U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

/  X  /  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
------   SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 1998

                                       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 No. 1-13048

                          HEALTHY PLANET PRODUCTS, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Delaware                                   92-2601764
--------------------------------         ---------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
  incorporation or organization)

1700 Corporate Circle, Petaluma, California                        94954
-------------------------------------------                      ----------
(Address of principal executive offices)                         (Zip Code)


Registrant's telephone number, including area code:           (707) 778-2280
--------------------------------------------------------------------------------

Former  name,  former  address and former  fiscal  year,  if changed  since last
report.

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

                  Yes   X                No
                      -----                 -----

As of November 2, 1998,  there were issued and outstanding  2,282,368  shares of
common stock of the  registrant  (exclusive  of 31,335 shares of voting Series D
Preferred Stock convertible into 31,335 shares of common stock).


    Transitional Small Business Disclosure Format    Yes          No   X
                                                         -----       -----

                                  Page 1 of 15


<PAGE>

<TABLE>
                          HEALTHY PLANET PRODUCTS, INC.
                          -----------------------------

                                      INDEX
                                      -----
<CAPTION>



                                                                                               Page
                                                                                               ----
<S>                                                                                            <C>
Form 10-QSB Cover Page                                                                          1


Index                                                                                           2

PART I.       FINANCIAL INFORMATION
-----------------------------------

         Item 1.         Financial Statements

                         Balance Sheet at September 30, 1998                                    3

                         Statements of Operations for the three-months ended                    5
                             and nine months ended September 30, 1998 and 1997

                         Statements of Cash Flows for the three-months ended                    6
                             and nine months ended September 30, 1998 and 1997

                         Notes to the Financial Statements                                      7

         Item 2.         Management's Discussion and Analysis of Financial                     12
                             Condition and Results of Operations


PART II.     OTHER INFORMATION
------------------------------

         Item 6.         Exhibits and Reports on Form 8-K                                      15

         Signature                                                                             15

</TABLE>



                                  Page 2 of 15

<PAGE>


                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements

                          HEALTHY PLANET PRODUCTS, INC.
                          -----------------------------

                                  BALANCE SHEET
                                  -------------

                                     ASSETS
                                     ------

                                                                   September 30,
                                                                        1998   
                                                                    (Unaudited)
                                                                   ------------
CURRENT ASSETS
     Cash and cash equivalents                                     $  2,258,382
     Marketable securities                                                  333
     Accounts receivable - net of allowances for doubtful
         accounts and returns of $226,594                               729,004
     Inventories                                                        774,185
     Advance on royalties                                               120,523
     Prepaid expenses                                                   110,246
     Deferred income taxes                                              264,900
                                                                   ------------

                  Total current assets                                4,257,573
                                                                   ------------
PROPERTY AND EQUIPMENT, at cost, net of accumulated
     depreciation and amortization                                      772,760
                                                                   ------------
OTHER ASSETS
     Deferred income taxes                                              185,800
     Security deposits                                                   34,277
     Publishing rights - net of accumulated
         amortization of $463,788                                       100,442
     Other                                                              103,660
                                                                   ------------

                  Total other assets                                    424,179
                                                                   ------------
TOTAL ASSETS                                                       $  5,454,512
                                                                   ============


                     The accompanying notes are an integral
                       part of these financial statements.


                                  Page 3 of 15


<PAGE>

<TABLE>
                          HEALTHY PLANET PRODUCTS, INC.
                          -----------------------------

                            BALANCE SHEET (continued)
                            -------------            

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
<CAPTION>
                                                                                September 30,
                                                                                    1998 
                                                                                ------------
                                                                                 (Unaudited)
<S>                                                                             <C>
CURRENT LIABILITIES
     Accounts payable                                                           $    330,560
     Royalties payable                                                                22,924
     Commissions payable                                                              78,138
     Series B preferred stock redemption and dividends payable                       161,500
     Accrued wages, bonuses and payroll taxes                                         65,625
     Accrued liabilities                                                               4,662
     Current portion of long-term debt                                               108,899
                                                                                ------------

                  Total current liabilities                                          772,308

OTHER LIABILITIES
     Long-term debt, net of current portion                                           17,148
     Accrued rent payable                                                            115,448
                                                                                ------------

                                                                                     904,904
                                                                                ------------

SHAREHOLDERS' EQUITY
     Common stock, $.01 par value, 12,000,000 shares
         authorized, 2,282,368 shares issued and outstanding                          22,823
     Preferred stock, Series D, $.10 par value, with
         aggregate liquidation preferences of $160,122,
         371,009 shares authorized, 31,335 issued and outstanding                      3,134

     Additional paid-in capital                                                   13,320,278

     Accumulated deficit                                                          (8,796,627)
                                                                                ------------

                  Total shareholders' equity                                       4,549,608 
                                                                                ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $  5,454,512
                                                                                ============


<FN>
                     The accompanying notes are an integral
                       part of these financial statements.
</FN>
</TABLE>


                                  Page 4 of 15

<PAGE>

<TABLE>
                                       HEALTHY PLANET PRODUCTS, INC.
                                       -----------------------------

                                          STATEMENTS OF OPERATIONS
                                          ------------------------

                                                (Unaudited)
<CAPTION>





                                            Three Months Ended Sept. 30,      Nine Months Ended Sept. 30,
                                            ------------------------------    ----------------------------

                                                1998              1997            1998             1997
                                            ------------      ------------    ------------     -----------
<S>                                         <C>               <C>             <C>              <C>
NET SALES                                   $  1,034,654      $  1,425,463    $  2,751,652     $ 3,138,656

COST OF GOODS SOLD                             1,119,734           792,356       2,482,727       1,572,129
                                            ------------      ------------    ------------     -----------

GROSS PROFIT (LOSS)                              (85,080)          633,107         268,925       1,566,527
                                            ------------      ------------    ------------     -----------

OPERATING EXPENSES
     Selling, shipping and marketing             366,824           344,615         949,751         802,660
     General and administrative                  524,098           437,361       1,451,431       1,227,645
                                            ------------      ------------    ------------     -----------
                                                 890,922           781,976       2,401,182       2,030,305
                                            ------------      ------------    ------------     -----------

OPERATING LOSS                                  (976,002)         (148,869)     (2,132,257)       (463,778)

OTHER INCOME/EXPENSE
     Interest expense                             (4,306)             --           (14,452)           --
     Interest income                              31,780            43,211          95,843         116,616
     Other income                                 32,779               467          98,764           5,138
                                            ------------      ------------    ------------     -----------
                                                  60,253            43,678         180,155         121,754
                                            ------------      ------------    ------------     -----------

LOSS BEFORE TAXES                               (915,749)         (105,191)     (1,952,102)       (342,024)

PROVISION FOR INCOME TAXES                       200,000              --           500,000         222,000
                                            ------------      ------------    ------------     -----------

NET LOSS                                   ($  1,115,749)    ($    105,191)  ($  2,452,102)   ($   564,024)
                                            ============      ============    ============     ===========

BASIC AND DILUTED LOSS PER SHARE                  ($0.49)           ($0.06)         ($1.08)         ($0.31)

WEIGHTED AVERAGE COMMON
     SHARES OUTSTANDING                        2,282,368         1,827,362       2,265,701       1,827,362
                                            ============      ============    ============     ===========


<FN>
                                    The accompanying notes are an integral
                                      part of these financial statements.
</FN>
</TABLE>

                                                 Page 5 of 15

<PAGE>

<TABLE>
                                               HEALTHY PLANET PRODUCTS, INC.
                                               -----------------------------

                                                 STATEMENTS OF CASH FLOWS
                                                 ------------------------

                                                        (Unaudited)
<CAPTION>


                                                           Three Months Ended Sept. 30,       Nine Months Ended Sept. 30,
                                                           -----------------------------      ---------------------------
                                                           
                                                               1998             1997              1998            1997
                                                           ------------      -----------      ------------    -----------
<S>                                                        <C>               <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                      
     Net Loss                                              ($1,115,749)      ($  105,191)     ($2,452,102)    ($  564,024)
     Non-cash items included in net loss
         Depreciation and amortization                          77,834            52,797          225,488         152,226
         Increase/(Decrease) in allowances for             
              doubtful accounts and returns                     86,284            62,518          (96,486)       (233,869)
         Change in inventory reserves                          319,000             --             665,000          81,000
         Decrease in deferred income taxes                     200,000             --             500,000         217,920
                                                           
     Changes in:                                           
         Accounts receivables                                 (329,108)         (489,607)         121,745          53,779
         Inventories                                           218,789           121,002          101,840        (403,764)
         Advances on royalties                                 118,890            97,179         (120,523)       (128,671)
         Prepaid expenses                                       99,770            (7,641)           5,480         (14,195)
         Accounts payable                                       69,316           147,262          (46,131)         (2,919)
         Royalties payable                                       8,066             5,770           18,351           8,374
         Commissions payable                                    41,561            59,136          (16,043)        (13,319)
         Accrued wages, bonus and payroll taxes                 22,765            44,692           18,855             435
         Income taxes payable                                    --                --                (800)        (16,300)
         Accrued liabilities                                   (20,804)           (4,630)         (15,641)        (45,788)
         Accrued rent payable                                    9,933             9,933           29,799          35,203
                                                           ------------      -----------      ------------    -----------
         Net cash used by operating activities                (193,453)           (6,780)      (1,061,168)       (873,912)
                                                           ------------      -----------      ------------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
         Sales of marketable securities                          --              979,919          249,667         973,103
         Purchases of equipment and color separations          (20,338)          (29,343)         (86,929)        (92,225)
         Security deposits                                       --                --               --              2,075
         Other                                                  (1,701)          (10,902)         (10,902)        (75,908)
                                                           ------------      -----------      ------------    -----------
         Net cash (used)/provided by investing activities      (22,039)         (933,104)         151,836        (807,045)
                                                           ------------      -----------      ------------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
         Principal repayments on note payable                  (25,694)            --            (118,348)          --
                                                           ------------      -----------      ------------    -----------
         Net cash used by financing activities                 (25,694)            --            (118,348)          --
                                                           ------------      -----------      ------------    -----------


INCREASE/(DECREASE)  IN CASH
     AND CASH EQUIVALENTS                                     (241,186)          926,324       (1,027,680)        (66,867)
CASH AND CASH EQUIVALENTS,
     BEGINNING OF PERIOD                                     2,499,568           657,520        3,286,062       1,650,711
                                                           ------------      -----------      ------------    -----------
CASH AND CASH EQUIVALENTS,
     END OF PERIOD                                          $2,258,382        $1,583,844       $2,258,382      $1,583,844
                                                           ============      ===========      ============    ===========


SUPPLEMENTARY CASH FLOW INFORMATION INCLUDES THE FOLLOWING:

         Cash paid during the period for:
              Interest                                      $    4,306        $        0       $   14,452      $        0
              Income taxes                                  $        0        $        0       $    1,600      $   20,380


<FN>
                        The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>


                                                       Page 6 of 15

<PAGE>


                          HEALTHY PLANET PRODUCTS, INC.
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The  financial  statements  included  herein have been  prepared by the Company,
without  audit,  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Certain  information  and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been omitted pursuant to such rules and regulations.
It is  believed,  however,  that  the  disclosures  are  adequate  to  make  the
information presented not misleading.

The financial statements, in the opinion of management,  reflect all adjustments
necessary, which are of a normal recurring nature, to fairly state the financial
position and the results of operations.  These results are not necessarily to be
considered indicative of the results for the entire year.

NOTE 2 - INVENTORIES

Inventories consist of the following:
                                                                  September 30,
                                                                       1998    
                                                                  -------------

         Raw materials                                            $     62,162
         Work-in-process                                               393,988
         Finished goods                                                318,035
                                                                  -------------
                                                                  $    774,185
                                                                  =============
NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:
                                                                  September 30,
                                                                       1998   
                                                                  -------------
         Machinery, equipment and leasehold improvements          $    727,397
         Molds                                                         436,422
         Color separations                                             302,632
         Furniture and fixtures                                         72,664
         Computer software                                              38,171
                                                                  -------------
                                                                     1,577,286

         Less accumulated depreciation and amortization               (804,526)
                                                                  -------------
                                                                  $    772,760
                                                                  =============


                                  Page 7 of 15


<PAGE>

                          HEALTHY PLANET PRODUCTS, INC.
                          -----------------------------

                    NOTES TO FINANCIAL STATEMENTS (continued)
                    -----------------------------

                                   (Unaudited)

NOTE 4 - INCOME TAXES

Deferred  income tax assets and  liabilities  are  recognized  using enacted tax
rates and reflect the expected future tax consequences of temporary  differences
between  recorded  amounts of assets and  liabilities  for  financial  reporting
purposes and tax basis of such assets and liabilities.  A valuation allowance is
recognized to offset a deferred tax asset if the eventual  realization of all or
a portion of the asset is uncertain.

The provision  for income taxes is based on pre-tax  earnings as reported in the
financial  statements  and  adjusted  for  requirements  of current tax law, and
changes in deferred taxes.

The  provision  for income taxes at September  30, 1998  consists of a valuation
allowance on deferred taxes.

As of January 1, 1998 the Company had available net operating loss carryovers of
approximately  $6,230,500 to be applied  against future federal  taxable income.
Due to a change in  ownership  during  1988,  $2,638,000  of these  amounts  are
subject to a Section 382  limitation  of a maximum of $476,950 per year.  If the
Company  does not  generate  sufficient  income to use the  maximum  limitation,
remaining amounts  accumulate for use in future periods until the operating loss
expires.  The remaining net operating loss  carryovers  generated after 1988 are
available to be used without yearly  limitation.  For federal tax purposes,  net
operating losses expire as follows:


                  Year Ending December 31,

                           2002                              $2,638,600
                           2003                               1,222,000
                           2004                               1,299,100
                           2005                                 383,300
                           2006                                  31,700
                           2012                                 655,800
                                                            -----------
                                                             $6,230,500
                                                            ===========

The Company has available  approximately  $25,500 of federal Alternative Minimum
Tax credits which can be carried forward  indefinitely and offset against future
income taxes.

The Company has available  approximately  $326,000 of  California  net operating
losses which can be carried  forward and offset against  future taxable  income.
These loss carryforwards expire in 2002.



                                  Page 8 of 15


<PAGE>

                          HEALTHY PLANET PRODUCTS, INC.
                          -----------------------------

                    NOTES TO FINANCIAL STATEMENTS (continued)
                    -----------------------------

                                   (Unaudited)



NOTE 4.  INCOME TAXES   (continued)

The  Company  has  substantial  net  operating  loss  carryforwards  and credits
available to offset  future income tax  liabilities.  The expected tax effect of
these  losses  and  credits  are   reflected  as  deferred  tax  assets  on  the
accompanying balance sheet. A valuation allowance has been established since the
realization of tax benefits of net operating loss  carryforwards is not assured.
The amount of the  valuation  allowance  will be reviewed on a quarterly  basis.
Deferred tax assets consist of the following:

         Net operating loss carryforwards                            $2,147,200
         AMT carryforwards                                               25,500
         Other                                                          278,000
                                                                     ----------
                                                                      2,450,700

         Valuation allowance on net operating
              loss carryforwards                                     (2,000,000)

         Deferred income taxes expected to be
              utilized currently                                       (264,900)
                                                                     -----------
         Deferred income taxes                                       $  185,800
                                                                     ===========




                                  Page 9 of 15

<PAGE>

<TABLE>
                                       HEALTHY PLANET PRODUCTS, INC.
                                       -----------------------------

                                 NOTES TO FINANCIAL STATEMENTS (continued)
                                 -----------------------------

                                                (Unaudited)
<CAPTION>

NOTE 5. - EARNINGS PER SHARE
                                                                 Three Months Ended September 30, 1998
                                                                 -------------------------------------

                                                                                                  Per-Share
                                                                Loss              Shares           Amount
                                                            ------------        ---------          -------
<S>                                                         <C>                 <C>                <C>
     Net loss                                               ($1,115,749)
                                                            ============
     Basic loss per share: 
         Loss available to common shareholders              ($1,115,749)        2,282,368          ($.49)

     Effect of dilutive securities                               --                --                 --
                                                            ------------        ---------          -------

     Diluted loss per share:
         Loss available to common shareholders
              plus assumed conversions                      ($1,115,749)        2,282,368          ($.49)
                                                            ============        =========          =======

                                                                 Nine Months Ended September 30, 1998
                                                                 ------------------------------------

                                                                                                  Per-Share
                                                               Loss               Shares           Amount
                                                            ------------        ---------          -------
     Net loss                                               ($2,452,102)
                                                            ============
     Basic loss per share:
         Loss available to common shareholders              ($2,452,102)        2,265,701          ($1.08)

     Effect of dilutive securities                               --                --                 --
                                                            ------------        ---------          -------

     Diluted loss per share:
         Loss available to common shareholders
              plus assumed conversions                      ($2,452,102)        2,265,701          ($1.08)
                                                            ============        =========          =======
</TABLE>

Warrants to purchase  368,117 shares of common stock at a weighted average price
per share of $4.45 and options to purchase  350,000  shares of common stock at a
weighted  average  price per share of $5.88 were  outstanding  at September  30,
1998, but were not included in the computation of diluted  earnings per share as
the exercise  prices were  greater  than the average  market price of the common
shares.

Preferred stock  convertible into 31,335 shares of common stock were outstanding
at September  30,  1998,  but were not  included in the  computation  of diluted
earnings per share as the effect would be anti-dilutive.

                                  Page 10 of 15

<PAGE>

<TABLE>
                                    HEALTHY PLANET PRODUCTS, INC.
                                    -----------------------------

                              NOTES TO FINANCIAL STATEMENTS (continued)
                              -----------------------------

                                             (Unaudited)
<CAPTION>


NOTE 5.
                                                             Three Months Ended September 30, 1997
                                                             -------------------------------------

                                                                                            Per-Share
                                                               Loss            Shares        Amount
                                                            ----------       ---------       -------
<S>                                                         <C>              <C>             <C>
     Net loss                                               ($105,191)
                                                            ==========
     Basic loss per share:
         Loss available to common shareholders              ($105,191)       1,827,362       ($.06)

     Effect of dilutive securities                              --              --              -- 
                                                            ----------       ---------       -------

     Diluted loss per share:
         Loss available to common shareholders              ($105,191)       1,827,362       ($.06)
                                                            ==========       =========       =======

                                                              Nine Months Ended September 30, 1997
                                                              ------------------------------------

                                                                                            Per-Share
                                                               Loss            Shares        Amount
                                                            ----------       ---------       -------

     Net loss                                               ($564,024)
                                                            ==========
     Basic loss per share:
         Loss available to common shareholders              ($564,024)       1,827,362       ($.31)

     Effect of dilutive securities                              --              --              -- 
                                                            ----------       ---------       -------

     Diluted loss per share:
         Loss available to common shareholders
              plus assumed conversions                      ($564,024)       1,827,362       ($.31)
                                                            ==========       =========       =======
</TABLE>

Warrants to purchase  68,117 shares of common stock at a weighted  average price
per share of $5.31 and options to purchase  325,000  shares of common stock at a
weighted  average  price per share of $6.19 were  outstanding  at September  30,
1997, but were not included in the computation of diluted  earnings per share as
the exercise  prices were  greater  than the average  market price of the common
shares.

Preferred stock convertible into 186,341 shares of common stock were outstanding
at September  30,  1997,  but were not  included in the  computation  of diluted
earnings per share as the effect would be anti-dilutive.


                                  Page 11 of 15

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     ---------------------------------------

                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  ---------------------------------------------


Special Note Regarding Forward-Looking Statements

Certain  statements in this Form 10-QSB,  including  information set forth under
this Item 2  "Management's  Discussion  and Analysis of Financial  Condition and
Results  of  Operations"  constitute  "forward-looking  statements"  within  the
meaning of the Private  Securities  Litigation  Reform Act of 1995 (the  "Act").
Healthy Planet Products, Inc. (the "Company") desires to avail itself of certain
"safe harbor" provisions of the Act and is therefore including this special note
to enable the Company to do so. Forward-looking statements included in this From
10-QSB or hereafter  included in other publicly  available  documents filed with
the Securities and Exchange Commission, report to the Company's stockholders and
other publicly  available  statements  issued or released by the Company involve
known and unknown risks, uncertainties,  and other factors which could cause the
Company's actual results,  performance  (financial or operating) or achievements
to  differ  from  the  future  results,  performance  (financial  or  operating)
achievements  expressed  or implied by such  forward  looking  statements.  Such
future results are based upon  management's  best  estimates  based upon current
conditions and the most recent results of operations. These include management's
forecasts  for sales,  the decrease in net sales for the nine month period ended
September 30, 1998,  purchasing plans and programs of certain large chain buyers
relating to holiday product recently experienced decline in gross margin as well
as marginal increases in general and administrative expenses, the recent adverse
trend  in  the  general  retail   environment,   general  economic   conditions,
competition  generally  and  specifically  relating  to  greeting  cards  having
environmental,  nature or  wildlife  themes and the  ability  of the  Company to
sustain  consumer demand for the Company's  principal  Sierra Club card line. In
addition,  the  ability of the Company to enhance and expand its product mix and
to successfully  introduce new products which will meet with consumer acceptance
may also affect future results.

Sales

For the nine months ended  September 30, 1998,  the Company's net sales amounted
to  $2,751,652  which  reflected a decrease of $387,004  versus last year's nine
month  results of  $3,138,656  or 12.3%.  Revenues  from the  Collectibles  line
amounted to $343,421 or 10.9% of revenues to date.  Factoring out  Collectibles,
revenues from the paper lines of the Company finished the nine month period down
23.3% below last year's levels.

For the three months ended  September 30, 1998, the Company's net sales amounted
to $1,034,654  representing a decrease of $390,809  compared to the prior year's
three month results of $1,425,463 or 27.4%.  Revenues from the Collectibles line
accounted for $161,928 of the quarter's sales or 15.6%. Excluding  Collectibles,
revenues for the quarter fell by $552,737 or 38.8%.

Gross Profit

For the nine months ended September 30, 1998,  gross profit amounted to $268,925
or 9.8% of sales. For the comparable prior year period, gross profit amounted to
$1,566,527 or 49.9% of sales. The


                                  Page 12 of 15

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     ---------------------------------------

            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
            ---------------------------------------------

Gross Profit   (continued)

decline  at gross  margin  was a result  of a  close-out  sale  combined  with a
provision for obsolete inventory depressing current year's margin by $1,045,000.
Without the provision for obsolete  inventory and close-out  sale,  gross profit
would have amounted to $1,313,925 or 47.8% of sales.

For the three  months  ended  September  30,  1998,  a loss at gross  profit was
incurred in the amount of $85,080.  For the comparable prior year period,  gross
profit amounted to $633,107 or 44.4% of sales.  During the quarter an additional
provision of $319,000 for obsolete  inventory was made. This combined with lower
sales or fixed  overhead  costs  accounted  for the period to period  decline at
gross margin.

Operating Expenses

For the nine months ended  September 30, 1998,  selling,  shipping and marketing
expenses  amounted to  $949,751  reflecting  an increase of $147,091  versus the
prior year's level of $802,660 or 18.3%. Increased commissions,  advertising and
travel costs associated with the new collectibles line accounted for the year to
year increase.

For the three months ended September 30, 1998,  selling,  shipping and marketing
expenses  amounted  to  $366,824  reflecting  an  increase  of $22,209  over the
previous year's level of $344,615 or 6.4%. Decreased  commissions were offset by
increases  in  advertising  and travel  costs  associated  with the new  product
launch.

General and  administrative  expenses amounted to $1,451,431 for the nine months
ended September 30, 1998, reflecting an increase of $223,786 or 18.2% versus the
prior year period  $1,227,645.  Increased  professional fees and the addition of
personnel for the new collectibles line accounted for the year to year increase.

General and  administrative  expenses  amounted to $524,098 for the three months
ended September 30, 1998,  reflecting an increase of $86,737 or 19.8% versus the
prior year quarter of $437,361.  Increased professional fees and the addition of
people for the new collectibles line accounted for the year to year increase.

Income

An  operating  loss of  $2,132,257  or $.94 per share was  incurred for the nine
months ended September 30, 1998.  Interest and other income of $180,155  reduced
the operating  loss to result in a net loss before income taxes of $1,952,102 or
$.86 per share.  For the prior year  period,  the net loss before  income  taxes
amounted to $342,024 or $.19 per share. Lower sales,  increased  operating costs
associated  with  the  new  collectibles  line,  the  close-out  of  slow-moving
inventory  and the write down of obsolete  inventory  resulted in the nine month
loss.  Net loss  for the nine  months  ended  September  30,  1998  amounted  to
$2,452,102 or $1.08 per share, compared to the prior year's net loss of $564,024
or $.31 per share.  During the nine month period a $500,000 valuation  allowance
was placed on deferred tax assets. Under

                                  Page 13 of 15

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     ---------------------------------------

            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
            ---------------------------------------------

Income   (continued)

Statement  of Financial  Accounting  Standard  No. 109,  "Accounting  for Income
Taxes",  a valuation  allowance is  recognized to offset a deferred tax asset if
the eventual  realization of all or a portion of the asset is uncertain.  Due to
the loss for the nine months ended  September 30, 1998,  the  realization of tax
benefits from net operating loss carryforwards is not assured. The amount of the
valuation allowance will be reviewed and may be adjusted on a quarterly basis.

Balance Sheet

Total assets at September  30, 1998  amounted to  $5,454,512  which  reflected a
decrease  versus the  December 31, 1997 level of  $8,036,000  by  $2,581,488  or
32.1%. A decline in cash,  inventories,  prepaid assets,  and  receivables  were
offset in part by increases in fixed  assets,  prepaid  assets and  royalties to
result in the period to period decline.  Total current  liabilities  amounted to
$772,308  as of  September  30,  1998  versus  the  December  31,  1997 level of
$806,000.  The  decrease  was a result of the paydown of  commissions  and trade
payables offset by increases in royalties due.

Liquidity and Capital Resources

At September 30, 1998, the Company's working capital was $3,485,265 reflecting a
decrease  of  $1,920,735   versus  working  capital  at  December  31,  1997  of
$5,406,000.  Cash of $1,061,168 was used during the period to support  operating
activities.  Cash of $97,831 was used for capital expenditures - separations and
publishing  rights for new card images for 1998 and collectible  molds for 1999.
Cash of  $118,348  was used to pay a note  related to the  Corlett  Collectibles
acquisition.

The present primary sources of the Company's  liquidity has been cash internally
generated from operations,  proceeds obtained by the Company through the private
sale of its securities,  and the  availability of a secured line of credit.  The
Company has a $500,000 secured line of credit from Westamerica Bank. The Company
draws on this line from time to time on a short term basis.  As of September 30,
1998, there was no outstanding amount under this line of credit.

Effects of Inflation

The Company does not view the effects of  inflation as having a material  effect
upon its  business.  Increases  in paper and  labor  costs  have been  offset by
increases  in the price of the  Company's  cards and through  higher print runs,
which  have  reduced  the unit cost of the  Company's  card  product.  While the
Company has in the past increased its prices to its customers, it has maintained
its relative  competitive  price  position  within the general range of greeting
cards.



                                  Page 14 of 15

<PAGE>

                           PART II. OTHER INFORMATION
                           --------------------------


Item 6.           Exhibits and Reports on Form 8-K
                  --------------------------------

                  a)  Exhibits

                      None

                  b)  Reports on Form 8-K


                  During the quarter  ended  September  30, 1998,  the following
reports on Form 8-K were filed by the Registrant.

Date of Report               Item Reported              Description
--------------               -------------              -----------








                                   SIGNATURES


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




                                     HEALTHY PLANET PRODUCTS, INC.
                                            (Registrant)

DATED:  November ____, 1998          by:       /s/   Bruce A. Wilson           
                                         --------------------------------------
                                               Bruce A. Wilson
                                     President, Chief Executive, Chief Operating
                                     and Chief Financial Officer.




                                  Page 15 of 15