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 fourteen week period ended June 3, 2000

                                       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                                  61-1251518
  (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 June 30, 2000, there were 16,333,070 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
                                  June 3, 2000

                                      INDEX


                                                                                            Page
<S>            <C>                                                                          <C>

PART I          Financial Information


Item 1.           Consolidated Financial Statements (Unaudited)
                  Consolidated Balance Sheets - June 3, 2000 and February 26, 2000             3
                  Consolidated Statements of Operations - Fourteen Weeks ended
                           June 3, 2000 and Thirteen Weeks ended May 29, 1999                  4
                  Consolidated Statements of Stockholders' Equity (Deficit) -
                           Fourteen Weeks ended June 3, 2000                                   5
                  Consolidated  Statements  of Cash  Flows  -  Fourteen  Weeks  ended
                           June  3,  2000  and  Thirteen Weeks ended May 29, 1999              6
                  Notes to Consolidated Financial Statements                                   7

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

Item 3.           Quantitative and Qualitative Disclosures About Market Risk                  14

PART II           Other Information                                                           16

Item 2.           Changes in Securities and Use of Proceeds                                   16

Item 6.           Exhibits and Reports on Form 8-K                                            16

                  Signatures                                                                  17
</TABLE>

                                                       2
<PAGE>
<TABLE>
<CAPTION>
                                           DESA HOLDINGS CORPORATION
                                          CONSOLIDATED BALANCE SHEETS
                                                                                 June 3,         February 26,
                                                                                   2000             2000
                                                                              ---------------   --------------
                                                                              (in thousands)    (in thousands)
                                                                               (Unaudited)
<S>                                                                           <C>                <C>
ASSETS
------
Current assets:
     Cash and cash equivalents                                                 $     854          $     173
     Accounts receivable, net                                                     44,782             32,921
     Inventories:
        Raw materials                                                                681                209
        Work-in-process                                                           13,175              9,756
        Finished goods                                                            69,615             50,192
                                                                               ---------          ---------
                                                                                  83,471             60,157
     Deferred tax assets                                                           1,743              1,743
     Other current assets                                                          2,961              2,003
                                                                               ---------          ---------
Total current assets                                                             133,811             96,997

Property, plant and equipment:
     Land                                                                            526                525
     Buildings and improvements                                                    6,397              6,294
     Machinery and equipment                                                      40,692             39,361
     Furniture and fixtures                                                        1,090              1,090
                                                                               ---------          ---------
                                                                                  48,705             47,270
     Less accumulated depreciation                                                31,560             30,574
                                                                               ---------          ---------
                                                                                  17,145             16,696

Goodwill, net                                                                     94,284             93,818
Other assets                                                                      21,310             22,266
                                                                               ---------          ---------
Total assets                                                                   $ 266,550          $ 229,777
                                                                               =========          =========
Liabilities and stockholders' equity (deficit)
Current liabilities:
     Accounts payable                                                          $  46,421          $  37,040
     Accrued interest                                                              7,026              5,233
     Other accrued liabilities                                                     8,037             13,225
     Current portion of long-term debt                                            52,303             23,500
                                                                               ---------          ---------
Total current liabilities                                                        113,787             78,998

Long-term debt                                                                   267,950            265,846
Other liabilities                                                                 15,881             15,629
                                                                               ---------          ---------
Total liabilities                                                                397,618            360,473

Commitments and contingencies

Series C redeemable preferred stock, $.01 par value; authorized--
     40,000 shares; issued and outstanding--22,461 shares at June 3,
     2000 and at February 26, 2000 (liquidation preference - $23,606,000
     at June 3, 2000 and $22,882,000 at February 26, 2000)                        20,002             19,937

Stockholders' equity (deficit):
     Common stock, $.01 par value; authorized--50,000,000 shares; issued and
     outstanding-- 16,333,070 shares at June 3, 2000 and 15,562,656 shares
     at February 26, 2000                                                            164                155

     Nonvoting  common stock,  $.01 par value;  authorized--3,000,000
     shares; issued and outstanding--90,604 shares at June 3, 2000
     and February 26, 2000                                                             1                  1

     Capital in excess of par value                                              103,074             98,075
     Carryover predecessor basis adjustment                                      (32,309)           (32,309)
     Accumulated deficit                                                        (219,809)          (214,518)
     Accumulated other comprehensive loss                                         (2,191)            (2,037)
                                                                               ---------          ---------
Total stockholders' equity (deficit)                                            (151,070)          (150,633)
                                                                               ---------          ---------
Total liabilities and stockholders' equity (deficit)                           $ 266,550          $ 229,777
                                                                               =========          =========
</TABLE>
See accompanying notes
                                                       3
<PAGE>
                            DESA HOLDINGS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (in thousands)

                                   (Unaudited)




                                               Fourteen Weeks     Thirteen Weeks
                                                   Ended              Ended
                                                June 3, 2000       May 29, 1999
                                               --------------    ---------------

Net sales                                         $ 70,619           $ 62,793
Cost of sales                                       49,627             44,451
                                                  --------           --------
Gross profit                                        20,992             18,342

Operating costs and expenses:
     Selling                                        15,142             12,635
     General and administrative                      4,416              3,602
     Other                                           1,734              1,524
                                                  --------           --------
                                                    21,292             17,761
                                                  --------           --------

Operating (loss) profit                               (300)               581

Interest expense                                     8,192              6,628
                                                  --------           --------
Loss before benefit for income taxes                (8,492)            (6,047)

Benefit for income taxes                            (3,990)            (2,659)
                                                  --------           --------

Net loss                                            (4,502)            (3,388)

Plus dividends and accretion on preferred stock        789                663
                                                  --------           --------
Loss applicable to common stockholders            $ (5,291)          $ (4,051)
                                                  ========           ========


See accompanying notes

                                       4
<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 26, 2000               $155           $1      $98,075      ($32,309)        ($214,518)         ($2,037)       ($150,633)

Comprehensive loss:

  Net Loss                                                                              (4,502)                           (4,502)

  Net change in
     foreign currency
     translation adjustment                                                                                (154)            (154)
                                                                                                                       ----------

Comprehensive loss                                                                                                        (4,656)
                                                                                                                       ----------

Accretion of preferred stock                                                               (65)                              (65)

Dividends on preferred stock                                                              (724)                             (724)

Issuance of common stock           9                     4,999                                                             5,008


                             ----------------------------------------------------------------------------------        ----------
Balance at
June 3, 2000                    $164           $1     $103,074      ($32,309)        ($219,809)         ($2,191)       ($151,070)

                             ==================================================================================        ==========

</TABLE>

See accompanying notes

                                                                 5
<PAGE>
<TABLE>
<CAPTION>
                                           DESA HOLDINGS CORPORATION
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 (in thousands)

                                                  (Unaudited)



                                                                            Fourteen Weeks     Thirteen Weeks
                                                                                Ended               Ended
                                                                             June 3, 2000       May 29, 1999
                                                                           ----------------    ---------------
<S>                                                                          <C>                <C>

Cash flows from operating activities
Net loss                                                                      $ (4,502)          $ (3,388)

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

     Depreciation                                                                  986                959
     Amortization                                                                1,590              1,481
     Equity in undistributed earnings of joint venture                             (51)               (39)
     Change in operating assets and liabilities, net of
               effects of acquisition:
        Accounts receivable, net                                                (6,250)            (3,826)
        Inventories                                                            (17,280)           (16,110)
        Other current assets                                                      (825)                26
        Accounts payable                                                         7,136             12,754
        Accrued interest                                                         1,794              3,273
        Other accrued liabilities                                               (2,084)            (1,155)
        Income taxes payable                                                    (4,452)            (3,251)
        Other liabilities                                                          169                (49)
                                                                              --------           --------
Net cash used in operating activities                                          (23,769)            (9,325)
                                                                              --------           --------


Investing activities
Capital expenditures                                                              (438)            (1,604)
Dividends received from joint venture                                               65                 52
Net cash paid for acquisition of businesses                                    (11,090)                --
Other                                                                               (1)              (224)
                                                                              --------           --------
Net cash used in investing activities                                          (11,464)            (1,776)
                                                                              --------           --------


Financing activities

Increase in working capital loan                                                32,742             13,516
Decrease in note payable                                                        (1,842)                --
Principal payments of term loans                                                (2,868)            (1,875)
Principal payments of acquisition loans                                         (3,125)                --
Proceeds from acquisition loans                                                  6,000                 --
Issuance of common stock                                                         5,007                 25
Payment of debt financing costs                                                     --               (688)
                                                                              --------           --------
Net cash provided by financing activities                                       35,914             10,978

Effect of exchange rates on cash                                                    --                 (2)
                                                                              --------           --------
Decrease in cash and cash equivalents for the period                               681               (125)

Cash and cash equivalents at beginning of period                                   173                888
                                                                              --------           --------
Cash and cash equivalents at end of period                                    $    854           $    763
                                                                              ========           ========

</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  fourteen  week period
ending  June 3, 2000 and  thirteen  week period  ending May 29,  1999  presented
herein have not been audited by independent public  accountants.  In the opinion
of management of DESA Holdings Corporation (with its consolidated  subsidiaries,
"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.  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 the
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  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  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  26, 2000,  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 is the issuer of the 9 7/8% Senior  Subordinated Notes. The Company has not
presented  separate financial  statements and other disclosures  concerning DESA
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 as of June 3, 2000 and February 26,  2000,  and for the fourteen  weeks
ended June 3, 2000 and thirteen weeks ended May 29, 1999.

Summarized consolidated balance sheet information (in thousands):

                                           June 3,             February 26,
                                            2000                   2000
                                        -------------         -------------
Assets:
Current assets                           $ 239,220              $ 205,265
Net fixed assets                            17,145                 16,696
Goodwill, net                               93,187                 92,713
Other assets                                21,310                 22,266
                                         ---------              ---------
                                         $ 370,862              $ 336,940
                                         =========              =========

Liabilities and stockholders' deficit:
Current liabilities                      $ 112,607              $  78,554
Long-term debt                             137,950                134,004
9 7/8% Senior Subordinated Notes           130,000                130,000
Other liabilities                           16,187                 15,629
Stockholders' deficit                      (25,882)               (21,247)
                                         ---------              ---------
                                         $ 370,862              $ 336,940
                                         =========              =========

Summarized consolidated statements of operations information (in thousands):


                                           June 3,              May 29,
                                             2000                 1999
                                       (Fourteen Weeks)     (Thirteen Weeks)
                                       --------------------------------------
Net Sales                                   70,619               62,793
Loss before benefit for income taxes       (8,492)              (5,999)
Loss applicable to common stockholders     (5,291)              (4,358)



                                       8

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


3. Financing Arrangements

Outstanding borrowings consist of the following (in thousands):
<TABLE>
<CAPTION>

                                                             June 3,     February 26,
                                                              2000           2000
                                                          ---------------------------
<S>                                                       <C>            <C>

9 7/8% Senior Subordinated Notes due 2007 (A)              $130,000       $130,000
Bank of America and various banks Term A Loan (B)            35,000         37,500
Bank of America and various banks Term B Loan (C)            47,423         47,750
Bank of America and various banks Term C Loan (D)             5,959             --
Bank of America and various banks Working Capital Loan
      Commitment (E)                                         58,121         25,379
Bank of America and various banks Acquisition Loan (F)       17,500         18,750
Bank of America and various banks Acquisition B Loan (G)     26,250         28,125
Note payable related to acquisition of Heath (H)                 --          1,842
                                                           --------       --------
Total outstanding borrowings                                320,253        289,346
Less current portion of long-term debt                       52,303         23,500
                                                           --------       --------
Total long-term debt                                       $267,950       $265,846
                                                           ========       ========
<FN>
(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 DESA.  Interest  is payable on a  quarterly
         basis under the prime rate  option or at the end of each LIBOR  period.
         The weighted  average interest rate was 9.38% in first quarter 2001 and
         8.03% in fiscal  year  2000.  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 DESA.  Interest  is payable on a  quarterly
         basis under the prime rate  option or at the end of each LIBOR  period.
         The weighted  average interest rate was 9.38% in first quarter 2001 and
         8.52% in fiscal  year  2000.  Once  repaid,  the Term B Loan may not be
         reborrowed.

(D)      The Term C Loan is payable in quarterly  installments  and commenced in
         May 2000 and extends through November 26, 2003, and accrues interest at
         the prime  rate plus  2.25% or LIBOR  plus 3.25% at the option of DESA.
         Interest is payable on a quarterly basis under the prime rate option or
         at the end of each LIBOR period. The weighted average interest rate was
         9.52% in first  quarter 2001.  Once repaid,  the Term C Loan may not be
         reborrowed.

(E)      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 DESA.
         The weighted  average interest rate was 9.88% in first quarter 2001 and
         8.60% in fiscal year 2000.  Interest  is payable on a  quarterly  basis
         under the prime rate  option or at the end of each LIBOR  period.  DESA
         can utilize letters of credit under the Working Capital Loan

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

         Commitment up to $10 million. As of June 3, 2000 and February 26, 2000,
         letters of credit of $9.2  million and $1.5  million  were  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.

(F)      The Acquisition Loan is payable in quarterly installments and commenced
         in February  2000 and extends  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 DESA. The weighted  average  interest
         rate was 9.50% in first  quarter  2001 and 8.22% in fiscal  year  2000.
         Once repaid, the Acquisition Loan may not be reborrowed.

(G)      The  Acquisition  B Loan  is  payable  in  quarterly  installments  and
         commenced in February  2000 and extends  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 DESA.  The weighted  average
         interest  rate was 9.44% in first quarter 2001 and 8.05% in fiscal year
         2000. Once repaid, the Acquisition B Loan may not be reborrowed.

(H)      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.  DESA 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  March  2000,  the  loan was  fully  satisfied  through
         reductions  of principal  for certain  payments made under the terms of
         the note.
</FN>
</TABLE>

In accordance with the terms of the Credit Facility,  the ability of the Company
to incur additional  indebtedness is limited,  as defined.  At June 3, 2000, the
Company can incur additional indebtedness of $7.7 million.

4. Comprehensive Loss

Comprehensive loss consisted of the following (in thousands):

                                      June 3,           May 29,
                                        2000              1999
                                     (Fourteen         (Thirteen
                                       Weeks)            Weeks)
                                    ----------------------------
Net loss                             $(4,502)          $(3,388)
Net change in foreign currency
      translation adjustment            (154)             (218)
                                     -------           -------
                                     -------           -------
Comprehensive loss                   $(4,656)          $(3,606)
                                     =======           =======

As of June 3, 2000 and May 29,  1999 the  cumulative  other  comprehensive  loss
consisted solely of the Company's foreign currency translation adjustment.

5. Segment Information

In March 2000, the Company  reorganized into three  divisions.  Each division is
comprised of dedicated  operational resources required to support their specific
product and  geographic  categories,  and shared  administrative  resources  for
certain corporate functions. The divisions are: (a) zone heating division, which
includes  indoor room heaters,  hearth  products and outdoor heaters sold in the
United States, (b) specialty  products division,  which includes specialty tools
and home  security  products  sold in the United States and

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


all products sold in Canada and (c) international division,  which includes zone
heating  and  specialty  products  sold in all  geographic  areas other than the
United States and Canada.  Zone heating division and specialty products division
are reportable segments.

Identifiable assets are those assets of the Company that are identified with the
operations in each segment.  Prior amounts have been  reclassified to conform to
the current year's presentation.  Operating results and other financial data for
the business  segments  for the periods  ended June 3, 2000 and May 29, 1999 are
presented below (in thousands):
<TABLE>
<CAPTION>

                                                      Specialty
                                      Zone Heating    Products
                                        Division      Division       Other         Total
                                      ----------------------------------------------------
<S>                                 <C>             <C>            <C>         <C>

Fourteen weeks ended June 3, 2000:
Net sales                            $  23,869       $  46,034      $     716    $  70,619
Operating profit (loss)                 (3,752)          4,312           (860)        (300)
Depreciation and amortization            1,750             770             56        2,576
Identifiable assets                    136,228         122,592          7,730      266,550
Capital expenditures                       364              74              0          438

Thirteen weeks ended May 29, 1999:
Net sales                               20,406          41,580            807       62,793
Operating profit (loss)                 (4,161)          5,454           (712)         581
Depreciation and amortization            1,764             624             52        2,440
Identifiable assets                    116,365         101,642          4,977      222,984
Capital expenditures                       850             754              0        1,604

</TABLE>

6. Acquisition

On April 3, 2000, DESA acquired the assets of Trine Products  Company  ("Trine")
located in Bronx, New York for  consideration  of  approximately  $11.1 million,
subject  to an  adjustment  for the  final  determination  of  acquired  working
capital. The Company financed the acquisition through borrowings of $6.0 million
and the issuance of common stock for $5.0  million.  The Company  accounted  for
such acquisition using the purchase method.

                                       11
<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 and the
seasonality of the Company's  business.  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 fourteen week period ended June 3, 2000 and the thirteen week
period ended May 29, 1999,  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 26, 2000,  included in the Company's
Annual Report on Form 10-K.

Overview

In March 2000, the Company  reorganized into three  divisions.  Each division is
comprised of dedicated  operational resources required to support their specific
product and  geographic  categories,  and shared  administrative  resources  for
certain corporate functions. The divisions are: (a) zone heating division, which
includes  indoor room heaters,  hearth  products and outdoor heaters sold in the
United States, (b) specialty  products division,  which includes specialty tools
and home  security  products  sold in the United States and all products sold in
Canada and (c) international division, which includes zone heating and specialty
products sold in all  geographic  areas other than the United States and Canada.
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 the
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.

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.

On April 3, 2000, DESA acquired the assets of Trine Products  Company  ("Trine")
located in Bronx, New York for  consideration  of  approximately  $11.1 million,
subject  to an  adjustment  for the  final  determination  of  acquired  working
capital. The Company financed the acquisition through borrowings of $6.0 million
and the  issuance of common  stock for $5.0  million.  Trine's  annual sales for
their most recent year-end (June 30, 1999) were approximately $25 million. Trine
produces a complete line of door chimes,  and  accessories  for  residential and
commercial  applications.  Trine products are sold through mass merchants,  home
centers, retail chains and hardware cooperatives.

                                       12
<PAGE>


Results of Operations

Fourteen  Week Period Ended June 3, 2000,  Compared to the Thirteen  Week Period
Ended May 29, 1999

Net sales.  Net sales in the fourteen  weeks ended June 3, 2000 ("first  quarter
2001") were $70.6 million,  an increase of 12.5% or $7.8 million compared to the
thirteen weeks ended May 29, 1999 ("first quarter 2000").  Zone heating division
had net sales of $23.9  million in first  quarter  2001, an increase of 17.0% or
$3.5 million from the first  quarter  2000.  This  increase is primarily  due to
increased  indoor heating and hearth product sales volumes.  Specialty  products
division had net sales of $46.0  million in the first  quarter 2001, an increase
of 10.7% or $4.5 million  over first  quarter  2000,  due to an increase in home
security  product sales and the  acquisition of Trine,  offset by a reduction in
generator sales.

Cost of Sales.  Cost of sales  for first  quarter  2001 was  $49.6  million,  an
increase of $5.2  million or 11.6% from first  quarter  2000.  The  increase was
attributable to the higher unit sales for the period. Cost of sales was 70.3% of
net sales in first quarter 2001 compared to 70.8% for first quarter 2000.

Selling,  General and Administrative  Expenses. For first quarter 2001, selling,
general and  administrative  expenses  were $21.3  million,  an increase of $3.5
million or 19.9% from first quarter 2000. The proportional increase is primarily
attributable  to selling  costs  associated  with the net sales  increase.  As a
percentage of net sales, selling, general and administrative expenses were 30.2%
for first quarter 2001 compared to 28.3% in first quarter 2000.  The increase as
a percent of sales is primarily the result of the timing of sales related costs,
a change in the product and customer mix related to sales program costs compared
to first quarter 2000, and higher administrative costs compared to first quarter
2000.

Operating  Profit.  The  operating  loss was $.3 million for first  quarter 2001
compared  to an  operating  profit of $.6  million  for first  quarter  2000,  a
decrease of $.9 million.  Operating loss  attributable to zone heating  products
was $3.8 million for first quarter 2001, a reduction of $.4 million or 9.8% from
first quarter 2000. The reduction is primarily the result of increased sales and
favorable  changes in sales mix.  Specialty  products  operating profit was $4.3
million for the first quarter 2001, a decrease of $1.1 million or 21% from first
quarter  2000.  This decrease is primarily  attributable  to  incremental  costs
related to the inclusion of Trine and increased sales program costs.

EBITDA.  EBITDA for the first quarter 2001 was $2.3  million,  a decrease of $.7
million or 24.6% from first  quarter  2000.  EBITDA is defined as income  (loss)
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 first quarter 2001 was $8.2 million,  an
increase of $1.6  million  from first  quarter  2000.  The increase is primarily
attributable  to market  interest  rate  increases  and higher levels of working
capital borrowing in support of increased sales.

Income Tax. The income tax rate was 47% for first  quarter  2001, an increase of
3% compared to the first quarter 2000 rate of 44%. The increase is primarily due
to an increase in non-deductible goodwill during fiscal year 2001.

Net Loss. The net loss was $4.5 million for first quarter 2001 compared to a net
loss of $3.4 million for first quarter  2000,  an increase of $1.1 million.  The
increase is primarily attributable to higher selling, general and administrative
expenses and interest, offset by increased sales volumes and related margins.

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

                                       13
<PAGE>
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,  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 first quarter 2001 was $23.8 million
compared to net cash used of $9.4 million for first quarter 2000. This increased
use of cash in  first  quarter  2001  was  primarily  due to  higher  sales  and
production in first quarter 2001 that resulted in increased accounts  receivable
and inventory, offset by higher accounts payable.

Net cash used in investing  activities was $11.5 million for first quarter 2001,
compared to $1.8 million in first  quarter  2000.  The use of cash for investing
activities  reflects  the  acquisition  of Trine  for  $11.1  million.  Net cash
provided  by  financing  activities  in first  quarter  2001 was $35.9  million,
compared to $11.0  million for first  quarter  2000.  Cash provided by financing
activities reflects the proceeds of a term loan and sale of common stock related
to the Trine acquisition, and an increase in the working capital loan associated
with the net increase in working capital.

The Credit  Facility  provides for  commitments in an aggregate  amount of up to
$207.2  million.  Borrowings  outstanding  under the Credit Facility were $190.3
million on June 3, 2000.  Outstanding  letters  of credit and  foreign  currency
contracts established to facilitate  merchandise purchases were $9.2 million and
$4.5  million,  respectively,  on June 3, 2000.  The  Company had the ability to
incur  additional  indebtedness of $7.7 million at June 3, 2000 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  2001 will be
approximately $5.0 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,  availability  under the
Credit Facility and the J.W. Childs  guaranteed  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 June 3,
2000,  approximately  $28.1  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 with the Clean-Up Period.  The Company's  ability
to fund its operations,  make planned capital expenditures,  make scheduled debt
payments,  make  desired  acquisitions,  refinance  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.

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 and
Hong Kong, 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.

                                       14
<PAGE>
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  periodic  review of the cost of interest rate swap  agreements and
interest rate cap  agreements  relative to the perceived  interest rate risk. At
June 3, 2000,  the Company did not have an interest  rate swap or interest  rate
cap agreement in place.

The following  table  summarizes the carrying  amounts and estimated fair values
the Company's remaining  financial  instruments at June 3, 2000 and February 26,
2000 (bracketed amount represents an asset):
<TABLE>
<CAPTION>

                                               June 3, 2000                     February 26, 2000
                                       Carrying          Fair Value        Carrying         Fair Value
                                        Amount                              Amount
                                     ------------------------------------------------------------------
                                                                 (in thousands)
<S>                                   <C>                <C>               <C>               <C>
Bank debt                              $190,253           $190,253          $157,504          $157,504
Senior subordinated notes               130,000            100,750           130,000            96,850
Note payable                                 --                 --             1,842             1,842
Foreign exchange contracts                   --                603                --               473
</TABLE>

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  fiscal 2000
interest expense by an aggregate of approximately $1.9 million.

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 foreign currency  purchase  transactions over a
period of four  quarters.  Gains and  losses  related  to  qualifying  hedges of
foreign  currency  risk  exposures  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.

                                       15
<PAGE>


PART II           Other Information


Item 2.  Changes in Securities and Use of Proceeds

On March 19, 2000,  options  representing 1,183 common shares were exercised and
shares were issued to employees at an aggregate  sale price of $7,700.  On April
7, 2000,  769,231 shares were issued to certain employees and shareholders at an
aggregate  sale price of $5,000,000.  These shares are exempt from  registration
under Section 4(2) of the Securities Act.



Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  27       Financial Data Schedule

         (b)      Reports on Form 8-K

The Company filed no reports on Form 8-K during the period for which this report
is made.


                                       16
<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: July 13, 2000           /s/ Stephen L. Clanton
                               Stephen L. Clanton
                               Chief Financial Officer
                               (Principal Financial Officer and
                                   Chief Accounting Officer)

                                       17