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, 1999       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.)

                           4320 International Blvd NW
                             Norcross, Georgia 30093
                    (Address of principal executive offices)

                                 (770) 806-9898
              (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 12, 1999

Common Stock, $.001 par value                               40,483,328



<PAGE>
                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                             ISOLYSER COMPANY, INC.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>

                                ASSETS                                    JUNE 30, 1999       DECEMBER 31, 1998
                                ------
                                                                       --------------------------------------------
<S>                                                                    <C>                    <C>

Current assets
       Cash and cash equivalents                                       $             4,341    $              7,325
       Accounts receivable, net                                                     14,613                  18,118
       Inventories, net                                                             22,588                  23,647
       Prepaid expenses and other assets                                             1,506                   1,413
       Net assets held for sale                                                     16,149                   9,873
                                                                       --------------------------------------------
            Total current assets                                                    59,197                  60,376
                                                                       --------------------------------------------

Property, plant and equipment                                                       21,319                  31,072
       Less accumulated depreciation                                               (12,457)                (15,511)
                                                                       --------------------------------------------
            Property, plant, and equipment, net                                      8,862                  15,561
                                                                       --------------------------------------------

Intangibles and other assets, net                                                   27,410                  33,581
                                                                       --------------------------------------------
                                                                       $            95,469    $            109,518
                                                                       ============================================

                 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
       Current installments of long term debt                          $               941    $              9,395
       Accounts payable                                                              3,023                   6,247
       Bank overdraft                                                                  485
                                                                                                               361
       Accrued expenses
                                                                                     3,584                   5,250
                                                                       --------------------------------------------
            Total current liabilities                                                8,033                  21,253
                                                                       --------------------------------------------

Long term debt, excluding current installments                                      17,134                  19,376
Other liabilities                                                                        -                     214
                                                                       --------------------------------------------
            Total liabilities                                                       25,167                  40,843
                                                                       --------------------------------------------

Shareholders' equity
       Common stock                                                                     40                      40
       Additional paid in capital                                                  204,359                 203,364
       Accumulated deficit                                                        (133,363)               (133,980)
       Cumulative translation adjustment                                               (60)                    (75)
       Unearned shares restricted to employee stock ownership plan                    (240)                   (240)
                                                                       --------------------------------------------
                                                                                    70,736                  69,109
       Treasury shares, at cost                                                       (434)                   (434)
                                                                       --------------------------------------------
       Total shareholders' equity
                                                                                    70,302                  68,675
                                                                       --------------------------------------------
                                                                       $            95,469    $            109,518
                                                                       ============================================
</TABLE>

See accompanying notes.


<PAGE>



                             ISOLYSER COMPANY, INC.
                 Condensed Consolidated Statement of Operations
                      (in thousands, except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                   Three months        Three months       Six months         Six months
                                                   ended               ended              ended              ended
                                                   June 30, 1999       June 30, 1998      June 30, 1999      June 30, 1998
                                                   ------------------------------------------------------------------------
<S>                                                <C>                 <C>                <C>                <C>

Net sales                                          $      32,251       $      38,874      $      67,020      $      80,104
Cost of goods sold                                        19,424              30,132             43,223             60,720
                                                   ------------------------------------------------------------------------
       Gross profit                                       12,827               8,742             23,797             19,384

Operating expenses:
       Selling, general and administrative                 8,481              10,036             18,133             19,827
       Research & development                                588               1,122              1,043              1,803
       Impairment loss                                     1,590               5,300              1,590              5,300
       Amortization of intangibles                           446                 521                897              1,048
                                                   ------------------------------------------------------------------------
            Total operating expenses                      11,105              16,979             21,663             27,978
                                                   ------------------------------------------------------------------------
Income (loss) from operations                              1,722              (8,237)             2,134             (8,594)
Interest income                                               32                  79                 82                171
Interest expense                                            (588)             (1,022)            (1,212)            (1,971)
Income from joint venture                                      -                  10                                    13
                                                   ------------------------------------------------------------------------
Income (loss) before income tax expense                    1,166              (9,170)             1,004            (10,381)

Income tax expense                                           182                  90                387                166
                                                   ------------------------------------------------------------------------

Net income (loss)                                  $         984       $      (9,260)     $         617      $     (10,547)
                                                   ------------------------------------------------------------------------

Other comprehensive income (loss)
         Foreign currency translation (loss)
         gain                                      $         (37)      $           9      $          15      $          10
                                                   ------------------------------------------------------------------------

Comprehensive income (loss)                        $         947       $      (9,251)     $         632      $     (10,537)
                                                   ========================================================================

Net income (loss) per common share:
   Basic                                           $        0.02       $       (0.23)     $        0.02      $       (0.26)
                                                   ========================================================================

   Diluted                                         $        0.02       $       (0.23)     $        0.02      $       (0.26)
                                                   ========================================================================

Weighted average number of common shares
   outstanding:
   Basic                                                  40,126              40,000             40,040             39,824
                                                   ========================================================================

   Diluted                                                41,221              40,000             40,555             39,824
                                                   ========================================================================

</TABLE>

See accompanying notes.



<PAGE>



                             ISOLYSER COMPANY, INC.
                 Condensed Consolidated Statement of Cash Flows
                                 (in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                            SIX MONTHS ENDED          SIX MONTHS ENDED
                                                                              JUNE 30, 1999            JUNE 30, 1998
                                                                        ---------------------------------------------------
<S>                                                                     <C>                           <C>

Cash flows from operating activities:
           Net income (loss)                                            $                     617     $            (10,547)

Adjustments to reconcile net income (loss) to net cash provided by
  (used in) operating activities
           Depreciation                                                                     2,013                    1,937
           Amortization                                                                       886                    1,048
           Provision for doubtful accounts                                                    124                       88
           Loss on disposal of property, plant and equipment                                    -                       10
           Impairment loss                                                                  1,590                    5,300
           Changes in assets and liabilities                                               (4,937)                     347
                                                                        ---------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:                                          293                   (1,817)
                                                                        ---------------------------------------------------

Cash flows from investing activities
           Additions to property, plant and equipment                                      (1,037)                  (2,856)
           Proceeds from disposition of net assets held for sale                            8,012                        -
                                                                        ---------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:                                        6,975                   (2,856)
                                                                        ---------------------------------------------------

Cash flows from financing activities:
           Net  (repayments) borrowings under credit agreements                           (11,728)                   2,743
           Changes in bank overdraft                                                          482                       48
           Proceeds from exercised stock options                                              591                        -
           Proceeds from issuance of common stock                                             403                      255
           Issuance of stock to 401(k) Plan                                                     -                      251
                                                                        ---------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES:                                      (10,252)                   3,297
                                                                        ---------------------------------------------------
Net decrease in cash and cash equivalents                                                  (2,984)                  (1,376)
Cash and cash equivalents at beginning of period                                            7,325                    9,299
                                                                        ---------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                              $                   4,341     $              7,923
                                                                        ===================================================
</TABLE>

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, 1998.

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

At December 31, 1998, the Company's LIFO inventory is included as a component of
net assets held for sale.

At June 30, 1999 and December 31, 1998 the net OREX  inventory is  approximately
$7,378,000 and $4,920,000 respectively.

3) The net assets of the Company's  MedSurg  subsidiary at June 30, 1999 and the
Company's White Knight Healthcare  subsidiary ("White Knight") and the Company's
former  headquarters at December 31, 1998 are classified as held for sale in the
accompanying condensed  consolidated financial statements,  and are comprised of
the following:

                                              June 30, 1999    December 31, 1998
                                             ---------------   -----------------
Assets:
   Accounts receivable ....................   $ 5,108,000      $ 3,589,000
   Inventory ..............................     5,527,000        6,744,000
   Prepaid expense and other assets .......       227,000           71,000
   Property and equipment, net ............     5,522,000        2,000,000
   Other assets ...........................     5,351,000           73,000
                                               -----------      -----------

               Total assets ...............    21,735,000       12,477,000
                                               -----------      -----------

Liabilities:
   Accounts payable .......................     3,367,000        1,441,000
   Bank overdraft .........................          --            361,000
   Accrued liability ......................     1,806,000          786,000
   Long-term debt .........................       413,000           16,000
                                               -----------      -----------

               Total liabilities ..........     5,586,000        2,604,000
                                              -----------       -----------

               Net assets held for sale ...   $16,149,000      $ 9,873,000
                                              ===========      ===========

On March 31, 1999, the Company disposed of its former  headquarters for proceeds
of $1.9 million in cash. On May 31, 1999,  the Company  disposed of the stock of
White Knight for proceeds of $8.2 million in cash.  These  proceeds were used to
repay outstanding borrowings under the Company's Credit Agreement.

On July 12, 1999,  the Company  disposed of its MedSurg  subsidiary  and entered
into an OREX  License  and Supply  Agreement  with  Allegiance  Healthcare,  for
proceeds  of $31.3  million in cash.  A portion of these  proceeds  were used to
pay-off the remaining balance of the Company's Credit Agreement.

The following  represents  the results of operations of the above noted disposed
entities for the three and six months ended June 30, 1999 and 1998:


                                 THREE MONTHS ENDED        SIX MONTHS ENDED
                                      JUNE 30                   JUNE 30
                                ------------------------------------------------
                                   1999         1998         1999        1998
                                ------------------------------------------------
Net Sales ................... $16,802,000  $24,325,000  $37,315,000  $53,404,000
Net income (loss) ...........     324,000   (8,694,000)   (421,422) (10,671,000)
Net income (loss) per share-basic    0.01        (0.22)      (0.01)       (0.27)
Net income (loss) per share-diluted (0.01)       (0.22)      (0.01)       (0.27)


4) Basic per share earnings (loss) is computed using the weighted average number
of common shares  outstanding for the period.  Diluted per share earnings (loss)
is computed  including the dilutive effect of all contingently  issuable shares.
The difference between basic and diluted weighted average shares is attributable
only to dilutive stock options.


<PAGE>



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,  1999 (the "1999  Quarter)  were
$32.3 million compared to $38.9 million for the three months ended June 30, 1998
(the "1998  Quarter"),  a decrease of 17.0%.  Net sales for the six month period
ended June 30, 1999 (the "1999  Period")  were $67.0  million  compared to $80.1
million  for the six month  period  ended June 30, 1998 (the "1998  Period"),  a
decrease of 16.4%.  Excluding sales of White Knight, the industrial  division of
White Knight ("White  Knight  Industrial"),  SafeWaste,  and Struble and Moffitt
(businesses  disposed of prior to June 30, 1999), net sales for the 1999 Quarter
and Period increased 3.1% and decreased 1.2%,  respectively,  as compared to the
1998 Quarter and Period.  Sales of Microtek products  increased 26.4% during the
1999  Quarter as compared to the 1998  Quarter and  increased  22.4% in the 1999
Period as compared to the 1998 Period.  This  increase was primarily a result of
increased  sales from a short-term  manufacturing  contract  arrangement  with a
customer and new business.  Sales of safety products  increased 18.8% during the
1999 Quarter as compared to the 1998 Quarter and increased 17.2% during the 1999
Period  as  compared  to  the  1998  Period.  This  increase  was  a  result  of
substantially  increased  purchases by a distributor.  Sales of custom procedure
trays and related products declined 15.5% during the 1999 Quarter as compared to
the 1998  Quarter and  declined  18.6% during the 1999 Period as compared to the
1998  Period.  This  decline was  primarily  attributed  to reduced  inventories
carried  by  distributors,  increased  competition  with  other  procedure  tray
companies and group purchasing organizations and, for the 1998 Period, relief of
previous year backlog with no comparable backlog in the 1999 Period. On July 12,
1999, the Company disposed of the net assets of MedSurg to Allegiance Healthcare
Corporation.

Included  in  the  foregoing  sales  figures  are  $800,000  in  sales  of  OREX
Degradables  and  Enviroguard  products during the 1999 Quarter and $1.6 million
during the 1999 Period as compared to $1.3 million and $3.1  million  during the
corresponding  periods of 1998. Sales of OREX Degradables did not contribute any
gross  profits to the  Company's  operating  results.  During 1997,  the Company
substantially  reduced  selling and marketing  efforts to increase sales of OREX
Degradables and focused on preserving its existing base of hospitals  purchasing
OREX  Degradables  and evaluating  means to exploit the market  position of OREX
Degradables  within its various  market  potentials.  During  1998,  the Company
substantially  revised its strategy to  commercialize  its OREX  products.  As a
result of these efforts,  in April 1999,  the Company  introduced new degradable
products to the  healthcare  industry  under the mark  Enviroguard  which uses a
hydroentanglement  manufacturing  process to  produce a  spunlaced  fabric.  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  and  Enviroguard  line of products at
acceptable  profit  margins.  In connection  with the July 12, 1999, sale by the
Company of the assets of MedSurg to Allegiance  Healthcare,  the Company granted
to Allegiance  Healthcare a worldwide  exclusive  license to Isolyser's OREX and
Enviroguard  proprietary  technologies  to make, use and sell products made from
material  which can be dissolved and disposed of through a sanitary sewer system
for healthcare applications. There can be no assurances that OREX Degradables or
Enviroguard  products will achieve or maintain  substantial  acceptance in their
target  markets.  See the risks  described under "Risk Factors" in the Company's
Annual  Report on Form 10-K for the period  ending  December 31, 1998 (the "1998
Annual Report") including,  without limitation, "Risk Factors- Limited Operating
History;  Net Losses," "-Risks of New Products" and  "-Manufacturing  and Supply
Risks" in the Company's 1998 Annual Report.

Gross  profit for the 1999  Quarter  was $12.8  million or 39.8% of net sales as
compared  $8.7 million or 22.5% of net sales in the 1998  Quarter.  Gross profit
for the 1999  Period was $23.8  million,  or 35.5% of net sales,  as compared to
$19.4  million,  or  24.2%  of net  sales  for the 1998  Period.  Included  as a
reduction  of cost of sales  during the 1999 Quarter and Period was $1.6 million
of excess OREX inventory  reserve  primarily due to anticipated  usage under the
aforementioned  Allegiance  supply  agreement,  which  increased  gross  profit.
Included  in cost of sales for the 1998  Quarter  and Period  was  approximately
$900,000  in  inventory  reserves  recorded in  connection  with the sale of the
industrial  division of White Knight,  which reduced gross profit.  Exclusive of
these  adjustments,  gross  profit was 35.0% and 33.2% of net sales for the 1999
Quarter and Period, respectively, as compared to 24.8% and 25.3% of net sales in
the 1998 Quarter and Period,  respectively.  The  improvement in gross profit is
attributable to improved gross profit at the Company's Microtek  subsidiary as a
result of increased sales as well as sales mix, and reduced  manufacturing costs
associated with the sale of the Company's Arden and Abbeville OREX manufacturing
facilities in August 1998 and October 1998, respectively.

Selling,  general and administrative  expenses were $8.5 million or 26.3% of net
sales in the 1999 Quarter as compared to $10.0  million or 25.8% of net sales in
the 1998  Quarter.  Selling,  general  and  administrative  expenses  were $18.1
million or 27.0% of net sales in the 1999 Period as compared to $19.8 million or
24.8%  of net  sales  in the 1998  Period.  Included  in  selling,  general  and
administrative  expenses  for the 1998  Quarter  and Period  were  approximately
$300,000 in charges related to the disposition of White Knight  Industrial.  The
reduction in selling, general and administrative expense is primarily attributed
to implementation of the Company's  operating plan which focused on reorganizing
marketing  and sales  efforts to achieve  reductions  in selling  and  marketing
expenses.

Research and development expenses were $588,000 or 1.8% of net sales in the 1999
Quarter as  compared to $1.1  million or 2.9% of net sales in the 1998  Quarter.
Research and development  expenses were $1.0 million or 1.6% of net sales in the
1999 Period as compared to $1.8 million or 2.3% of net sales in the 1998 Period.
The decline in research and development  expense is primarily related to reduced
costs associated with the development and registration of the Company's LTS Plus
product as well as reduced  development cost associated with the introduction of
the Company's Enviroguard product line.

Effective  May 31, 1999,  the Company  disposed of the stock of White Knight for
proceeds of $8.2 million in cash.  In  conjunction  with this  disposition,  the
Company  recorded  impairment  charges of $1.6 million.  On August 11, 1998, the
Company  disposed  of its  Arden and  Charlotte,  North  Carolina  manufacturing
facilities,  White Knight  Industrial and substantially all of the assets of its
SafeWaste  subsidiary for proceeds of  approximately  $13.4 million in cash. The
Company also contracted to sell its Abbeville, South Carolina OREX manufacturing
facility which was subsequently  sold in October 1998. In conjunction with these
sales, the Company recorded  impairment  charges of $5.3 million during the 1998
Quarter.

Amortization  of  intangibles  was $446,000 and $897,000 in the 1999 Quarter and
Period,  respectively,   as  compared  to  $521,000  and  $1.0  million  in  the
corresponding  periods of 1998. The decline in amortization  expenses was due to
the sale of White Knight Industrial during 1998.

The resulting  income from  operations was $1.7 million and $2.1 million for the
1999 Quarter and Period, respectively,  as compared to a loss from operations of
$8.2 million and $8.6 million for the 1998 Quarter and Period, respectively.

Interest expense,  net of interest income,  was $556,000 and $1.1 million in the
1999 Quarter and Period  respectively,  as compared to $943,000 and $1.8 million
in the  corresponding  periods  of 1998.  The  decline  in  interest  expense is
attributed  to reduced  borrowings  during the 1999 Quarter and Period offset by
increases in the Company's  borrowing interest rate combined with lower interest
income as a result of lower cash balances during the 1999 Quarter and Period.

Provisions  for income taxes reflects an expense of $182,000 and $387,000 in the
1999  Quarter and Period,  respectively,  as compared to $90,000 and $166,000 in
the corresponding periods of 1998.

The resulting net income was $984,000 and $617,000 for the 1999 Quarter and 1999
Period,  respectively,  as  compared  to a net loss of $9.3  million  and  $10.5
million in the corresponding periods of 1998.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1999, the Company's cash and equivalents totaled $4.3 as compared to
$7.3 million at December 31, 1998.

During the 1999 Period,  the Company  generated  $293,000 of cash from operating
activities  as  compared  to a use of  $1.8  million  in the  1998  Period.  The
generation  of cash in the 1999  Period is  primarily  attributable  to improved
operating  results  offset by $1.7  million  decline  in accrued  expenses.  The
Company generated $7.0 million from investing  activities during the 1999 Period
consisting  primarily of $8.2 million from the  disposition  of White Knight and
the Company's  former  headquarters.  These amounts were offset by approximately
$1.0 million in capital  expenditures during the 1999 Period as compared to $2.9
million  used  during the 1998  Period.  The  decline in cash used in  investing
activities  is due to  substantial  completion  of the  Company's  investment in
information  systems at its Microtek and MedSurg  subsidiaries.  During the 1999
Period,  the Company used  approximately  $10.2  million in cash from  financing
activities compared to proceeds from financing activities of $3.3 million in the
1998 Period.  The Company  utilized cash proceeds  from  dispositions  to reduce
amounts outstanding under its Credit Agreement.

As more fully  described  in the  Company's  1998  Annual  Report,  the  Company
maintains  a $25  million  credit  agreement  (as  amended to date,  the "Credit
Agreement") consisting of a revolving credit facility maturing on June 30, 2000.
Current additional borrowing availability under the revolving credit facility at
June 30, 1999 was approximately $7.0 million.  Outstanding  borrowings under the
revolving credit facility were approximately $13.4 million at June 30, 1999. 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,  1999.  Through
June 1999, the Bank and the Company  amended the Credit  Agreement to reduce the
credit facility,  revise certain  covenants and extend the term of the facility.
At June 30, 1999, the Company was in compliance with the covenants  contained in
its Credit Agreement.

On March 31, 1999, the Company disposed of its former corporate headquarters for
proceeds of  approximately  $1.9 million in cash.  Effective  May 31, 1999,  the
Company  disposed of the stock of White  Knight for  proceeds of $8.2 million in
cash. These proceeds were  subsequently  used to reduce  outstanding  borrowings
under the Company's Credit Agreement.  On July 12, 1999, the Company disposed of
its MedSurg  subsidiary  and entered into an OREX  License and Supply  Agreement
with  Allegiance  Healthcare,  for cash proceeds at closing of $31.3 million.  A
portion of these proceeds were  subsequently used to repay the remaining balance
of 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, funds budgeted to be generated from operations and proceeds from sales
of assets  will be  adequate  to meet its  liquidity  and  capital  requirements
through 1999.  Currently  unforeseen  future  developments and increased working
capital requirements may require additional debt financing or issuance of common
stock in 1999 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.

YEAR 2000 ISSUE

Many companies are affected by the year 2000 issue,  which could cause equipment
reliant upon computer  applications to fail or create  erroneous  results due to
the  failure of  computer  programs to  correctly  identify  the year 2000 after
December 31, 1999.

During 1996, as part of a program to install improved  information  systems on a
Company-wide  basis, the Company initiated a conversion from existing management
information  software to programs  that are year 2000  compliant.  The Company's
Microtek operations  substantially  completed such conversion in September 1998.
The Company's corporate  operations  substantially  completed such conversion in
July 1999. Costs incurred to date for such conversions approximate $8 million of
which $2.5 million have been  expensed  with $5.5 million  representing  capital
expenditures.  The Company  estimates that costs remaining to be incurred before
scheduled  completion of such conversion will be approximately  $92,000,  all of
which are expected to be capitalized.  The Company has begun, but not completed,
a program to evaluate year 2000 compliance of non-information technology assets.
The Company has  scheduled  to complete  compliance  solutions on such assets by
third quarter 1999,  and estimates  related costs at less than  $200,000.  Other
than such costs,  the  Company  does not believe its efforts to become year 2000
compliant will have a material adverse impact upon the Company.  Estimated costs
to be incurred  and the  schedule to become year 2000  compliant  are subject to
uncertainties and risks (including,  for example, failure to timely identify and
correct non-compliant systems,  encountering unanticipated delays or impediments
to conversion and disruptions of ordinary business operations),  and the failure
of the Company to complete such  conversion  within budget and on schedule could
adversely affect the Company.

The  Company is not  currently  aware of any of its  customers,  product  users,
suppliers or other  vendors which are  non-compliant  with year 2000 in a manner
which would have an adverse effect upon the Company or its operations;  however,
the Company has not yet  completed  its  inquiries to third  parties  concerning
their  compliance  with the year 2000 issue.  The Company plans to complete such
inquiries in the third  quarter of 1999.  The Company  continues to evaluate the
potential  impact  upon the  Company of  noncompliance  with year 2000 issues by
third  parties  with  which the  Company  deals.  The  Company's  customers  are
primarily healthcare institutions or vendors to such institutions.

The  Company has not adopted a specific  contingency  plan to address  year 2000
non-compliance  issues.  The  Company's  experience  in  installing  replacement
information  systems  has  caused  the  Company  to  become  familiar  with  the
consequences  of  reliance  on such  technology  and short  term  solutions  for
temporary  interruptions to such systems.  If the Company  experiences  critical
interruptions to its information  systems or  technologies,  the Company will be
required  to engage  additional  clerical  services  and  would  expect to incur
additional  distribution  expenses which could have a material adverse effect on
the Company's operating results.

The statements made under this caption are Year 2000 Readiness  Disclosure under
the Year 2000 Information and Readiness Disclosure Act.

FORWARD LOOKING STATEMENTS

Statements  made in this  Management's  Discussion  and  Analysis  of  Financial
Condition  and Results of Operations  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
1998 Annual Report including,  without  limitation,  those described under "Risk
Factors - Limited  Operating  History;  Net Losses",  "-Risks of New  Products",
"-Risks of Planned Divestitures", and "-Manufacturing & Supply Risks".

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's  greatest  sensitivity on market risk is to changes in the general
level of U.S. interest rates and its effect upon the Company's interest expense.
At June 30, 1999,  $13.4 million of the Company's  long-term and short-term debt
bears interest at floating rates. Because these rates are variable,  an increase
in interest rates would result in additional interest expense and a reduction in
interest rates would result in reduced interest expense.

On July 12, 1999,  the Company paid off the remaining  long-term and  short-term
debt that bears interest at floating rates.



<PAGE>



                                     PART II

                                OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS

Not applicable.

ITEM 2.

CHANGES IN SECURITIES

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

Not applicable.

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 Commission (the "Commission") and delivered to its shareholders the
Company's Proxy  Statement for its Annual Meeting of  Shareholders  held May 27,
1999 (the "Proxy Statement").

(a) The Company's annual meeting of shareholders was held on May 27, 1999.

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

(c)  With  respect  to  each  matter  (as  more  fully  described  in the  Proxy
     Statement) voted upon at the meeting,  the inspector of election  tabulated
     the following votes:

     i.   Election of Directors

                         NUMBER OF VOTES   NUMBER OF VOTES   ABSTENTION AND
 NOMINEE FOR OFFICE           FOR             WITHHELD       BROKER NONVOTES
 ------------------           ---             --------       ---------------
 Gene R. McGrevin           36,071,226        391,397             -0-
 Migirdic Nalbantyan        36,100,857        361,766             -0-
 Travis W. Honeycutt        36,086,097        376,526             -0-
 Rosdon Hendrix             36,062,031        400,592             -0-
 Dan R. Lee                 36,099,577        363,066             -0-
 Kenneth F. Davis           36,074,437        388,186             -0-
 John E. McKinley           36,077,582        385,041             -0-
 Ronald L. Smorada          36,078,307        384,316             -0-

     ii.  Adoption of 1999 Long-Term Incentive Plan

          FOR          AGAINST     ABSTENTIONS AND BROKER AND NONVOTES
          ---          -------     -----------------------------------

          34,245,913   1,980,219                236,491

     iii. Adoption of 1999 Employee Stock Purchase Plan:

          FOR           AGAINST    ABSTENTIONS AND BROKER AND NONVOTES
          ---           -------    -----------------------------------

          35,233,387   1,074,824                154,412


ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

Exhibit No.    Description
-----------    -----------

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

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

(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 the 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; however, the Company filed a current report on Form 8-K on
     July 13, 1999 and July 27, 1999.



<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, 1999.

                                        ISOLYSER COMPANY, INC.


                                            By: /s/ Migirdic Nalbantyan
                                                Migirdic Nalbantyan
                                                President & CEO
                          (principal executive officer)


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