                                                                       338,500          338,500
   Deferred compensation and consulting                                                          (223,764)        (304,862)
   Accumulated deficit                                                                        (37,477,276)     (37,848,773)
                                                                                            --------------   --------------
           Total shareholders' equity                                                           5,596,940        3,745,726
                                                                                            --------------   --------------
                                                                                            $   6,457,717    $   5,650,475
                                                                                            ==============   ==============
</TABLE>






               The  accompanying  notes are an integral part of these unaudited
condensed consolidated balance sheets.

                                       -3-

<PAGE>



                    BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                              For the Three Months             For the Nine Months
                                                                 Ended June 30,                  Ended June 30,

                                                               1999              1998            1999            1998
                                                              ------            ------          ------          ------
<S>                                                       <C>               <C>               <C>             <C>
REVENUES                                                  $   612,085       $  1,372,751      $ 1,387,394     $ 1,443,520

OPERATING EXPENSES:
  Cost of revenues                                            261,566            753,591          552,209         793,029
  Management, consulting and research fees                     98,932            120,313          578,682         782,687
  Other general and administrative                             89,855            640,564          341,008       1,949,027
                                                          -----------       -------------     ------------    ------------
         Total operating expenses                             450,353          1,514,468        1,471,899       3,524,743
INCOME (LOSS) FROM OPERATIONS                                                   (141,717)         (84,505)     (2,081,223)
OTHER INCOME (EXPENSE):
  Interest income, net                                          9,883             54,144           93,005         110,881
   Minority interest                                                -                  -           16,341               -
  Other, net                                                        -                  -          495,000               -
                                                          -----------       -------------     ------------    ------------
         Total other income, net                                9,883             54,144          604,346         110,881
                                                          -----------       -------------     ------------    ------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS                  171,616            (87,573)         519,841      (1,970,342)
   Gain on disposal of discontinued Volu-Sol, Inc.                 --                 -                --          28,027
NET INCOME (LOSS)                                             171,616            (87,573)         519,841      (1,942,315)
Preferred stock dividends and accretion of
    beneficial conversion feature                             (46,545)          (204,303)        (152,297)       (973,455)
                                                            ----------      -------------     ------------    ------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES                 125,071           (291,876)         367,544      (2,915,770)
                                                          ============      =============     ============    ============
NET INCOME (LOSS) PER COMMON SHARE  (basic)               $      0.06       $      (0.53)     $      0.22     $     (5.55)
                                                          ============      =============     ============    ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                  2,056,000            549,000        1,652,000         525,000
   (basic)
NET INCOME (LOSS) PER COMMON SHARE (diluted)              $      0.04       $      (0.53)     $      0.14     $     (5.55)
                                                          ============      =============     ============    ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                  3,102,000            549,000        2,698,000         525,000
   (diluted)
</TABLE>
























                  The accompanying notes are an integral part of these unaudited
condensed consolidated statements.



                                       -4-

<PAGE>



                       BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (Unaudited)

                  Increase (Decrease) in Cash and Cash Equivalents


<TABLE>
<CAPTION>
                                                                                For the Nine Months
                                                                                   Ended June 30,
                                                                                1999              1998
                                                                               ------            ------
<S>                                                                        <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                          $    519,841      $ (1,942,316)
  Adjustments to reconcile net loss to net cash used in operating
      activities:
  Gain on disposal of Volu-Sol, Inc.                                                 --           (28,027)
  Depreciation and amortization                                                  96,515            83,355
  Issuance of Common Stock, options and warrants for services                        --           561,526
  Amortization of deferred consulting expense                                    81,098           447,084
  Gain on sale of investments                                                  (270,000)               --
  Cancellation of stock issued to consultants                                        --           (50,000)
  Income from management fee from equity investment                            (450,000)               --
  Exchange of related-party note receivable                                          --            24,671
  Changes in assets and liabilities:
  Accounts receivable, net                                                       698,283           31,431
  Inventories                                                                    261,933           68,834
   Prepaid expenses                                                                   --               --
  Other assets                                                                (1,483,618)         (39,436)
  Accounts payable and accrued liabilities                                        88,190       (1,199,091)
  Minority Interest                                                                   --               --
                                                                           --------------    -------------
    Net cash generated (used) in operating activities                           (457,758)      (2,041,969)
                                                                           --------------    -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                                (5,646)          (3,721)
Net (advances) repayments from related parties                                        --       (1,225,335)
Payments received on notes receivable                                                 --               --
Proceeds from sale of investment                                                 431,000               --
Purchase investments, net                                                       (288,122)              --
                                                                           --------------    -------------
    Net cash generated (used) in investing activities                            137,232       (1,229,056)
                                                                           --------------    -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock, net                                        --        1,196,841
Proceeds from issuance of common stock, net                                      848,985          206,303
Net decrease in notes payable                                                   (515,500)              --
                                                                           --------------    -------------
    Net cash provided (used) by financing activities                             333,485        1,403,144
                                                                           --------------    -------------
</TABLE>









                   The  accompanying   notes  are  an  integral  part  of  these
unaudited condensed consolidated statements.

                                       -5-

<PAGE>



                          BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (Unaudited)

                     Increase (Decrease) in Cash and Cash Equivalents


<TABLE>
<CAPTION>
                                                                                For the Nine Months
                                                                                   Ended June 30,


                                                                                1999             1998
                                                                               ------           ------

<S>                                                                        <C>               <C>
NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                                             $      12,959     $ (1,867,881)

CASH AND CASH EQUIVALENTS AT  BEGINNING
   OF THE PERIOD                                                                  27,701        1,922,790
                                                                           --------------    -------------

CASH AND CASH EQUIVALENTS AT END OF
   THE PERIOD                                                              $      40,660     $     54,909
                                                                           ==============    =============
</TABLE>



      SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

The Company  reduced its ownership in Rockwood LC from 52% to 19% in March 1999.
This change in ownership  increased  the carrying  amount of its  investment  in
Rockwood  LC  by  $1,231,377  from  reclassifying   receivables  of  $1,011,508,
unamortized  intangible  assets of $251,150  and reducing  minority  interest by
$31,281.

During the nine months ended June 30, 1999, the Company reduced notes payable by
$559,000 by exchanging 189,000 shares of its investment in Bioxide Corporation.

During the nine months ended June 30, 1999, the Company  received 178,692 shares
of Bioxide Corporation in exchange for receivables of $402,056.

During the nine months ended June 30, 1999,  the Company  converted  $369,445 of
preferred stock to common stock.

During the nine months ended June 30, 1999,  the Company  paid  preferred  stock
dividends of $169,929 by issuing additional shares of preferred stock.
















                The   accompanying notes are an integral part of these unaudited
condensed consolidated statements.


                                       -6-

<PAGE>



                      BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
               NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Unaudited)

(1)  PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The  accompanying  interim  condensed   consolidated  financial  statements  are
unaudited and have been prepared  consistent with generally accepted  accounting
principles for interim  financial  information and with the instructions to Form
10- QSB and Item 310(b) 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. These statements should be read in
conjunction with the audited financial  statements and notes thereto included in
the Company's annual report on Form 10-K for the fiscal year ended September 30,
1998. Reference to the Company or Biomune includes Biomune Systems, Inc. and its
wholly owned subsidiary, Optim Nutrition, Inc.

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  contain  all  adjustments   (consisting  only  of  normal
recurring  adjustments)  necessary  to fairly  present the  Company's  financial
position as of June 30, 1999 and the results of operations  for the three months
and nine months and cash flows for the nine months ended June 30, 1999 and 1998.
The  interim  financial  statements  should  be read  in  conjunction  with  the
following  explanatory notes. The results of operations for the three months and
nine months ended June 30, 1999 are not  necessarily  indicative  of the results
that may be expected for the year ending September 30, 1999.

(2) DIVESTITURE OF VOLU-SOL, INC.

On October 1, 1997, the Company  divested itself of its wholly owned  subsidiary
Volu-Sol,  Inc.,  by  distributing  the common stock of Volu-Sol pro rata to the
Company's  stockholders  of  record  as of  March 5,  1997.  The  operations  of
Volu-Sol,  Inc.  are  reflected  herein as  discontinued  operations  during the
affected period.

(3)  NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share ("Basic EPS") excludes  dilution and is
computed by dividing net income (loss) by the weighted  average number of common
shares outstanding during the period. Diluted net income (loss) per common share
("Diluted  EPS")  reflects  the  potential  dilution  that could  occur if stock
options or other contracts to issue common stock including convertible preferred
stock were exercised or converted into common stock.  The computation of Diluted
EPS does not assume  exercise or  conversion  of  securities  that would have an
anti-dilutive effect on net income per common share.

At June 30, 1999, there were outstanding options and warrants to purchase 15,632
shares  of common  stock and there  were  1,428,388  shares of  preferred  stock
outstanding, convertible into a minimum of 1,046,190 shares of common stock.


<TABLE>
<CAPTION>
                                Number of             Convertible into #
Preferred Stock             Preferred Shares           of Common Shares
---------------             ----------------           ----------------
<S>                            <C>                        <C>
Series A                              34,410                      1,190
Series E                                  10                     15,000
Series F                           1,392,748                    448,000
Series J                               1,220                    582,000
                               -------------              -------------
                                   1,428,388                  1,046,190
                               =============              =============
</TABLE>




                                       -7-

<PAGE>



(4)  COMMON STOCK TRANSACTIONS

The Company has  deferred  consulting  expense  related to shares  issued  under
consulting  agreements  entered into prior to September 30, 1998. These deferred
amounts are being  recognized  over the terms of the  agreements as services are
provided.  Total amortization of these deferred  consulting expenses was $66,310
for the nine months  ended June 30, 1999 and $6,492 for the three  months  ended
June 30, 1999.

(5)  STOCK OPTIONS AND WARRANTS

As of December 16, 1997, the Company offered all holders of options and warrants
a one-time  opportunity to exchange  their options or warrants,  as the case may
be, for options or warrants  exercisable  until  February 28, 1998 at a price of
$.50 per share.  Option and  warrant  holders  who  decline  to  exchange  their
outstanding  options or warrants and exercise the replacement  warrants retained
their existing options or warrants,  without any change in the previously stated
exercise  terms and price.  For the three months ended  December 31, 1997,  as a
result of this exchange  offer,  the Company  recorded  compensation  expense of
$124,359 related to options held by employees and directors.

During the nine months ended June 30, 1999,  warrants to purchase 147,059 shares
of common stock expired. As a result, $544,773 was reclassified from the caption
"Common Stock Warrants" to the caption "Additional Paid-in Capital."

Subsequent  to  December  31,  1997,  an option  holder  exercised  his right to
purchase  412,457  shares  of common  stock at $0.50  per share and the  Company
received $206,229 in cash.

(6)  RELATED-PARTY TRANSACTIONS

During the nine months  ended June 30, 1999,  the Company  recorded a management
fee of $225,000 from its Rockwood subsidiary.

From  March 5, 1997  through  September  30,  1997,  the  Company  made loans to
Volu-Sol,  Inc.  (then  a  wholly  owned  subsidiary  of the  Company)  totaling
$390,500.  During the year ended September 30, 1998,  Volu-Sol made a payment of
$150,000 of which $114,351 went to principal and $35,649 to interest  During the
nine months  ended June 30, 1999 the Company made  additional  loans to Volu-Sol
totaling  $96,000.  These loans bear interest at a rate of 10% per annum and are
due on demand.  Accrued but unpaid  interest  owed to the Company on these loans
totaled  $28,813 at June 30,  1999.  During the nine months ended June 30, 1999,
the Company sold and assigned the Volu-Sol Note plus accrued interest to Bioxide
Corporation in exchange for 178,205 shares of Bioxide Corporation common stock.

During the nine months ended June 30, 1999 the Company  sold  320,000  shares of
Bioxide Corporations stock and recorded a gain of $270,000.

During the nine months ended June 30, 1999, the Company exchanged 322,000 shares
of its common stock for 1,900 shares of Volu-Sol Series A Preferred  pursuant to
an agreement  with  investors  entered into prior to the  effective  date of the
divestiture  of  Volu-Sol.  Approximately  122,000  shares of common  stock were
issued in the exchange to a shareholder of the Company and its former President,
CEO and Chairman.

(7) PREFERRED STOCK TRANSACTIONS

During the nine months ended June 30, 1999, the Company accrued dividends on its
outstanding Series A, Series E, Series F and Series J Preferred stock of $9,125,
$7,220, $45,600 and $85,125 respectively.  Preferred stock dividends are payable
in either  additional shares of preferred stock (of the same series) or in cash,
at the option of the Company.  On June 30, 1999,  accrued dividends on Series A,
E, F and J Preferred stock totaling $147,070,  were paid by issuing 1,825 shares
of Series A  Preferred  stock,  6.2 shares of Series E Preferred  stock,  75,999
shares of Series F Preferred stock and 85.2 shares of Series J Preferred stock.

During the nine months ended June 30, 1999, 307.4 shares of the Company's Series
E preferred  stock were  converted into  approximately  289,000 shares of common
stock.  Subsequent  to June 30,  1999,  20  additional  shares  of Series E were
converted into approximately 30,000 shares of common stock.

                                       -8-

<PAGE>



(8) ROCKWOOD TRANSACTION

In April 1998,  the Company  acquired a  controlling  (52%)  equity  interest in
Rockwood's successor,  Rockwood Companies LLC (referred to as "Rockwood LC") for
$360,000 cash, a commitment to issue 500,000 shares of preferred  stock (payable
if certain benchmarks in sales were obtained),  and covenants on the part of the
Company to loan  $1,500,000  to  Rockwood LC or its  affiliates  over a one-year
period.  Rockwood LC  distributes  and sells health and beauty aids to wholesale
and retail  chains.  Rockwood LC  retained  the right to redeem a portion of the
Company's  member  interest if the Company  failed to keep its covenants to make
the loans to Rockwood LC. As of December 31, 1998,  the Company had not advanced
$850,000 of the funds it had  covenanted to loan to Rockwood LC. By letter dated
March 15, 1999 Rockwood  exercised its right to reduce the Company's interest to
19% and to terminate,  effective  December 31, 1998, other on-going  commitments
and agreements between the Company and Rockwood.

ITEM 2 - Management's Discussion and Analysis or Plan of Operation

           The  following  discussion  should  be read in  conjunction  with the
unaudited  condensed  consolidated  financial  statements  and the notes thereto
appearing elsewhere in this Quarterly Report on Form 10-QSB.

Overview

           The Company is engaged in the research, development, distribution and
sale of  biologic  pharmaceutical  products,  nutraceutical  food  products  and
supplements, medical foods and health and beauty aids. Certain of these products
have been  developed  by the Company and  incorporate  a patented  whey  protein
technology,  which is designed to provide or increase protective immunities from
an immune response to disease and to provide  nutritional  supplementation.  The
Company  markets  under  an  exclusive  license  agreement  a  medical  food bar
(NiteBite)  that is a patented  formulation  developed  by  researchers  at Beth
Israel Deaconess Medical Center,  Harvard Medical School.  The energy and sports
nutrition  bars of the  Company  (Mountain  Lift)  are  also  marketed  under an
exclusive  license from the developer of the products.  The Company also holds a
minority  interest in Rockwood  LC that  distributes  health and beauty aids and
related products to national wholesale and retail customers.

           The  Company  believes  its  future  results  of  operations  will be
affected by factors such as:

           o         the  availability of cash from financing activities to fund
                     its  operations;

           o         the results of  research  and  development  efforts and the
                     clinical  trials on  BWPT-301,  BWPT-302  and other  future
                     pharmaceutical drug candidates based on or derived from the
                     Technology;

           o         market acceptance of  Optimune, the  nutrition and  medical
                     food bars, and pharmaceutical drug candidates;

           o          increased competitive pressures;

           o          changes in raw material sources and costs; and

           o          adverse changes in general economic conditions in any
                      market in which the Company conducts or markets its
                      products.

           During the nine  months and the  quarter  ended  June 30,  1999,  the
Company's  revenues  were  generated  from the sale of  Optimune  and  Maximune,
special food bars and nutrition bars, and sale of health and beauty aids through
Rockwood  LC. The  Company's  primary  focus and efforts  during the fiscal year
ended  September  30,  1998,  were the  commercialization  of its  nutraceutical
products,  assessing and obtaining additional nutraceutical and medical products
to add to its product line,  and, to a lesser extent,  continuing its efforts to
obtain FDA approval of BWPT-301 for the treatment of cryptosporidiosis in people
with AIDS and BWPT-302 for the treatment of E. coli, strain 0157:H7.


                                       -9-

<PAGE>



           Continuing  in  fiscal  year  1999,  the  Company  has  directed  its
resources and efforts on:

           o          commercialization of its nutraceutical products;

           o          continued marketing and selling of the NiteBite and
                      Mountain Lift bars;

           o          acquisition of new nutraceutical and or medical food
                      products;

           o          development of one or more additional nutraceutical
                      products based on its BWPT products (collectively the
                      "Technology");

           o          approval of BWPT-301 and BWPT-302; and

           o          renewing its Technology license.

Results of Operations

Comparison of the Three Months Ended June 30, 1999
with the Three Months Ended June 30, 1998

           During the three months ended June 30, 1999, the Company had revenues
of $612,085  compared to $1,372,751 for the comparable  three month period ended
June 30, 1998.  The decrease in sales is due  primarily to the Company  reducing
its interest in Rockwood LC from 52% to 19% and partially  offset by an increase
in sales of its medical food, sports and energy bars and nutrition products.

           Cost of sales were  $261,566 for the three months ended June 30, 1999
compared to cost of sales of $753,591  for the same period in 1998.  The overall
gross  margin for the quarter in 1999 was 57% of  revenues,  compared to 45% for
the  comparable  quarter in 1998.  The  increase  in gross  margin is due to the
higher margins from the sale of its nutrition products,  medical food and sports
and energy bars.

           Management,  consulting  and research fees were $98,932 for the three
months ended June 30,  1999,  as compared to $120,313 for the three months ended
June 30, 1998. General and  administrative  expenses decreased from $538,926 for
the three  months ended June 30, 1998 to $89,855 for the three months ended June
30, 1999.  The decrease in fees and expenses is due to the Company's  efforts to
reduce overhead costs.

           During the three months  ended June 30,  1998,  the Company had a net
loss of $291,876  ($0.53 per share,  fully diluted)  compared to a net profit of
$125,071  ($0.04 per  share) for the three  months  ended  June 30,  1999.  This
turnaround  from a net loss in 1998 to a net profit in the same  quarter in 1999
is  attributable  primarily  to the  increase  in  revenue  from  the  Company's
nutraceutical  products  and  medical  food bars and a  reduction  in  operating
expense discussed above.

Comparison of the Nine Months Ended June 30, 1999
with the Nine Months Ended June 30, 1998

           During the nine months ended June 30, 1999,  the Company had revenues
of $1,387,394  compared to $1,443,520 for the comparable nine month period ended
June 30, 1998. The decrease in revenues is due to the reduction of the Company's
ownership interest in Rockwood LC.

           Cost of sales were  $552,209  for the nine months ended June 30, 1999
compared to cost of sales of $793,029  for the same period in 1998.  The overall
gross  margin for 1999 was 60% of revenues,  compared to 45% for the  comparable
quarter in 1998. The increase in gross margin is due to the higher gross margins
from the Company's Optim product line.


                                       -10-

<PAGE>



           Management,  consulting  and research fees were $578,682 for the nine
months ended June 30, 1999,  compared to $782,687 for the nine months ended June
30, 1998. This decrease is due to the Company's decision to allocate its limited
resources to development and  commercialization  of its  nutraceutical  products
rather than continuing research and development of pharmaceuticals at historical
levels.  General and  administrative  expenses decreased from $1,847,389 for the
nine months  ended June 30, 1998 to $341,008  for the nine months ended June 30,
1999. The decrease in these  expenses is due to the Company's  efforts to reduce
overhead costs and a reduction in the number of employees.

           During the nine  months  ended June 30,  1999,  the Company had a net
profit of $367,544 ($0.14 per share,  fully diluted),  compared to a net loss of
$2,915,770  ($5.55 per share)  during the nine months ended June 30, 1998.  This
turnaround  from a net loss in 1998 to a net profit in the same  quarter in 1999
is  attributable  primarily  to the  increase  in  revenue  from  the  Company's
nutraceutical  products and medical food bars, the sale of Bioxide  shares,  the
recording  of  management  fees from  Rockwood  LC, and a reduction in operating
expenses discussed above.

Liquidity and Capital Resources

           Historically,  the Company has been unable to finance its  operations
from cash flows from operating  activities.  The Company expects it will require
substantial  funds and time to  commercialize  its  nutraceutical  products,  to
complete clinical trials,  to obtain  regulatory  approval for and commercialize
products  utilizing the Technology and to develop and  commercialize  additional
nutraceutical  products  based  on the  Technology.  Because  revenue-generating
operating  activities  are not in place at  significant  levels and  because the
Company will require  significant capital to accomplish the objectives set forth
above,  additional  funding will be required,  although  such funding may not be
available or may not be available on favorable terms.  Management  believes that
the Company-funded  research and development efforts to date have positioned the
Company to pursue future  research and  development  efforts and clinical trials
with joint venture,  strategic  alliance,  government or private grants or other
third-party funding.

           As of June 30, 1999, the Company had cash and cash equivalents of
$40,660  and  working  capital  of  $1,986,604  as  compared  to cash  and  cash
equivalents of $27,701 and working capital of $981,757 as of September 30, 1998.
The increase in cash is due to the sale of Bioxide shares.

           The Company  paid  preferred  stock  dividends of $169,529 by issuing
additional shares of preferred stock.

           During the nine months  ended June 30, 1999 the Company  sold 320,000
shares of its Bioxide Corporation stock and recorded a gain of $270,000.

           During the nine months ended June 30, 1999,  the Company's  operating
activities used cash of $457,758.  During the same period in the previous fiscal
year, the Company's  operating  activities  used  $2,041,969 of cash,  which was
provided by the raising of capital from the sale of preferred stock.

           The Company has no established  credit  facility with a bank or other
lending  institution.  The Company has in the past, from time to time,  borrowed
money from certain shareholders,  but there is no formal financing  arrangement,
agreement or understanding in effect at this time.

Assignment of Note and Sale of Bioxide Shares

           The Company borrowed $600,000 from the Calvin Black Trust in May 1998
pursuant to a promissory note and line of credit  agreement  ("Black Note").  On
March 31, 1999,  the Company  entered into an agreement  with IMG,  Ltd., a Utah
limited liability company, for the sale of 300,000 shares of Bioxide Corporation
common stock owned by the Company.  The purchase  price for such  securities was
$3.00 per share and was paid in cash of $341,000  and by the  assumption  of the
Black Note by IMG. At March 31, 1999,  principal and accrued  interest due under
the Note was  $570,552.27.  In connection with the assumption of the Black Note,
the Trust and IMG entered into a separate  agreement pursuant to which the Trust
released its claims  against the Company.  The sole member and manager of IMG is
David G. Derrick, formerly the President, CEO and director of the Company.


                                       -11-

<PAGE>



Exchange of Volu-Sol Note Receivable

           Prior to and from time to time following the divestiture of Volu-Sol,
the Company  loaned  funds to  Volu-Sol.  The amounts  loaned to Volu-Sol by the
Company were repayable pursuant to a promissory note ("Volu-Sol Note"). At March
31, 1999, amounts owing under the Volu-Sol Note totaled approximately  $402,000.
During the nine months ended June 30, 1999,  the Company  exchanged the Volu-Sol
Note with Bioxide Corporation for 178,205 shares of the common stock of Bioxide.

Exchange of Volu-Sol Series A Preferred

           In connection  with certain  financing  transactions  entered into by
Volu-Sol at or about the effective date of the  divestiture,  the Company agreed
to  exchange  certain  shares  of  Volu-Sol  Series A  Preferred  for  shares of
previously  unissued  common stock of the Company under  certain  circumstances.
During the nine months ended June 30, 1999, the Company issued 322,000 shares of
its common  stock in exchange  for 1,900  shares of Volu-Sol  Series A Preferred
pursuant to this agreement. Certain of the shares of common stock issued in this
exchange were issued to David G. Derrick,  a former  officer and director of the
Company.  The  Volu-Sol  Series A Preferred  is  convertible  to common stock of
Volu-Sol at the rate of a minimum of 160 common shares for each preferred share.

Special Statement Concerning Forward-looking Statements

           This Report, in particular the "Management's  Discussion and Analysis
or of Operation" section,  contains  forward-looking  statements  concerning the
expectations  and  anticipated  operating  results  of  the  Company.  All  such
forward-looking   statements  are  intended  to  qualify  for  the  safe  harbor
protection  provided by Section 21E of the  Securities  Exchange Act of 1934, as
amended.  The Company  cautions the reader that numerous  factors govern whether
events  described  by any  forward-looking  statement  made by the Company  will
occur.  Any one of such factors could cause actual results to differ  materially
from those  projected  by the  forward-looking  statements  made in this Report.
These forward-looking  statements include plans and objectives of management for
future operations,  including plans and objectives  relating to the products and
the future economic performance of the Company, including:

           o          market acceptance of the products;

           o          development of new nutraceutical products;

           o         the extent of additional research and development,  general
                     and  administrative  and other direct costs associated with
                     clinical trials and FDA approval of certain  products using
                     the Technology;

           o          unexpected delays in receipt of final FDA approval; and

           o         and  the  lack of  sufficient  cash  to  fund  current  and
                     projected  operations and budgeted research and development
                     for fiscal year 1999.

           The forward-looking  statements are based on current expectations and
assumptions, such as:

           o          the Company will have adequate financing available;

           o          the efficacy of the Technology-based products will be
                      established during the ongoing clinical trials and future
                      clinical trials;

           o          the Company will successfully market the health and beauty
                      aids and its nutraceutical products and successfully
                      develop and commercialize other nutraceutical products;

           o          the Company will successfully develop and commercialize
                      the Technology; and

           o          the Company will timely and properly quantify and analyze
                      the data derived from its clinical trials.

                                       -12-

<PAGE>




           Assumptions  involve  judgments  with respect to, among other things,
future economic,  competitive and market conditions,  future business decisions,
and the  results  of the  clinical  trials  and the time and money  required  to
successfully  complete those trials, all of which are difficult or impossible to
predict  accurately  and many of which are  beyond the  control of the  Company.
Although   the   Company   believes   that  the   assumptions   underlying   the
forward-looking   statements  in  this  Report  are  reasonable,  any  of  these
assumptions  could prove inaccurate.  Therefore,  there can be no assurance that
the  results  contemplated  in any of the  forward-looking  statements  will  be
realized.  Budgeting  and other  management  decisions  are  subjective  in many
respects and are susceptible to  interpretations  and periodic revision based on
actual experience and business  developments,  the impact of which may cause the
Company to alter its marketing capital expenditure plans or other budgets.  This
will  affect  the  Company's  business,   financial  condition  and  results  of
operations.   In  light  of  the  significant   uncertainties  inherent  in  the
forward-looking  statements,  any such  statement  should not be  regarded  as a
representation  by the Company or any other person that the  objectives or plans
of the Company will be achieved.

Update on Year 2000 Readiness

           The  "Year  2000  problem"  is  pervasive   and  complex,   with  the
possibility  that it will affect many technology  systems.  Systems and embedded
technology that are  date-sensitive  may recognize a date using "00" as the year
1900  rather  than the year  2000.  This  could  result in a system  failure  or
miscalculations  causing  disruptions  of  operations,  including,  among  other
things, a temporary inability to process transactions,  send invoices, or engage
in similar normal business activities.

           The  Company  has  reviewed  its   operating   systems,   information
technology and information  management  systems and  non-information  technology
systems in anticipation of potential Year 2000 problems. To date, the review has
not revealed any problems with the Company's  internal systems or equipment.  In
addition, the Company has not received any notification from significant vendors
or service  providers or other third parties whose  services are  significant to
the business  operations  of the Company of possible Year 2000 problems with the
information  systems and  technology  of such third  parties that may  adversely
affect the  business,  results  of  operations  or  financial  condition  of the
Company.

           There  can be no  assurance  that the  Company  will  not  experience
operational  difficulties as a result of Year 2000 issues, either arising out of
internal  operations,   or  caused  by  third-party  service  providers,   which
individually or collectively could have an adverse impact on business operations
or require the Company to incur unanticipated expenses to remedy any problems.

                         PART II.    OTHER INFORMATION

ITEM 1.  Legal Proceedings

           On  September  29,  1998,  Bryan  Furtek filed a lawsuit in the Third
Judicial  District Court for Salt Lake County,  Salt Lake  Department,  State of
Utah (Civil No. 9890909809),  naming the Company, Bioxide Corporation,  David G.
Derrick,  Jack  Solomon,  Genesis  Investment  Corporation,  and  Biomed  Patent
Development as defendants.  The  plaintiff's  claims  allegedly arose out of his
role  in  the  development  of  certain  waste  disposal   technologies.   Those
technologies  were  included  in the  property  sold by the  Company  in 1998 to
Bioxide Corporation. The defendants, including the Company, filed answers to the
complaint,  denying  all of  plaintiff's  principal  allegations  and claims and
asserting  counterclaims  against Mr.  Furtek,  including,  among other  things,
unjust  enrichment  and a claim that Furtek  misrepresented  his  authority  and
ability to patent the  technology at the core of the  litigation.  This case has
been settled and the lawsuit dismissed.



                                       -13-

<PAGE>



ITEM 2.   Changes in Securities and Use of Proceeds

Issuance of Unregistered Equity Securities During the Quarter Ended June 30,
1999

           During the quarter  ended June 30, 1999,  the Company  issued  79,000
shares of common stock upon conversion of preferred stock.


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

           At the Company's Annual Meeting of Shareholders on June 23, 1999, the
following  actions  were  submitted  and approved by vote of the majority of the
issued and outstanding shares of the Company:

(1)        Election of directors;

(2)        Selection of Tanner+Co., as the Company's independent public
           accountants.

(3)        Adoption of the 1999 Stock Option Plan by the Board of Directors.

(4)        Issuance  of shares  upon  conversion  of the  Series F and  Series J
           Preferred Stock of the Company in aggregate  amounts in excess of 20%
           of the issued and outstanding shares of common stock of the Company.

(5)        Amendment to the Company's  Article's of  Incorporation  changing the
           corporate name of the Company to Option Nutrition, Inc.

           A total of 1,546,104 shares  (approximately  74.5%) of the issued and
outstanding  shares of the Company were represented by proxy or in person at the
meeting. These shares were voted on the matters described above as follows:

1.         Election of directors.

<TABLE>
<CAPTION>
                                                                                            #Shares
                                                                                          Abstaining/
                 Name                      # Shares For          #Shares Against            Withheld
-------------------------------------- -------------------- -------------------------  -------------------
<S>                                               <C>                   <C>                          <C>
Aaron Gold, D.D.                                  1,537,789             0                            8,315
Charles J. Quantz                                 1,537,789             0                            8,318
Thomas Q. Garvey, III, M.D.                       1,557,883             0                            8,221
Christopher D. Illick                             1,537,883             0                            8,221
Michael G. Acton                                  1,537,883             0                            8,221
</TABLE>

2.         Ratification  of the Board of Directors'  selection of Tanner+Co.  as
           the independent public accountants of the Company.

<TABLE>
<CAPTION>
                         #Shares For                     #Shares Against                     #Shares Abstaining
              -----------------------------------------------------------------------------------------------------------
<S>                         <C>                               <C>                                  <C>
                            1,489,941                         54,620                               1,542
</TABLE>

3. Ratification of the adoption of the 1999 Stock Option Plan as follows:

<TABLE>
<CAPTION>
                         #Shares For                     #Shares Against                     #Shares Abstaining
              -----------------------------------------------------------------------------------------------------------
<S>                        <C>                               <C>                                   <C>
                           367,468                           82,069                                2,345
</TABLE>


                                       -14-

<PAGE>



4.         Issuance of shares of common stock upon  conversion of certain series
           of  preferred  stock in excess of 20% of the issued  and  outstanding
           shares of the Company's common stock.

<TABLE>
<CAPTION>
                         #Shares For                     #Shares Against                     #Shares Abstaining
              -----------------------------------------------------------------------------------------------------------
<S>                         <C>                                <C>                                 <C>
                            364,824                            82,120                              4,938
</TABLE>

5. Adoption of amendment changing the name of the Company.

<TABLE>
<CAPTION>
                         #Shares For                     #Shares Against                     #Shares Abstaining
              -----------------------------------------------------------------------------------------------------------
<S>                        <C>                                 <C>                                   <C>
                           1,486,991                           58,136                                977
</TABLE>


ITEM 6.   Exhibits and Reports on Form 8-K

           (a)       Exhibits

                     27        Financial Data Schedule

           (b)       Reports on Form 8-K




                                       -15-

<PAGE>


                                 SIGNATURES

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



                                  BIOMUNE SYSTEMS, INC.
                                  (Registrant)



Date:   August 16, 1999           /s/ Michael G. Acton
                                  ----------------------------------------------
                                  Michael G. Acton, Chief Executive Officer and
                                  Controller (Principal Financial and Accounting
                                  Officer)






























                                       -16-