UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

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

              For the thirteen week period ended November 27, 1999

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

              For the transition period from _________ to _________

                       Commission File Number 333-44969-01

                            DESA HOLDINGS CORPORATION
             (Exact name of registrant as specified in its charter)


          Delaware                                    22-2940760
 (State or other jurisdiction of         (IRS Employer Identification No.)
 incorporation or organization)

                 2701 Industrial Drive, Bowling Green, KY 42101
               (Address of principal executive offices) (Zip Code)

                                 (270) 781-9600
              (Registrant's telephone number, including area code)

Indicate by check 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 the past 90 days. Yes [ X ] No [ ]

As of January 11, 2000,  there were  15,552,547  shares of  Registrant's  Common
Stock, $.01 par value per share, and 90,604 shares of the Registrant's Nonvoting
Common Stock, $.01 par value per share, outstanding.



<PAGE>
<TABLE>
<CAPTION>

                            DESA HOLDINGS CORPORATION
                                    FORM 10-Q
                                November 27, 1999

                                      INDEX

                                                                                         Page

<S>     <C>                                                                              <C>
PART I   Financial Information

Item 1.    Consolidated Financial Statements (Unaudited)
           Consolidated Balance Sheets - November 27, 1999 and February 27, 1999          3
           Consolidated Statements of Operations - Thirteen and Thirty-nine Week
                    ended November 27, 1999 and November 28, 1998                         4
           Consolidated Statements of Stockholders' Equity (Deficit)                      5
           Consolidated Statements of Cash Flows - Thirty-nine Weeks
                    ended November 27, 1999 and November 28, 1998                         6
           Notes to Consolidated Financial Statements                                     7

Item 2.    Management's Discussion and Analysis of Financial Condition and
                    Results of Operations                                                13

Item 3.    Quantitative and Qualitative Disclosures About Market Risk                    18

PART II  Other Information

Item 6.    Exhibits and Reports on Form 8-K                                              20

           Signatures                                                                    21

</TABLE>
                                       2
<PAGE>
<TABLE>
<CAPTION>
                                               DESA HOLDINGS CORPORATION

                                              CONSOLIDATED BALANCE SHEETS
                                                                                 November 27,            February 27,
                                                                                     1999                   1999
                                                                                --------------         --------------
                                                                                (in thousands)         (in thousands)
ASSETS                                                                            (Unaudited)
------
<S>                                                                              <C>                   <C>
Current assets:
     Cash and cash equivalents                                                    $       573           $       888
     Accounts receivable, net                                                          88,308                30,390
     Inventories:
        Raw materials                                                                     788                   986
        Work-in-process                                                                13,790                 6,376
        Finished goods                                                                 46,017                37,891
                                                                                  -----------           -----------
                                                                                       60,595                45,253
     Deferred tax assets                                                                2,137                 2,137
     Other current assets                                                               1,919                 1,321
                                                                                  -----------           -----------
Total current assets                                                                  153,532                79,989

Property, plant and equipment:
     Land                                                                                 390                   390
     Buildings and improvements                                                         6,051                 6,173
     Machinery and equipment                                                           37,769                34,527
     Furniture and fixtures                                                               668                   725
                                                                                  -----------           -----------
                                                                                       44,878                41,815
     Less accumulated depreciation                                                     29,943                26,182
                                                                                  -----------           -----------
                                                                                       14,935                15,633

Goodwill, net                                                                          94,445                81,882
Deferred tax assets                                                                       598                   598
Other assets                                                                           23,148                25,250
                                                                                  -----------           -----------
Total assets                                                                      $   286,658           $   203,352
                                                                                  ===========           ===========
Liabilities and stockholders' equity (deficit)
Current liabilities:
     Accounts payable                                                             $    48,474           $    25,232
     Accrued interest                                                                   8,412                 3,075
     Other accrued liabilities                                                         29,855                10,732
     Current portion of long-term debt                                                 27,544                13,307
                                                                                  -----------           -----------
Total current liabilities                                                             114,285                52,346

Long-term debt                                                                        285,766               285,138
Other liabilities                                                                      14,880                   599
                                                                                  -----------           -----------
Total liabilities                                                                     414,931               338,083

Commitments

Series C redeemable preferred stock, $.01 par value; authorized--
     40,000 shares; issued and outstanding-- 21,180 shares at November 27,
     1999 and 19,990 shares at February 27, 1999 (liquidation preference -
     $22,224,000 at November 27, 1999 and $20,371,000 at February 27, 1999)            18,591                17,207

Stockholders' equity (deficit):
     Common stock, $.01 par value; authorized-- 50,000,000 shares; issued and
     outstanding-- 15,552,547 shares at November 27, 1999 and 15,548,692 shares
     at February 27, 1999                                                                 155                   155

     Nonvoting  common stock,  $.01 par value;  authorized-- 3,000,000
     shares; issued and outstanding-- 90,604 shares at November 27, 1999
     and February 27, 1999                                                                  1                     1

     Capital in excess of par value                                                    98,009                97,984
     Carryover predecessor basis adjustment                                           (32,309)              (32,309)
     Accumulated deficit                                                             (210,966)             (216,742)
     Accumulated other comprehensive loss                                              (1,754)               (1,027)
                                                                                  -----------           -----------
Total stockholders' equity (deficit)                                                 (146,864)             (151,938)
                                                                                  -----------           -----------
Total liabilities and stockholders' equity (deficit)                              $   286,658           $   203,352
                                                                                  ===========           ===========
See accompanying notes
</TABLE>
                                                           3
<PAGE>
<TABLE>
<CAPTION>

                                        DESA HOLDINGS CORPORATION

                                  Consolidated Statements of Operations
                                              (in thousands)

                                               (Unaudited)



                                                     Thirteen Weeks Ended       Thirty-nine Weeks Ended

                                                   Nov 27,        Nov 28,        Nov 27,        Nov 28,
                                                    1999            1998          1999           1998
                                                  ---------      ---------      ---------      ---------

<S>                                               <C>            <C>            <C>            <C>
Net sales                                         $156,763       $134,679       $317,480       $250,849
Cost of sales                                      100,983         87,055        210,783        166,996
                                                  --------       --------       --------       --------
Gross profit                                        55,780         47,624        106,697         83,853

Operating costs and expenses:
     Selling                                        25,363         19,570         54,557         40,323
     General and administrative                      4,252          3,762         11,300          9,726
     Other                                           1,613          1,712          4,677          3,850
                                                  --------       --------       --------       --------
                                                    31,228         25,044         70,534         53,899
                                                  --------       --------       --------       --------

Operating profit                                    24,552         22,580         36,163         29,954

Interest expense                                     7,589          7,559         21,551         20,796
                                                  --------       --------       --------       --------
Income before provision for income taxes            16,963         15,021         14,612          9,158

Provision for income taxes                           7,727          6,808          6,788          4,188
                                                  --------       --------       --------       --------

Net Income                                           9,236          8,213          7,824          4,970

Less dividends and accretion on preferred stock        699            627          2,047          1,830
                                                  --------       --------       --------       --------
Income applicable to common stockholders          $  8,537       $  7,586       $  5,777       $  3,140
                                                  ========       ========       ========       ========

</TABLE>
                                                    4
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>

                                                      DESA Holdings Corporation
                                        Consolidated Statements of Stockholders' Equity (Deficit)
                                                           (in thousands)

                                                             (Unaudited)

                                                                     Carryover                         Cumulative
                                          Nonvoting    Capital in   Predecessor                          Other            Total
                               Common       Common     Excess of       Basis         Accumulated      Comprehensive   Stockholders'
                                Stock       Stock      Par Value    Adjustment         Deficit            Loss           Deficit
                             -------------------------------------------------------------------------------------------------------
<S>                             <C>          <C>       <C>          <C>              <C>               <C>             <C>

Balance at
February 27, 1999                $155         $1        $97,984      ($32,309)        ($216,742)        ($1,027)        ($151,938)

Comprehensive income:

  Net Income                                                                              7,824                             7,824

  Foreign currency
   translation adjustment                                                                                  (727)             (727)
                                                                                                                      ------------

Comprehensive income                                                                                                        7,097
                                                                                                                      ------------


Accretion of preferred stock                                                               (194)                             (194)

Dividends on preferred stock                                                             (1,853)                           (1,853)

Issuance of common stock                                     25                                                                25


                             --------------------------------------------------------------------------------------   ------------
Balance at
November 27, 1999                $155         $1        $98,009      ($32,309)        ($210,966)        ($1,754)        ($146,864)

                             ======================================================================================   ============
</TABLE>

See accompanying notes

                                                                  5
<PAGE>
<TABLE>
<CAPTION>

                                         DESA HOLDINGS CORPORATION
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (in thousands)

                                                (Unaudited)

                                                                                   Thirty-nine Weeks Ended

                                                                                 Nov 27,           Nov 28,
                                                                                  1999              1998
                                                                               -----------       -----------
<S>                                                                            <C>               <C>

Cash flows from operating activities
Net income                                                                      $  7,824          $  4,970

Adjustments to reconcile net income to net cash used in operating activities:

     Depreciation                                                                  3,767             2,957
     Amortization                                                                  4,478             3,511
     Deferred income taxes                                                          --                 (15)
     Equity in undistributed earnings of joint venture                              (158)             (117)
     (Increase) decrease in operating assets:
         Accounts receivable, net                                                (57,918)          (58,457)
         Inventories                                                             (15,342)           (7,674)
         Other current assets                                                       (598)             (570)
     Increase (decrease) in operating liabilities:
         Accounts payable                                                         23,242            23,896
         Accrued interest                                                          5,417             1,074
         Other accrued liabilities                                                11,990              (272)
         Income taxes payable                                                      6,470             2,759
         Other liabilities                                                           161               146
                                                                                --------          --------
Net cash used in operating activities                                           $(10,667)         $(27,792)
                                                                                --------          --------


Investing activities
Capital expenditures                                                              (3,069)           (3,645)
Dividends received from joint venture                                                139               123
Net cash paid for acquisition of businesses                                         --             (39,635)
Other                                                                               (825)             (986)
                                                                                --------          --------
Net cash used in investing activities                                           $ (3,755)         $(44,143)
                                                                                --------          --------


Financing activities

Increase in working capital loan                                                  17,762            32,657
Decrease in note payable                                                            (202)             --
Principal payments of term loans                                                  (2,775)           (1,725)
Issuance of common stock                                                              25            12,076
Increase in acquisition loans                                                       --              30,000
Payment of preferred stock expenses                                                 --                 (96)
Payment of debt financing costs                                                     (703)           (1,193)
                                                                                --------          --------
Net cash provided by financing activities                                         14,107            71,719

Effect of exchange rates on cash                                                    --                   4
                                                                                --------          --------
Decrease in cash and cash equivalents for the period                                (315)             (212)

Cash and cash equivalents at beginning of period                                     888               794
                                                                                --------          --------
Cash and cash equivalents at end of period                                      $    573          $    582
                                                                                ========          ========
</TABLE>

See accompanying notes

                                                     6
<PAGE>

                            DESA HOLDINGS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)




1. Basis of Presentation

The interim  consolidated  financial statements for the periods presented herein
have not been  audited by  independent  public  accountants.  In the  opinion of
management of DESA  Holdings  Corporation  (the  "Company" or  "Holdings"),  all
adjustments  (consisting only of normal recurring accruals) considered necessary
to present  fairly the results of operations for the periods have been included.
Interim results are not necessarily indicative of results for a full year. Sales
of the Company's zone heating products follow seasonal  patterns that affect the
Company's results of operations including inventory levels,  accounts receivable
levels and debt levels during the year.

The  unaudited  consolidated  financial  statements  have been  prepared  by the
Company in accordance with generally accepted accounting  principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation S-X. Certain information and footnote  disclosures  normally included
in the financial  statements  prepared in  accordance  with  generally  accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.

The  consolidated  balance  sheet  presented as of February  27, 1999,  has been
derived from the consolidated financial statements that have been audited by the
Company's independent auditors.  The consolidated financial statements and notes
thereto  included  herein should be read in  conjunction  with the  consolidated
financial  statements and notes thereto  included in the Company's Annual Report
on Form 10-K.

2. Summary of Significant Accounting Policies

Consolidation

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly-owned subsidiary,  DESA International,  Inc. ("DESA") and
all of its wholly-owned subsidiaries, including DESA Industries of Canada, Inc.,
DESA Europe BV, DESA Industries of V.I.,  Inc., and Heath Company  Limited.  All
significant intercompany accounts and transactions have been eliminated.  DESA's
50% interest in a joint venture is accounted for using the equity method.

Use of Estimates

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

                                       7

<PAGE>
                            DESA HOLDINGS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



Summarized Financial Information of DESA International, Inc

DESA International,  Inc. is the issuer of the 9 7/8% Senior Subordinated Notes.
The  Company  has  not  presented  separate   financial   statements  and  other
disclosures   concerning  DESA   International,   Inc.  because  management  has
determined  that such  information  is not  material  to  holders  of the Senior
Subordinated Notes.

The following summarized  consolidated  financial  information is being provided
for DESA  International,  Inc. as of November 27, 1999 and February 27, 1999 and
for the thirteen and thirty-nine  weeks ended November 27, 1999 and November 28,
1998.

Summarized consolidated balance sheet information (in thousands):

                                       November 27,       February 27,
                                          1999               1999
                                      ---------------------------------
Assets
Current assets                          $ 261,612          $ 187,892
Net fixed assets                           14,935             15,633
Goodwill, net                              93,332             80,744
Deferred tax assets                           598                598
Other assets                               23,148             25,250
                                        ----------------------------
                                        $ 393,625          $ 310,117
                                        ============================

Liabilities and stockholders' deficit
Current liabilities                     $ 113,176          $  51,939
Long-term debt                            153,750            153,000
9 7/8% Senior Subordinated Notes          130,000            130,000
Other liabilities                          14,880                599
Stockholders' deficit                     (18,181)           (25,421)
                                        ----------------------------
                                        $ 393,625          $ 310,117
                                        ============================

Summarized consolidated statements of operations information (in thousands):
<TABLE>
<CAPTION>
                                     Thirteen Weeks Ended               Thirty-nine Weeks Ended
                                November 27,     November 28,        November 27,    November 28,
                                    1999             1998                1999            1998
                                ------------------------------      ------------------------------
<S>                              <C>            <C>                  <C>              <C>
Net Sales                         $ 156,763      $ 134,679            $ 317,480        $ 250,849
Income before income taxes           16,963         15,021               14,612            9,158
Net income                           9,236           8,213                7,824            4,970
</TABLE>


                                       8
<PAGE>
                            DESA HOLDINGS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



Impact of Recently Issued Accounting Pronouncements

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities" ("FAS 133"). FAS 133 must first be applied in the first
quarter of fiscal  years that begin after June 15,  2000.  FAS 133 will  require
Holdings to recognize all derivatives on the consolidated balance sheets at fair
value.  Derivatives  that are not hedges must be adjusted to fair value  through
income.  If the  derivative  is a hedge,  depending  on the nature of the hedge,
changes in the fair  value of  derivatives  will  either be offset  against  the
change in fair  value of the  hedged  assets,  liabilities  or firm  commitments
through  earnings or recognized in other  comprehensive  income until the hedged
item is recognized in earnings.  The ineffective portion of a derivatives change
in fair value will  immediately be recognized in earnings.  Management  does not
believe  that  FAS 133  will  have a  significant  effect  on the  earnings  and
financial  position  of the  Company.  The  Company  expects  to  adopt  FAS 133
beginning in the first quarter of fiscal 2002 which begins in March 2001.

3. Financing Arrangements

Outstanding borrowings consist of the following (in thousands):

                                                      November 27,  February 27,
                                                          1999          1999
                                                      --------------------------

9 7/8% Senior Subordinated Notes due 2007 (A)          $130,000       $130,000
NationsBank and various banks Term A Loan (B)            42,600         44,875
NationsBank and various banks Term B Loan (C)            48,250         48,750
NationsBank and various banks Working Capital Loan
      Commitment (D)                                     40,444         22,682
NationsBank and various banks Acquisition Loan (E)       20,000         20,000
NationsBank and various banks Acquisition B Loan (F)     30,000         30,000
Note payable related to acquisition of Heath (G)          2,016          2,138
                                                       --------       --------
Total outstanding borrowings                            313,310        298,445
Less current portion of long-term debt                   27,544         13,307
                                                       --------       --------
Total long-term debt                                   $285,766       $285,138
                                                       ========       ========

(A)      The Senior  Subordinated  Notes are  payable on  December  15, 2007 and
         accrue  interest  at a rate of 9.875%  per annum.  Interest  is payable
         semi-annually on June 15 and December 15,  commencing on June 15, 1998.
         The Senior Notes can be redeemed prior to the mandatory redemption date
         based upon the occurrence of certain  events,  as defined.  DESA is the
         issuer  of  the  Senior   Subordinated   Notes,  which  are  fully  and
         unconditionally guaranteed by Holdings.

(B)      The Term A Loan is payable in quarterly  installments  through November
         26,  2003,  and accrues  interest at the prime rate plus 2.00% or LIBOR
         plus 3.00% at the option of the  Holdings.  As of November 27, 1999 the
         interest rate was 8.75%. Interest is payable on a quarterly basis under
         the prime rate option or at the end of each LIBOR period.  Once repaid,
         the Term A Loan may not be reborrowed.

(C)      The Term B Loan is payable in quarterly  installments  through November
         26,  2004,  and accrues  interest at the prime rate plus 2.25% or LIBOR
         plus 3.25% at the  option of  Holdings.  As of  November  27,  1999 the
         interest rate was 9.00%. Interest is payable on a quarterly basis under
         the prime rate option or at the end of each LIBOR period.  Once repaid,
         the Term B Loan may not be reborrowed.

                                       9
<PAGE>
                            DESA HOLDINGS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


(D)      The  Working  Capital  Loan  Commitment  is  payable at any time at the
         option of Holdings prior to November 26, 2003, and accrues  interest at
         the  prime  rate  plus  2.00% or LIBOR  plus  3.00%,  at the  option of
         Holdings.  As of November 27, 1999 $.7 million was accruing interest at
         a rate of 10.50% with the balance  accruing  interest at rates  between
         8.41% and 8.44%.  Interest  is payable on a  quarterly  basis under the
         prime rate  option or at the end of each  LIBOR  period.  Holdings  can
         utilize  letters of credit under the Working Capital Loan Commitment up
         to  $10  million.  As of  November  27,  1999,  letters  of  credit  of
         $3,333,000 are outstanding  under the Working Capital Loan  Commitment.
         Borrowings  are generally  limited to specific  percentages of eligible
         trade  receivables and inventory.  Holdings pays commitment fees of 1/2
         of  1%  per  annum  on  the  daily  unutilized   Working  Capital  Loan
         Commitment.

(E)      The Acquisition Loan is payable in quarterly installments commencing in
         February  2000 and  extending  through  November 26, 2003,  and accrues
         interest,  which is payable quarterly,  at the prime rate plus 2.25% or
         LIBOR plus 3.25% at the option of Holdings. As of November 27, 1999 the
         interest rate was 9.41%.  Once repaid,  the Acquisition Loan may not be
         reborrowed.

(F)      The Acquisition B Loan is payable in quarterly installments  commencing
         in February  2000 and extending  through  November 26, 2003 and accrues
         interest,  which is payable quarterly,  at the prime rate plus 2.25% or
         LIBOR plus 3.25% at the option of Holdings. As of November 27, 1999 the
         interest rate was 9.35%. Once repaid, the Acquisition B Loan may not be
         reborrowed.

(G)      The note  payable is due on December  31,  2008 and  accrues  interest,
         which is payable  semi-annually  beginning  June 30, 1998, at a rate of
         7.5% per annum.  Holdings may elect,  upon written notice, to defer any
         interest  payments,   in  which  event  such  interest  payments  shall
         effectively  convert to principal and accrue interest at a rate of 7.5%
         per annum. In fiscal 2000,  $80,000 of interest  payments were deferred
         and were converted into principal.

In  accordance  with the terms of the Credit  Facility,  the  ability of DESA to
incur additional indebtedness is limited, as defined. At November 27, 1999, DESA
can incur additional indebtedness of $31.2 million.

4. Comprehensive Income

Comprehensive income consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                         Thirteen Weeks Ended         Thirty-nine Weeks Ended
                                      November 27,  November 28,    November 27,    November 28,
                                        1999            1998           1999            1998
                                      ----------------------------------------------------------
<S>                                  <C>             <C>            <C>             <C>
Net income                            $ 9,236         $ 8,213        $ 7,824         $ 4,970
Net change in foreign currency
      translation adjustment             (425)            131           (727)           (406)
                                      -------         -------        -------         -------
Comprehensive income                  $ 8,811         $ 8,344        $ 7,097         $ 4,564
                                      =======         =======        =======         =======
</TABLE>


As of November 27, 1999 and November 28, 1998 the cumulative other comprehensive
loss consisted solely of the Company's foreign currency translation adjustment.

                                       10
<PAGE>
                            DESA HOLDINGS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



5. Segment Information

The Company is organized into two primary product  categories:  (a) zone heating
products,  which  include  indoor  room  heaters,  hearth  products  and outdoor
heaters,  and (b) specialty  products,  which include  specialty  tools and home
security products.

Corporate expenses include corporate headquarters staff, a modest portion of the
cost of certain support functions, including accounting,  management information
systems, human resources and treasury and the amortization of deferred financing
costs.

Identifiable assets are those assets of the Company that are identified with the
operations in each product  segment.  Corporate  assets include  primarily cash,
deferred income taxes and deferred financing costs.  Operating results and other
financial data for the two business  segments for the periods ended November 27,
1999 and November 28, 1998 are presented below (in thousands):
<TABLE>
<CAPTION>

                                           Zone Heating      Specialty          General
                                             Products         Products         Corporate          Total
                                          ---------------------------------------------------------------
<S>                                        <C>              <C>              <C>              <C>
Thirteen weeks ended November 27, 1999
Net sales                                   $104,275         $ 52,488               --          $156,763
Operating profit (loss)                       19,161            6,863         $ (1,472)           24,552
Depreciation and amortization                  2,069              478              419             2,966
Identifiable assets                          176,370           96,496           13,792           286,658
Capital expenditures                             190              231               --               421

Thirteen weeks ended November 28, 1998
Net sales                                     95,852           38,827               --           134,679
Operating profit (loss)                       17,776            6,047           (1,243)           22,580
Depreciation and amortization                  2,113              432              466             3,011
Identifiable assets                          153,978           93,345           17,047           264,370
Capital expenditures                             568              268                3               839

<CAPTION>

                                           Zone Heating      Specialty          General
                                             Products         Products         Corporate          Total
                                          ---------------------------------------------------------------
<S>                                        <C>              <C>              <C>              <C>
Thirty-nine weeks ended November 27, 1999
Net sales                                   $175,143         $142,337               --          $317,480
Operating profit (loss)                       22,943           16,836         $ (3,616)           36,163
Depreciation and amortization                  4,927            2,080            1,238             8,245
Identifiable assets                          176,370           96,496           13,792           286,658
Capital expenditures                           1,945            1,096               28             3,069

Thirty-nine weeks ended November 28, 1998
Net sales                                    148,000          102,849               --           250,849
Operating profit (loss)                       20,819           12,381           (3,246)           29,954
Depreciation and amortization                  3,891            1,358            1,219             6,468
Identifiable assets                          153,978           93,345           17,047           264,370
Capital expenditures                           3,059              517               69             3,645

</TABLE>

                                       11
<PAGE>
                            DESA HOLDINGS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


6.       Prior Period Acquisitions

On August 19,  1998,  the  Company  consummated  two  acquisitions.  The Company
acquired  by  merger  Fireplace  Manufacturers,  Inc.  ("FMI")  for a net  cash
purchase  price  of  $25,805,000.   The  purchase  price  includes   non-compete
agreements  with  certain  executives  of FMI  covering a three year  period for
aggregate  payments of  $3,050,000.  The Company  also  acquired  certain of the
assets of Universal  Heating,  Inc.  ("UHI") through Desa U. S. Inc., which then
merged  into  DESA,  for  a  cash  purchase  price  of  $12,634,000,   including
non-compete  payments of $1,998,000.  The Company  financed the two acquisitions
through  borrowings of $26,363,500  under the Credit  Facility (Term Loan B) and
the issuance of Common Stock for $12,075,500.

The Company  accounted  for such  acquisition  using the  purchase  method.  The
following  summarizes  the fair value of the  assets  acquired  and  liabilities
assumed at August 19, 1998 for the two acquisitions (in thousands):

               Current assets                  $  4,450
               Property, plant and equipment      1,201
               Other assets                      15,734
               Goodwill                          34,234
               Current liabilities               (3,060)
               Long Term liabilities            (14,120)
                                               --------
                                               $ 38,439

                                       12

<PAGE>

                            DESA HOLDINGS CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



This quarterly report on Form 10-Q of Desa Holdings Corporation (the "Company"),
which  includes  its  consolidated  subsidiaries  unless the  context  indicates
otherwise, contains statements that constitute forward looking statements within
the meaning of Section 21E of the  Securities  Exchange Act of 1934, as amended.
Those  statements  appear  in a number  of places  in this  report  and  include
statements  regarding the strategies,  plans, beliefs or current expectations of
the Company and its  management  and other  statements  that are not  historical
facts.  Readers are cautioned that any such forward  looking  statements are not
guarantees of future performance and involve risks and  uncertainties,  and that
actual  results  may  differ  materially  from  those set forth in such  forward
looking statements as a result of various factors. Such factors include, but are
not limited to, the  Company's  vulnerability  to adverse  general  economic and
industry  conditions  because of its leverage,  the Company's  ability to obtain
future  financing  on  acceptable  terms,  the  Company's  ability to  integrate
acquired  companies and to complete  acquisitions  on  satisfactory  terms,  the
demand and price for the Company's  products  relative to production  costs, the
seasonality of the Company's business and uncertainties regarding the resolution
of Year 2000 problems.  The Company undertakes no obligation to release publicly
the results of any revisions to these  forward  looking  statements  that may be
made to reflect errors or circumstances that occur after the date hereof.

The following  discussion of the Company's  results of operations  and financial
condition for the thirteen and thirty-nine  week periods ended November 27, 1999
and November  28,  1998,  should be read in  conjunction  with the  consolidated
financial  statements of the Company and the notes thereto  contained herein, as
well as for the fiscal year ended  February 27, 1999,  included in the Company's
Annual Report on Form 10-K.

Overview

The Company is organized into two primary product  categories:  (a) zone heating
products,  which  include  indoor  room  heaters,  hearth  products  and outdoor
heaters,  and (b) specialty  products,  which include  specialty  tools and home
security  products.  The Company  records sales upon shipment of products to its
customers.  Net sales  constitute  gross sales net of an accrual for returns and
allowances and cash discounts.

Sales of the  Company's  zone heating  products  follow  seasonal  patterns that
affect the  Company's  results of  operations.  Demand  for the  Company's  zone
heating  products  has  been  historically  highest  in the  third  quarter,  as
consumers  prepare  for  winter.  Consequently,  the  Company's  net  sales  and
Company's fiscal operating profit have also been historically highest during the
Company's fiscal third quarter.  Management  believes that the Company's results
of operations  will continue to follow this pattern;  there can be no assurance,
however,  that third quarter  results will always surpass those of the first and
second quarters, or that any improvement shown will be as great as that shown in
previous  years.  In  particular,  unusually warm weather in the fall may reduce
demand for zone heating products.

The  Company's net sales and  operating  profit of zone heating  products in its
current  fiscal  year may be  adversely  affected  by warm  weather  during  the
preceding  winter,  which  can  result  in  higher  inventory  carryover  by the
Company's customers. Last winter was unusually warm and, consequently, net sales
and operating profit of zone heating products were below normal levels;  however
net sales and  operating  profits of zone heating  products were above the prior
year results.

Sales of the Company's  specialty products do not follow a significant  seasonal
pattern and are not affected by weather patterns. Historically, these sales have
followed a relatively level quarterly pattern.

                                       13
<PAGE>
Results of Operations

Thirteen  Week Period Ended  November 27,  1999,  Compared to the Thirteen  Week
Period Ended November 28, 1998

Net sales.  Net sales in the thirteen  weeks ended  November  27, 1999,  ("third
quarter 2000") were $156.8 million, an increase of 16% or $22.1 million compared
to the  thirteen  weeks ended  November 28, 1998 ("third  quarter  1999").  Zone
heating  products  had net sales of $104.3  million in third  quarter  2000,  an
increase of 9% or $8.4 million from the third  quarter  1999.  This  increase is
primarily due to increased outdoor heating and hearth product sales volumes.

Specialty  products had net sales of $52.5 million in the third quarter 2000, an
increase of 35% or $13.7 million over third  quarter  1999,  due to an increased
market  demand  for  generators  related to the  concern  of year 2000  computer
problems.

Cost of Sales.  Cost of sales  for third  quarter  2000 of  $101.0  million,  an
increase of $13.9 million or 16% from third quarter 1999,  was  attributable  to
the  higher  net sales for the  period.  Cost of sales was 64.4% of net sales in
third quarter 2000 compared to 64.6% for third quarter 1999.

Selling,  General and Administrative  Expenses. For third quarter 2000, selling,
general and  administrative  expenses  were $31.2  million,  an increase of $6.2
million or 25% from third quarter 1999 and are primarily attributable to the net
sales   increase.   As  a  percentage  of  net  sales,   selling,   general  and
administrative expenses were 20% for third quarter 2000 compared to 19% in third
quarter 1999. The change is the result of increased customer sales program costs
and increased  shipping  costs due to start-up  inefficiencies  related to a new
distribution center for heating products.

Operating  Profit.  Operating  profit was $24.6  million for third  quarter 2000
compared to an operating  profit of $22.6  million for third  quarter  1999,  an
improvement of $2.0 million or 9%. Operating profit attributable to zone heating
products was $19.2  million for third  quarter 2000, an increase of $1.4 million
or 8% from  third  quarter  1999.  This is a result of the  increased  sales and
higher factory overhead  absorption  offset by higher shipping costs and selling
costs associated with the sales increase.  Specialty  products  operating profit
was $6.9 million for the third  quarter  2000, an increase of $.8 million or 14%
over third quarter 1999.  This increase is  attributable  to the higher level of
specialty products sales and their related contribution margins.

EBITDA. EBITDA for the third quarter 2000 was $27.5 million, an increase of $1.9
million or 8% from third quarter 1999. EBITDA is defined as income before income
taxes plus interest  expense and  depreciation as well as  amortization  expense
associated with intangibles and deferred charges. EBITDA is presented because it
is a widely accepted  financial  indicator of a leveraged  company's  ability to
service and/or incur indebtedness and because management believes that EBITDA is
a relevant  measure of the Company's  ability to generate cash without regard to
the Company's capital structure or working capital needs. However, EBITDA should
not be  considered as an  alternative  to net income as a measure of a company's
operating  results or to cash flows from  operating  activities  as a measure of
liquidity as defined by generally accepted accounting principles.

Interest Expense.  Interest expense for third quarter 2000 was $7.6 million, the
same as third quarter 1999. The  comparable  level is a result of slightly lower
levels of borrowing and offset by increased  interest rates in conjunction  with
Amendment and Waiver No. 4 made to the Credit Facility on May 25, 1999.

Income Tax. The income tax rate was 46% for third quarter 2000 and is comparable
to the third quarter 1999 rate of 45%.

Net Income.  Net income was $9.2 million for third  quarter 2000 compared to net
income of $8.2 million for third quarter 1999, an  improvement  of $1.0 million.
This improvement is attributable to higher sales volume in both zone heating and
specialty products.

                                       14

<PAGE>
Thirty-nine  Week Period Ended  November 27, 1999,  Compared to the  Thirty-nine
Week Period Ended November 28, 1998

Net sales. Net sales in the thirty-nine weeks ended November 27, 1999, ("year to
date 2000") were $317.5 million, an increase of 27% or $66.6 million compared to
the  thirty-nine  weeks ended  November  28, 1998  ("year to date  1999").  Zone
heating  products  had net  sales of $175.1  million  in year to date  2000,  an
increase of 18% or $27.1  million from the year to date 1999.  This  increase is
primarily  due to the  acquisition  of Fireplace  Manufacturers,  Inc.  ("FMI"),
increased outdoor heating and fireplace product demand.

Specialty  products  had net sales of $142.3  million in year to date  2000,  an
increase of 38% or $39.5  million  over year to date 1999,  due to an  increased
market demand for generators  related to the fear of year 2000 computer problems
partially  offset by a decrease in demand for  specialty  products due to higher
customer inventory levels.

Cost of Sales.  For year to date  2000,  cost of sales was  $210.8  million,  an
increase  of $43.8  million or 26% from year to date 1999,  attributable  to the
higher net sales for the  period.  Cost of sales was 66% of net sales in year to
date 2000  compared  to 67% for year to date 1999.  This  decrease is because of
lower  manufacturing  overhead  per  unit of zone  heating  products,  primarily
resulting from higher year to date production levels and cost reduction programs
this year compared to a year ago.

Selling,  General and Administrative  Expenses.  For year to date 2000, selling,
general and  administrative  expenses were $70.5  million,  an increase of $16.6
million or 31% from year to date 1999, and are primarily attributable to the net
sales   increase.   As  a  percentage  of  net  sales,   selling,   general  and
administrative  expenses  were 22% for year to date 2000 compared to 22% in year
to date 1999. This comparable level, as a percentage of net sales, is associated
with  proportional  increases in selling  expenses and increased  volume,  which
absorbed more of the fixed expenses in the engineering and administration areas.
The volume related  improvements are offset by  inefficiencies  encountered with
the set-up of a new distribution facility for zone heating products.

Operating  Profit.  Operating  profit  was $36.2  million  for year to date 2000
compared to $30.0 million for year to date 1999, an  improvement of $6.2 million
or 21%. Operating profit attributable to zone heating products was $22.9 million
for year to date 2000, an increase of $2.1 million from year to date 1999.  This
is a result of the increased sales and higher factory overhead absorption offset
by higher selling costs and shipping costs  associated  with the sales increase.
Specialty  products operating profit was $16.8 million for year to date 2000, an
increase  of $4.5  million  or 36% over  year to date  1999.  This  increase  is
attributable  to  increased  sales  of  specialty  products  and  their  related
contribution margins.

EBITDA.  EBITDA for year to date 2000 was $44.4  million,  an  increase  of $8.0
million  or 22% over year to date 1999 of $36.4  million.  EBITDA is  defined as
income  before income taxes plus interest  expense and  depreciation  as well as
amortization expense associated with intangibles and deferred charges. EBITDA is
presented  because it is a widely  accepted  financial  indicator of a leveraged
company's  ability to service and/or incur  indebtedness and because  management
believes that EBITDA is a relevant measure of the Company's  ability to generate
cash without regard to the Company's capital structure or working capital needs.
However,  EBITDA should not be considered as an  alternative  to net income as a
measure  of a  company's  operating  results  or to cash  flows  from  operating
activities as a measure of liquidity as defined by generally accepted accounting
principles.

Interest Expense.  Interest expense for year to date 2000 was $21.6 million,  an
increase of $.8 million or 4%  compared  to year to date 1999.  The  increase is
associated  with higher  levels of borrowing  and  increased  interest  rates in
conjunction  with Amendment and Waiver No. 4 made to the Credit  Facility on May
25, 1999.

Income Tax. The income tax rate was 46% for year to date 2000 is  comparable  to
the rate for year to date 1999 of 46%.

Net Income.  Net income was $7.8 million for year to date 2000  compared to $5.0
million  for year to date 1999,  an  improvement  of $2.8  million or 57%.  This
improvement  is  primarily  attributable  to  higher  sales  volume in both zone
heating and specialty products.

                                       15
<PAGE>
Liquidity and Capital Resources

The  Company's  primary  cash  needs  have  been for  working  capital,  capital
expenditures and debt service  requirements.  The Company's sources of liquidity
have been cash flows from operations and borrowings  under its revolving  credit
facilities.  The  Company's  business  is  subject  to  a  pattern  of  seasonal
fluctuation.  The Company's needs for working capital and the corresponding debt
levels tend to peak in the second and third fiscal quarters. The amount of sales
generated during the second and third fiscal quarters  generally  depends upon a
number of factors,  including  the level of retail  sales for  heating  products
during the prior winter and current fall weather conditions  affecting the level
of sales of heating  products,  general economic  conditions,  and other factors
beyond the Company's control.

Net  cash  used in  operating  activities  for the year to date  2000 was  $10.7
million  compared  to net cash used of $27.8  million for the year to date 1999.
This  decrease  in cash  used of  $17.1  million  reflects  the  higher  accrued
liabilities balance of $29.9 million,  compared to $10.7 million in year to date
1999, offset by a higher inventory  balance of $60.6 million,  compared to $45.3
million in year to date 1999.

Net cash used in  investing  activities  was $3.8  million  for the year to date
2000,  compared to $44.1 million for the year to date 1999. This lower cash used
for investing  activities reflects the acquisition of FMI and Universal Heating,
Inc. ("UHI") in 1999. Net cash provided by financing  activities for the year to
date 2000 was $14.1  million,  compared  to $71.7  million  for the year to date
1999. The difference reflects a decrease in the working capital loan utilization
of $14.9  million,  the prior year's  issuance of Common Stock of $12.1 million,
and bank loans associated with the acquisitions of UHI and FMI of $30.0 million.

The Credit  Facility  provides for  commitments in an aggregate  amount of up to
$215.9  million.  Borrowings  outstanding  under the Credit Facility were $181.3
million on November 27, 1999. Outstanding letters of credit and foreign currency
contracts established to facilitate  merchandise purchases were $3.3 million and
$5.1 million, respectively, on November 27, 1999. The Company had the ability to
incur  additional  indebtedness  of $31.2 million at November 27, 1999 under the
Credit  Facility.  The Company is in compliance with all its covenants under the
Credit Facility.

The  Company  expects  that  capital  expenditures  during  fiscal  2000 will be
approximately $5.5 million.  Capital expenditures are expected to be funded from
internally generated cash flows and by borrowings under the Credit Facility.

Management  believes that cash flow from operations and  availability  under the
Credit  Facility  will  provide  adequate  funds for the  Company's  foreseeable
working   capital  needs,   planned  capital   expenditures   and  debt  service
obligations.  Additionally,  the  Company  reviews  potential  acquisitions  and
relationships  from time to time and may be required to seek  additional debt to
fund any  acquisition.  The  Credit  facility  requires a  Clean-Up  Period,  as
defined,  under  the  Working  Capital  Loan  Commitment,  for  a  period  of 30
consecutive  days occurring  between  January 1 and May 30 in each calendar year
commencing  January 1,  1998.  During the  Clean-Up  Period,  the sum of Working
Capital  advances,  Letter  of Credit  advances  and  Swing  Line loan  advances
outstanding shall not exceed $30,000,000 for any Clean-Up Period. As of November
27, 1999,  approximately  $10.4 million of working capital  borrowings have been
classified as current as a result of the Clean-Up  requirement.  Such amount may
be reborrowed after compliance of the Clean-Up Period.  The Company's ability to
fund its  operations,  make planned  capital  expenditures,  make scheduled debt
payments,  make  desired  acquisitions,   finance  indebtedness  and  remain  in
compliance with all of the financial covenants under its debt agreements depends
on its future operating performance and cash flow, which in turn, are subject to
prevailing  economic  conditions  and to financial,  business and other factors,
some of which are beyond its control.

Year 2000

The Company is  currently  reviewing  its computer  and  operational  systems to
identify and  determine  the extent to which any such  systems have  experienced
potential errors and failures as a result of the "Year 2000" problem.  As of the
date of this  filing,  January 11,  2000,  the Company has not  experienced  any
significant  business  disruptions  as a result of the Year 2000 problem  either
directly  because of it's own  computer  systems or  indirectly  because of it's
suppliers or customers. However, there can be no assurance that the Company will
not be affected by Year 2000

                                       16
<PAGE>

problems  that have not yet  occurred.  The Company will continue to monitor the
issue and work to resolve any issues that may arise.

The Year 2000 problem is a result of computer  programs  being written using two
digits,  rather than four digits,  to identify  years.  The Year 2000  presented
several  potential risks to the Company (i) that the Company's  internal systems
may not have functioned  properly,  (ii) that suppliers computer systems may not
have functioned properly and,  consequently,  deliveries of required parts would
have  been  delayed,  (iii)  that  customers'  computer  systems  may  not  have
functioned  properly  and,  consequently,  orders or payments for the  Company's
products may have been  delayed,  and (iv) that the  Company's  bank's  computer
systems could have  malfunctioned,  disrupting the Company's  orderly posting of
deposits,  funds  transfers and payments.  The  occurrence of any one or more of
these events could have had a material adverse effect on the Company's financial
condition and results of operations.

                                       17
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risks relating to the Company's  operations result primarily from changes
in interest rates. The Company also has limited foreign currency risk associated
with its  Canadian,  European,  and  Hong  Kong  operations.  A  portion  of the
Company's  operations  consists of  purchasing  and sales  activities in foreign
jurisdictions.  The Company  manufactures  its  products  in the United  States,
purchases products in Europe,  China, and Japan and sells the products primarily
in the United States,  Canada, and Europe. As a result, the Company's  financial
results  could be  affected  by factors  such as  changes  in  foreign  currency
exchange rates or weak economic  conditions in the foreign  markets in which the
Company  operates.  The Company employs  established  policies and procedures to
manage its  exposure  to  fluctuations  in  interest  rates and the value of the
foreign  currencies.  Interest rate and foreign  currency  transactions are used
only to the extent considered  necessary to meet the Company's  objectives.  The
Company does not utilize derivative  financial  instruments for trading or other
speculative purposes.  There have been no material changes in the market risk to
which the Company is exposed  since the end of the  Company's  preceding  fiscal
year.

Interest Rate Risk

The Company's interest rate risk management  objective is to limit the impact of
interest  rate  changes on its  earnings  and cash flow and to lower its overall
borrowing cost. To achieve its objectives,  the Company regularly  evaluates the
amount of its variable  rate debt as a percentage  of its  aggregate  debt.  The
Company manages its exposure to interest rate  fluctuations in its variable rate
debt through interest rate swap agreements. These agreements effectively convert
interest rate exposure  from variable  rates to fixed rates of interest  without
the exchange of the underlying  principal  amounts.  In fiscal 1999, the Company
entered  into  interest  rate swap  agreements  with  Nations Bank to manage its
exposure  to interest  rate  fluctuations.  The  interest  rate swap  agreements
provide for  payment by the  Company of fixed  rates of interest  based on three
month LIBOR (4.75% at November 27, 1999).  Notional  principal  amounts of these
agreements total $125 million,  of which $75 million terminated in November 1999
and $50 million terminates in August 2001. The agreements  terminating in August
2001 may be  canceled  at the  option of  Nations  Bank in  February  2000.  The
notional  amounts are used to measure the interest to be paid or received and do
not represent the amount of exposure to credit loss. Net proceeds to the Company
of $420,193 were  recorded as  adjustments  to interest  expense in year to date
2000.

The following  table  summarizes the carrying  amounts and estimated fair values
the Company's remaining financial  instruments at February 27, 1999 and February
28, 1998 (bracketed amount represents an asset):

                                   November 27, 1999       February 27, 1999
                                 Carrying   Fair Value   Carrying   Fair Value
                                  Amount                  Amount
                                                (in thousands)
Bank debt                       $ 181,294   $ 181,294    $ 166,307   $ 166,307
Senior subordinated notes         130,000      91,000      130,000     102,700
Note payable                        2,016       2,016        2,138       2,138
Interest rate swap agreements          --        (319)          --        (438)

Based on the average  outstanding  amount of variable rate  indebtedness  of the
Company in FY 2000 a one  percentage  point change in the interest rates for the
Company's variable rate debt would have impacted the Company's year to date 2000
interest  expense by an aggregate of  approximately  $1.4 million,  after giving
effect to the Company's interest rate swap agreements.

Foreign Currency Exchange Rate Risk

The Company does not conduct a significant portion of its manufacturing or sales
activity in foreign markets.  The Company's  reported financial results could be
affected, however, by factors such as changes in foreign currency exchange rates
in the markets where it operates.  When the U.S. dollar strengthens against such
foreign  currencies,  the reported U.S. dollar value of local currency operating
profits generally  decreases;  when the U.S. dollar weakens against such foreign
currencies,  the reported U.S. dollar value of local currency  operating profits
generally increases.  The Company utilizes foreign exchange forward contracts to
mitigate the  short-term  effect of movements in currency  exchange rates on the
Company's  foreign  currency based inventory  purchases.  The Company  regularly
hedges by entering into foreign exchange forward contracts, approximately 85% to
95% of its budgeted (future) net

                                       18
<PAGE>

foreign currency purchase  transactions  over a period of 4 quarters.  Gains and
losses  related to  qualifying  hedges of foreign  currency  risk  exposure  are
recorded when the related  inventory is purchased.  Because the Company does not
have  significant  foreign  operations,  the  Company  does  not  believe  it is
necessary to enter into any other derivative financial instruments to reduce its
exposure to foreign currency exchange rate risk.

                                       19
<PAGE>

PART II           Other Information


Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  10       Employment  agreement,  dated as of November 10, 1999
                           between the Company and W. Michael Clevy

                  27       Financial Data Schedule

         (b)      Reports on Form 8-K

The Company filed a report on Form 8-K dated November 15, 1999  reporting  under
item 5 the resignation of its Chief Executive Officer and President and election
of a replacement  therefore.  On the same report,  the Company also reported the
resignation of its Chief Operating Officer and the election of a Chief Financial
Officer.  The Company  filed no other  reports on Form 8-K during the period for
which this report is made.

                                       20
<PAGE>


SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                           DESA HOLDINGS CORPORATION

                           By:

Dated:  January 11, 2000   /s/ Stephen L. Clanton
                           Stephen L. Clanton
                           Chief Financial Officer
                           (Principal Financial Officer)

Dated:  January 11, 2000   /s/ Edward G. Patrick
                           Edward G. Patrick
                           Vice President of Finance and Treasurer

Dated:  January 11, 2000   /s/ Scott M. Nehm
                           Scott M. Nehm
                           Vice President and Controller
                           (Chief Accounting Officer)

                                       21