SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

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


          For Quarter Ended June 30, 1998 Commission File No. 0-24866
                            -------------                     -------


                             ISOLYSER COMPANY, INC.
             (Exact name of Registrant as specified in its charter)


   Georgia                                             58-1746149
(State or other jurisdiction of                       (IRS Employer
 incorporation or organization)                     Identification No.)

                              650 Engineering Drive
                                 Technology Park
                             Norcross, Georgia 30092
                    (Address of principal executive offices)

                                 (770) 582-6363
              (Registrant's telephone number, including area code)

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

Yes   X     No

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

Class                                     Outstanding at August 13, 1998

Common Stock, $.001 par value                        39,957,412


580940.2
WP6.1

<PAGE>



                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements

                             ISOLYSER COMPANY, INC.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)
                                   (unaudited)

                           Assets               June 30, 1998  December 31, 1997
                           ------                                              
                                                    ---------------------
Current assets
 Cash and cash equivalents                       $    7,923     $       9,299
 Accounts receivable, net                            16,010            13,909
 Inventories                                         27,311            32,067
 Prepaid expenses and other assets                    1,435             1,745
 Assets held for sale                                31,015            35,751
                                                     ---------------------
  Total current assets                               83,694            92,771
                                                     ---------------------

Property, plant and equipment                        37,617            37,622
     Less accumulated depreciation                  (18,667)          (17,630)
                                                      ---------------------
         Property, plant, and equipment, net         18,950            19,992
                                                      ----------------------

Intangibles and other assets, net                    30,562            31,571
                                                       ----------------------
                                                   $ 133,206        $ 144,334
                                                       ======================

                      Liabilities and Shareholders' Equity
                      ------------------------------------

Current liabilities
     Current installments of long term debt         $  2,715        $   4,610
     Accounts payable                                  7,424           10,108
     Bank overdraft                                      282                0
     Accrued expenses                                  4,333            5,644
                                                      ------------------------
         Total current liabilities                    14,754           20,362
                                                      ------------------------

Long term debt, excluding current installments        42,107           37,546
     Other liabilities                                   262              309
                                                      ------------------------
         Total liabilities                            57,123           58,217
                                                      ------------------------

Shareholders' equity
     Common stock                                         40               39
     Additional paid in capital                      203,165          203,601
     Retained earnings                              (126,291)        (115,743)
     Cumulative translation adjustment                   (97)            (103)
     Unearned shares restricted to employee 
        stock ownership plan                            (300)            (300)
                                                     -------------------------
                                                      76,517           87,494
Treasury shares                                         (434)          (1,377)
                                                     -------------------------
     Total shareholders' equity                       76,083           86,117
                                                     -------------------------
                                                   $ 133,206       $  144,334
                                                     =========================

See accompanying notes.






<PAGE>




                             ISOLYSER COMPANY, INC.
                 Condensed Consolidated Statement of Operations
                      (in thousands, except per share data)
                                   (unaudited)

                          Three months Three months   Six months    Six months
                             ended         ended         ended        ended
                         June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
                              -------------------------------------------------

Net sales                     $38,874  $  42,434     $  80,104      $   82,437
Cost of goods sold             30,132     32,962        60,720          63,808
                              --------------------------------------------------
   Gross profit                 8,742      9,472        19,384          18,629

Operating expenses:
   Selling, general & 
      administrative           10,036     10,544        19,827          21,078
   Research & development       1,122        619         1,803           1,387
   Impairment loss              5,300          0         5,300               0
   Amortization of 
     intangibles                  521        961         1,048           1,917
                              -----------------------------------------------
      Total operating 
         expenses              16,979     12,124        27,978          24,382
                              -----------------------------------------------
Loss from operations          (8,237)    (2,652)       (8,594)         (5,753)
Interest income                   79        111           171             340
Interest expense              (1,022)    (1,012)       (1,971)         (2,031)
Gain (loss) in joint 
   venture                        10         (6)            13            (20)
                              -----------------------------------------------
Loss before income tax 
   expense                    (9,170)    (3,559)      (10,381)         (7,464)

Income tax expense                90          7           166              11
                              ------------------------------------------------

Net loss                    $ (9,260)$   (3,566)    $ (10,547)     $    (7,475)
                              ------------------------------------------------

Net loss per common share-                                        
Basic and Diluted           $  (0.23)   $  (0.09)   $   (0.26)     $     (0.19)
                              ================================================

Weighted average number of
common shares outstanding      40,000     39,252        39,824          39,214
                              ================================================

See accompanying notes.
--------------------------------------------------------------------------------



<PAGE>


--------------------------------------------------------------------------------
                             ISOLYSER COMPANY, INC.
                 Condensed Consolidated Statement of Cash Flows
                                 (in thousands)
                                   (unaudited)

                                        Six months ended Six months ended
                                         June 30, 1998      June 30, 1997
                                      ------------------------------------

Cash flows from operating activities:
     Net loss                             $(10,547)         $     (7,475)

Adjustments to reconcile net loss to 
  net cash used in operating activities:
     Depreciation                             1,937                 3,650
     Amortization                             1,048                 1,917
     Provision for doubtful accounts             88                   173
     Loss(Gain) on disposal of property, 
       plant & equipment                         10                  (27)
     Impairment loss                          5,300                     0
     Changes in assets and liabilities          347                  (87)
                                          --------------------------------
Net cash used in operating activities:      (1,817)               (1,849)
                                          --------------------------------

Cash flows from investing activities
     Additions to property, plant and 
       equipment                            (2,856)               (2,852)
                                          --------------------------------
Net cash used in investing activities:      (2,856)               (2,852)
                                          --------------------------------

Cash flows from financing activities:
     Net borrowings (repayments) under 
           credit agreements                  2,743               (4,582)
     Changes in bank overdraft                   48               (2,380)
     Proceeds from exercised stock options        0                   574
     Proceeds from issuance of stock            255                   306
     Issuance of stock to 401(k) Plan           251                   133
                                          --------------------------------
Net cash provided by (used in) financing 
    activities:                               3,297               (5,949)
                                          --------------------------------
Net decrease in cash and cash equivalents    (1,376)              (10,650)
Cash and cash equivalents at beginning
   of period                                  9,299                20,925
                                            --------------------------------
Cash and cash equivalents at end 
   of period                                $ 7,923            $    10,275
                                            ================================

See accompanying notes.

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











<PAGE>




                             ISOLYSER COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1)   In the  opinion of  management,  the  information  furnished  reflects  all
     adjustments (consisting only of normal recurring adjustments) necessary for
     a fair  presentation of the financial  position,  results of operations and
     cash flows for the interim periods. Results for the interim periods are not
     necessarily  indicative of results to be expected for the full year.  These
     consolidated  financial  statements  should be read in conjunction with the
     consolidated  financial  statements  and  notes  thereto  contained  in the
     Company's Annual Report on Form 10-K at December 31, 1997.

2)   Inventories are stated at the lower of cost or market and are summarized as
     follows:


                                              JUNE 30, 1998    DECEMBER 31, 1997
                                              -------------    -----------------
Raw materials and supplies                     $21,744,000    $  24,121,000
Work in process                                  3,804,000        4,456,000
Finished goods                                  22,677,000       25,901,000
                                               ------------    -------------
        Total                                   48,225,000      54,478,000
Reserve for excess, slow moving and obsolete   (21,775,000)    (22,411,000)
         inventory                             ------------    -------------
        Total                                  $26,450,000   $  32,067,000
                                               ============    =============
                           

At June  30,  1998  and  December  31,  1997  net  OREX  inventory  approximated
$5,611,000 and $7,500,000 respectively.

3)   On February  25, 1998,  the Company  approved a plan to dispose of its OREX
     manufacturing  facilities  in  Arden  and  Charlotte,  North  Carolina  and
     Abbeville,  South  Carolina,  and its White Knight  subsidiary and recorded
     impairment  charges to adjust the carrying  value of such entities to their
     estimated  fair  market  value  based  on  appraisals  and/or  analyses  of
     discounted future operating cash flows from those entities.

     On August 11, 1998, the Company disposed of its Arden and Charlotte,  North
     Carolina OREX  manufacturing  facilities,  the  industrial  division of its
     White  Knight  subsidiary  and  substantially  all  of  the  assets  of its
     SafeWaste  subsidiary  for proceeds of  approximately  $13.4  million.  The
     Company has also  contracted  to sell its  Abbeville,  South  Carolina OREX
     manufacturing  facility  and is  currently  negotiating  to  dispose of the
     remaining portion of its White Knight  subsidiary.  Based on the above, the
     Company  recorded an additional  impairment  loss and other charges of $6.5
     million in June,  1998 primarily  relating to the writedown of property and
     equipment  to its  estimated  fair  market  value . The net assets of these
     entities including the Company's SafeWaste  subsidiary at June 30, 1998 are
     classified as assets held for sale in the accompanying consolidated balance
     sheets, and are comprised of the following:

         580940.2
WP6.1



<PAGE>






                                     JUNE 30, 1998    DECEMBER 31, 1997
Assets:
  Accounts receivable               $    8,850,000  $     8,848,000
  Inventory                             11,847,000       13,085,000
  Prepaid expense and other assets         153,000          186,000
  Property and equipment, net           16,259,000       19,980,000
  Other assets                             400,000          286,000
                                     ---------------- -------------
   Total Assets                      37,509,000          42,385,000
                                     ---------------- -------------
Liabilities:
 Accounts payable                       2,651,000         2,247,000
 Bank overdraft                           273,000           508,000
 Accrued liabilities                    1,658,000         2,044,000
 Long-term debt                         1,912,000         1,836,000
                                     ---------------- -------------
  Total Liabilities                     6,494,000         6,635,000
                                     -------------    -------------
  Net Assets held for sale          $  31,015,000  $     35,750,000
                                   ==============     =============


The following represents the results of operations of the entities held for sale
for the three and six months ended June 30, 1998 and 1997:


                     THREE MONTHS         SIX MONTHS    
                    ENDED JUNE 30, 1998  ENDED JUNE 30,
                          1998              1997         1998         1997
                           ----             ----         ----         ----
Net sales         $    9,683,000    $   11,496,000  $  21,275,000   $24,853,000
Net loss              (8,331,000)       (2,040,000)   (10,182,000)   (3,922,000)
Net loss per  
   share - basic           (0.21)            (0.05)         (0.26)        (0.10)
and diluted

4)   Loss per common  share is computed  using the  weighted  average  number of
     common  shares  outstanding  during  the  respective  periods.  There is no
     difference between basic and diluted weighted average and per share amounts
     for these periods.

5)   In June 1997,  the Financial  Accounting  Standards  Board issued SFAS 130,
     "Reporting  Comprehensive  Income".  SFAS 130 establishes new rules for the
     reporting and display of comprehensive income and its components.  SFAS 130
     requires foreign currency  translation  adjustments to be included in other
     comprehensive  income.  Effective January 1, 1998, the Company adopted SFAS
     130.  Management  believes the pronouncement does not significantly  impact
     the presentation of the Company's consolidated financial statements.

6)   At June 30, 1998, the Company was not in compliance  with a covenant of its
     credit facility

         580940.2
WP6.1

<PAGE>



pertaining to operating  results and net worth.  Such covenant  violations  were
waived by the Company's lenders on August 10, 1998.

ITEM 2.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS

Net sales for the three  months ended June 30, 1998 ( the "1998  Quarter")  were
$38.9 million compared to $42.4 million for the three months ended June 30, 1997
( the "1997  Quarter"),  a decrease of 8.3%.  Net sales for the six months ended
June 30, 1998 (the "1998  Period") were $80.1 million  compared to $82.4 million
for the six months ended June 30, 1997 (the "1997 Period"),  a decrease of 2.8%.
Sales of custom procedure trays and related products  decreased 9.2% in the 1998
Quarter as compared to the 1997 Quarter and increased 5.4% in the 1998 Period as
compared to the 1997  Period.  This  decrease in the 1998  Quarter is  primarily
attributable  to timing of shipments  during the 1997 Quarter in anticipation of
the Company's previously announced adoption of synchronous manufacturing at this
division. Sales of Microtek products decreased 4.9% and 1.2% in the 1998 Quarter
and the 1998 Period,  respectively,  as compared to the corresponding periods of
1997, primarily attributed to lower sales volumes to hospitals.  Sales of safety
products  declined  25.6%  and  22.0%  in the  1998  Quarter  and  1998  Period,
respectively,  as  compared  to the  corresponding  periods  of  1997,  due to a
substantial  reduction in purchases of LTS products by  Allegiance,  the primary
distributor  of  such  products,  and  previously  reported  adverse  regulatory
developments  which  occurred  in the first  quarter of 1998.  While the Company
plans to  introduce a new LTS product to preserve  its market  share  created by
LTS, the Company's ability to do so is subject to obtaining federal registration
of such product.  See "Risk Factors -- Regulatory Risks" in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (the "Annual  Report").
The Company  expects that its  operating  results will  continue to be adversely
affected by reduced  sales of LTS, and no  assurances  can be provided  that the
Company  will be able to  maintain  its  market  share on such  products  by the
registration and introduction of a new LTS product.  White Knight sales declined
9.1% and  11.7% in the  1998  Quarter  and the  1998  Period,  respectively,  as
compared to the corresponding periods of 1997, due to a competitor's purchase of
a significant  customer and the Company's decision to de-emphasize  marketing of
White  Knight  products  in favor of higher  margin  products  sold by its other
subsidiaries.  In February 1998, the Company  announced  plans to sell its White
Knight  subsidiary,  which,  if  consummated,  would  significantly  reduce  the
Company's  net sales.  On August  11,  1998,  the  Company  sold the  industrial
division of White Knight and is currently in  negotiations to sell the remaining
portion of White Knight.  See "Risk Factors - Risks of Planned  Divestitures" in
the Company's Annual Report.

Included  in the  foregoing  sales  figures  are $1.3  million  in sales of OREX
Degradables  during the 1998 Quarter and $3.1 million  during the 1998 Period as
compared to $2.5 million and $4.7 million  during the  corresponding  periods of
1997.  During 1997,  the Company  substantially  reduced its efforts to increase
sales of OREX Degradables and instead focused on preserving its existing base of
hospitals

         580940.2
WP6.1



<PAGE>



purchasing  OREX  Degradables  and evaluating  means to market OREX  Degradables
within its various market  potentials.  The Company to date has not achieved any
gross profits on its sale of OREX Degradables.  The Company's future performance
will depend to a substantial  degree upon market acceptance of and the Company's
ability  to  successfully  manufacture,  market,  deliver  and  expand  its OREX
Degradables line of products at acceptable profit margins. The Company's ability
to achieve such  objectives is subject to risks including the risks described in
the Company Annual Report under "Risk Factors."

Gross  profit  for the 1998  Quarter  was $8.7  million or 22.5% of net sales as
compared to $9.5 million or 22.3% of net sales in the 1997 Quarter. Gross profit
for the 1998 Period was $19.4 million or 24.2% of net sales as compared to $18.6
million or 22.6% of net sales in the 1997 Period.  Included in cost of sales for
the 1998 Quarter and Period was  approximately  $900,000 in  inventory  reserves
connected  with the sale of the  industrial  division  of  White  Knight,  which
reduced gross profit.  Improvements in gross profit margins are  attributable to
increased  gross  profits  at the  Company's  Microtek  division  and  increased
overhead absorption at the Company's Arden and Abbeville material  manufacturing
plant due to impairment reserves recorded during the fourth quarter of 1997, and
contract manufacturing at the Company's Abbeville manufacturing plant.

Selling,  general and administrative expenses were $10.0 million or 25.8% of net
sales in the 1998 Quarter as compared to $10.5  million or 24.8% of net sales in
the 1997  Quarter.  Selling,  general  and  administrative  expenses  were $19.8
million or 24.8% of net sales in the 1998 Period as compared to $21.1 million or
25.6%  of net  sales in the 1997  Quarter.  Included  in  selling,  general  and
administrative  expenses  for the 1998  Quarter  and  Period  are  approximately
$300,000  in charges  related to the sale of the  industrial  division  of White
Knight.  The  reduction  in  selling,  general  and  administrative  expense  is
primarily  attributed to  implementation  of the Company's  operating  plan that
focused on  reorganizing  marketing and sales  efforts to achieve  reductions in
selling and marketing expenses.

Research and development  expenses were $1.1 million or 2.9% of net sales in the
1998  Quarter  as  compared  to $0.6  million  or 1.5% of net  sales in the 1997
Quarter. Research and development expenses were $1.8 or 2.3% of net sales in the
1998 Period as compared to $1.4 million or 1.7% of net sales in the 1997 Period.
The increase in research and  development  expense is  primarily  attributed  to
increased  effort in  development  of OREX  roll-stock  production in Asia,  and
regulatory  expense  associated  with the  Company's  effort to  obtain  federal
regulatory approval of its new LTS products.

Amortization  of intangibles was $521,000 and $1,048,000 in the 1998 Quarter and
1998  Period,  respectively,  as  compared  to $961,000  and  $1,917,000  in the
corresponding  periods of 1997. The decline in  amortization  expense was due to
charges  recorded  during the fourth quarter of 1997 for the impairment of White
Knight's carrying value.

On August 11,  1998,  the  Company  disposed of its Arden and  Charlotte,  North
Carolina OREX manufacturing facilities, its White Knight industrial division and
substantially  all of the assets of its  SafeWaste  subsidiary  for  proceeds of
approximately  $13.4  million.  The  Company  has  also  contracted  to sell its
Abbeville,   South  Carolina  OREX  manufacturing   facility  and  is  currently
negotiating to

         580940.2
WP6.1

<PAGE>



dispose of the remaining portion of its White Knight  subsidiary.  In connection
with this sale, the Company recorded  impairment and other charges totaling $6.5
million for the quarter ended June 30, 1998. The resulting loss from  operations
was $8.2  million in the 1998  Quarter as compared to a $2.7  million  loss from
operations in the 1997  Quarter.  The resulting  loss from  operations  was $8.6
million in the 1998 Period as compared to a $5.8 million loss from operations in
the 1997 Period.

Interest expense,  net of interest income,  was $943,000 and $1.8 million in the
1998  Quarter and 1998  Period,  respectively,  as compared to $901,000 and $1.7
million in the  corresponding  periods of 1997. The increase in interest expense
is attributed to increased interest expense as a result of increased  borrowings
during  1998  combined  with  lower  interest  income as a result of lower  cash
balances during 1998.

Provision  for income  taxes  reflect an expense of $90,000 and  $166,000 in the
1998 Quarter and 1998 Period, respectively,  as compared to an expense of $7,000
and $11,000 in the corresponding periods of 1997.

The  resulting  net loss was $9.3 million and $10.5 million for the 1998 Quarter
and 1998  Period,  respectively,  as compared to a net loss of $3.6  million and
$7.5 million for the corresponding periods of 1997.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1998,  the Company's  cash and  equivalents  totaled $7.9 million as
compared to $9.3 million at December 31, 1997.

During the 1998  Period,  the  Company  used $1.8  million of cash in  operating
activities. This use of cash in the 1998 Period is attributable to a combination
of the Company's  operating loss, increase in accounts receivable as a result of
an incremental  increase in sales of $2.6 million in the 1998 Period as compared
to the last six months of 1997 and a decrease in accounts payable as a result of
accelerated  payments to obtain discounts on accounts payable.  The Company used
$2.9 million in investing  activities  during the 1998 Period.  This use of cash
during  the  1998  Period  was   attributable  to  several   computer   software
implementations  in  progress.  During the 1998  Period,  the  Company  borrowed
approximately  $2.7  million  in  cash  under  the  Company's  revolving  credit
facility.

As more fully  described in the Company's  Annual Report,  the Company has a $55
million credit  agreement (the "Credit  Agreement")  consisting of a $40 million
revolving  credit  facility  maturing on August 31, 1999 and a $15 million  term
loan  facility  maturing  on August 31,  2001.  The  Company  has no  additional
borrowing  availability  under the revolving  credit  facility at June 30, 1998.
Outstanding  borrowings under the revolving  credit facility were  approximately
$29.7  million  at June 30,  1998.  Outstanding  borrowings  under the term loan
facility were $11.3 million at June 30, 1998. The Credit Agreement  provides for
the  issuance of up to $3 million in letters of credit.  Outstanding  letters of
credit  were  $50,000 at June 30,  1998.  At June 30,  1998,  the Company was in
violation of the net worth and

         580940.2
WP6.1



<PAGE>



operating results covenants contained in the Credit Agreement.  These violations
were waived by the  Company's  lenders on August 10, 1998.  No assurance  can be
provided that other  violations of covenants  contained in the Company's  Credit
Agreement will not occur in the future or, if such violations  occur, that those
violations will be waived.  Any unwaived default by the Company under the Credit
Agreement would be expected to have a material  adverse effect upon the Company.
At June 30, 1998,  outstanding  indebtedness under the Credit Agreement exceeded
the Company's cash and cash equivalents.

On August 11,  1998,  the  Company  disposed of its Arden and  Charlotte,  North
Carolina  manufacturing  facilities,  its White Knight  industrial  division and
substantially  all of the assets of its  SafeWaste  subsidiary  for  proceeds of
approximately $13.4 million.  The Company also contracted to sell its Abbeville,
South  Carolina  OREX  manufacturing  facility and is currently  negotiating  to
dispose of the remaining  portion of its White Knight  subsidiary.  Net proceeds
received to date from these  divestitures have been applied to reduce debt under
the Company's Credit Agreement.

Based upon its current  business plan, the Company  currently  expects that cash
equivalents  and short term  investments on hand, the Company's  existing credit
facility and funds  budgeted to be generated  from  operations and proceeds from
sales of assets will be adequate to meet its liquidity and capital  requirements
through 1998.  Currently  unforeseen  future  developments and increased working
capital  requirements  may require  additional debt financing or the issuance of
common stock in 1998 and subsequent  years.  There can be no assurances that the
Company  could obtain any required  additional  debt  financing or  successfully
consummate an issuance of common stock on terms favorable to the Company,  if at
all.

Statements  made in this  Management's  Discussion  and  Analysis  of  Financial
Condition  and  Results  of  Operations,  including  those  in  the  immediately
preceding  paragraph,   include   forward-looking   statements  made  under  the
provisions of the Private Securities Litigation Reform Act. The Company's actual
results could differ  materially from such  forward-looking  statements and such
results  will be affected by risks  described  in the  Company's  Annual  Report
including,  without  limitation,  those  described under "Risk Factors - Limited
Operating History; Net Losses", "-Risks of New Products",  "Risks of Expansion",
"-Manufacturing & Supply Risks" and "-Liquidity Risks".


ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

         580940.2
WP6.1

<PAGE>



                                     PART II

                                OTHER INFORMATION


ITEM 1.           LEGAL PROCEEDINGS

Not applicable.

ITEM 2.           CHANGES IN SECURITIES AND USE OF PROCEEDS

During the  quarter  for which  this  report is filed,  there  were no  material
modifications in the instruments defining the rights of shareholders. During the
quarter  for which this  report is filed,  none of the rights  evidenced  by the
shares of the Company's common stock were materially limited or qualified by the
issuance or  modification  of any other class of securities.  During the quarter
for which this report is filed,  the Company  sold no equity  securities  of the
Company that were not registered under the Securities Act of 1933, as amended.

ITEM 3.           DEFAULT UPON SENIOR SECURITIES

At June 30, 1997,  the Company was not in  compliance  with the covenants of its
credit facility pertaining to net worth and operating income. This violation was
waived by the Company's lenders on August 10, 1998.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

During the period covered by this report,  the Company filed with the Securities
and Exchange (the  "Commission") and delivered to its shareholders the Company's
Proxy  Statement for its Annual  Meeting of  Shareholder  held May 27, 1998 (the
"Proxy Statement").

(a) The Company's Annual Meeting of Shareholders was held on May 27, 1998.

(b) The nominees for the Board of Directors of the Company are identified below.

(c) The inspector of election  tabulated the following votes for the election of
directors:

         580940.2
WP6.1



<PAGE>




                  (I)      Election of Directors


                    NUMBER OF VOTES NUMBER OF VOTES  ABSTENTIONS AND
NOMINEE FOR OFFICE        FOR          WITHHELD     BROKER NON-VOTES
------------------        ---          --------     ----------------
Gene R. McGrevin      33,198,411        401,200           -0-
Terence N. Furness    33,202,997        396,614           -0-
Travis W. Honeycutt   33,161,133        438,478           -0-
Dan R. Lee            33,183,196        416,415           -0-
Rosdon Hendrix        33,194,698        404,913           -0-
Kenneth F. Davis      33,188,188        411,423           -0-
John E. McKinley      33,210,132        389,479           -0-


ITEM 5.           OTHER INFORMATION

Appropriate  proposals of shareholders intended to be presented at the Company's
1999 annual meeting  without  inclusion in the Company's proxy statement must be
received  by the  Company  by March  28,  1999.  If the date of the next  annual
meeting is advanced  or delayed by more than 30  calendar  days from the date of
the Company's 1998 annual meeting (May 27, 1998), the Company shall, in a timely
manner,  inform its shareholders of the change,  and the date by which proposals
of shareholders must be received.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)        Exhibits:

Exhibit Description
No.

3.1(1) Articles of Incorporation of Isolyser Company, Inc.

3.2(2) Articles of Amendment to Articles of Incorporation  of Isolyser  Company,
       Inc.

3.3(1) Amended and Restated Bylaws of Isolyser Company, Inc.

3.4(3) First Amendment to Amended and Restated Bylaws of Isolyser Company, Inc.

3.5(4) Second Amendment to Amended and Restated Bylaws of Isolyser Company, Inc.

4.1(1) Specimen Certificate of Common Stock

27.1 Financial Data Schedule

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<PAGE>




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


1.   Incorporated by reference to the Company's  Registration  Statement on Form
     S-1 (File No. 33- 83474).

2.   Incorporated by reference to Exhibit 3.2 of the Company's  Annual Report on
     Form 10-K for year ended December 31, 1996.

3.   Incorporated by reference to Exhibit 3.1 to the Company's Current Report on
     Form 8-K filed July 29, 1996.

4.   Incorporated by reference to Exhibit 3.1 to the Company's Current Report on
     Form 8-K filed December 20, 1996.


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



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<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has caused  this  quarterly  report on Form 10-Q to be signed on its
behalf by the undersigned thereunto duly authorized on August 13, 1998.


                                            ISOLYSER COMPANY, INC.


                                            By: /s/ Terence N. Furness
                                              Terence N. Furness
                                              President & CEO
                                             (principal executive officer)


                                            By: /s/ Peter A. Schmitt
                                               Peter A. Schmitt
                                               Chief Financial Officer
                                              (principal financial officer)







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