QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS
                 SUBJECT TO THE 1934 ACT REPORTING REQUIREMENTS

                                   FORM 10-QSB

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                  For the quarterly period ended June 30, 1998

                                       OR

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

                       Commission File Number: 001-14005

                            FRISBY TECHNOLOGIES, INC.
             (Exact Name of Registrant as Specified in its Charter)

            Delaware                                    62-1411534
  (State or other Jurisdiction of                   (I.R.S. Employer
  Incorporation or Organization)                 Identification Number)

                               77 East Main Street
                                   Suite 2000
                            Bay Shore, New York 11706
              (Address of Principal Executive Offices and Zip Code)
                                 (516) 969-8570
              (Registrant's telephone number, including area code)



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

                     Yes       X               No  ________

     Number of shares  outstanding of the issuer's Common Stock, par value $.001
per share, as of July 31, 1998: 5,120,613 shares.



<PAGE>


                            FRISBY TECHNOLOGIES, INC.


                                      INDEX

<TABLE>
<CAPTION>

                                                                                                 PAGE NO.
<S>                                                                                             <C>    

Part I            Financial Information                                                                4

Item 1.           Financial Statements                                                                 4

                  Balance Sheets - June 30, 1998 (unaudited) and
                  December 31, 1997                                                                    4

                  Statements of Operations - Three and Six
                  Month Periods Ended June 30, 1998 (unaudited)
                  and June 30, 1997(unaudited)                                                         5

                  Statement of Stockholders' Equity - Six Month Period
                  Ended June 30, 1998 (unaudited)                                                      6

                  Statements of Cash Flows - Six Month Period Ended
                  June 30, 1998 (unaudited) and June 30, 1997 (unaudited)                              7

                  Notes to Financial Statements - June 30, 1998 (unaudited)                            8

Item 2.           Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                                           10

Part II           Other Information                                                                   14

                  Signatures                                                                          15


</TABLE>

<PAGE>


                         PART I - FINANCIAL INFORMATION
                          Item 1. Financial Statements

                            Frisby Technologies, Inc.
                                 Balance Sheets
<TABLE>
<CAPTION>


                                                                                   June 30, 1998             December 31, 1997
                                                                                   -------------             -----------------
                                                                                    (unaudited)
<S>                                                                              <C>                           <C>

Assets
Current assets:
Cash and cash equivalents                                                       $     2,875,306               $       375,222
Short-term investments                                                                8,753,702                          -
Accounts receivable - billed                                                            467,963                       358,452
Accounts receivable - unbilled                                                          150,137                        52,150
Inventory                                                                               529,604                       247,686
Recoverable and prepaid income taxes                                                     26,902                        26,902
Other current assets                                                                    395,619                         7,192
                                                                                     ----------                    ----------
Total current assets                                                                 13,199,233                     1,067,604
Property and equipment, net                                                              71,963                        61,323
Other non-current assets
                                                                                         76,811                       138,908
                                                                                     ----------                    ----------
Total assets                                                                     $   13,348,007               $     1,267,835
                                                                                 ==============               ===============

Liabilities and stockholders' equity Current liabilities:
Accounts payable                                                                $       671,511               $       353,427
Accrued expenses and other current liabilities                                          232,791                        63,143
License fees payable                                                                     50,930                       184,640
Deferred license revenues                                                                54,569                        50,000
                                                                                     ----------                    ----------
Total current liabilities                                                             1,009,801                       651,210
Accrued license agreement costs                                                         101,250                       101,250
Deferred license revenues                                                                36,867                        40,000
                                                                                     ----------                    ----------
Total liabilities                                                                     1,147,918                       792,460
Commitments
Stockholders' equity:
Preferred Stock, 1,000,000 shares authorized; shares issued and                       2,479,000                           -
      outstanding: 587,500 in 1998 and none in 1997
Common Stock, $.001 par value; 10,000,000 shares authorized;                              5,121                         3,281
     5,120,613 and 3,280,613 shares issued and outstanding in
     1998 and 1997
Additional paid-in capital                                                           12,185,327                     1,540,575
Deferred compensation                                                                 (190,000)                           -
Accumulated deficit                                                                 (2,279,359)                   (1,068,481)
                                                                                    -----------                   -----------
Total stockholders' equity                                                           12,200,089                       475,375
                                                                                    -----------                   -----------
Total liabilities and stockholders' equity                                       $   13,348,007                $    1,267,835
                                                                                 ==============                ==============

</TABLE>

     See accompanying notes.


<PAGE>


                                             Frisby Technologies, Inc.
                                             Statements of Operations
                                                    (Unaudited)

<TABLE>
<CAPTION>

                                                   Three month period ended                   Six month period ended
                                                           June 30,                                  June 30,
                                            ---------------------------------------- -- ------------------------------------
                                                   1998                  1997                 1998                1997
                                            -------------------    -----------------    -----------------    ---------------
<S>                                            <C>                    <C>                      <C>                <C>   


Revenues:
Product sales                                 $        546,765         $    205,636         $    818,140        $  220,462
Research and development projects                       79,421               92,719              128,692           231,332
Licenses and royalties                                  48,050               37,000               74,668            46,000
                                                --------------          -----------         ------------         ----------
Total revenues                                         674,236              335,355            1,021,500           497,794
                                                --------------          -----------         ------------         ----------

Cost of sales:
Product sales                                          530,886              174,566              752,699           241,447
Research and development projects                       64,203               45,967               98,981           135,400
Licenses and  royalties                                  5,541               17,750                7,304            28,100
                                                --------------         ------------         ------------         ----------
Total cost of sales                                    600,630              238,283              858,984           404,947
                                                --------------         ------------         ------------         ----------
Gross profit                                            73,606               97,072              162,516            92,847
Selling and marketing expense                          224,719               92,327              444,867           152,168
General and administrative expense                     641,553              260,141            1,042,546           430,686 
                                                --------------         ------------         ------------         ----------
Loss from operations                                 (792,666)            (255,396)          (1,324,897)          (490,007)
Interest income (expense)                              111,135              (8,790)              114,019           (14,041)
                                                --------------         ------------         ------------         ----------
Loss before income taxes                             (681,531)            (264,186)          (1,210,878)          (504,048)
Income tax provision                                -                     -                    -                    44,792
                                                --------------        -------------         ------------         ----------
Net loss                                        $    (681,531)        $   (264,186)         $(1,210,878)        $ (548,840)
                                                ==============        =============         ============        ===========
Net loss per common share - basic and           $        (.14)        $       (.09)         $     (0.30)        $    (0.19)
    diluted                                     ==============        =============         ============        ===========

 
</TABLE>



                                              See accompanying notes.


<PAGE>


                            Frisby Technologies, Inc.
                        Statement of Stockholders' Equity
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                               Additional      Deferred
                         Preferred Stock                  Common Stock         Paid-In      Compensation    Accumulated
                     Shares           Amount         Shares         Amount     Capital         Expense       Deficit        Total
<S>                  <C>            <C>           <C>             <C>          <C>             <C>          <C>          <C>    

Balance at            --              --           3,280,613       $ 3,281     $1,540,575         --        $(1,068,481)  $  475,375
December 31, 1997

Exercise of         587,500         $2,479,000         --             --             --           --            --         2,479,000
preferred stock
option, net of
related costs

Initial public        --             --            1,840,000         1,840     10,394,752         --            --        10,396,592
offering, net               
of related 
costs

Issuance              --             --                --             --          250,000     $(250,000)        --              --
of options
and warrants
to consultants

Amortization          --             --                --             --             --          60,000         --           60,000
of deferred
compensation


Net loss              --             --                --             --             --           --       (1,210,878)   (1,210,878)
                  ---------      ---------         ---------       ---------     --------  ------------    -----------    ---------
Balance
at June 30,
1998               587,500      $ 2,479,000     5,120,613       $   5,121     $ 12,185,327  $ (190,000)   $(2,279,359) $ 12,200,089
                 ==========     ===========     =========      ===========    ============ ============   ===========    ===========

</TABLE>

     See accompanying notes.



<PAGE>


                            Frisby Technologies, Inc.
                            Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                     Six month period ended
                                                                                            June 30,
                                                                           -------------------------------------------
                                                                                  1998                        1997
                                                                                  ----                        ----
<S>                                                                             <C>                          <C> 
Operating activities
Net loss                                                                     $    (1,210,878)       $       (548,840)

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

Depreciation                                                                           9,304                   7,566
Amortization of deferred compensation                                                 60,000                    -
Deferred income tax provision                                                             -                   44,792
Changes in assets and liabilities:
Accounts receivable                                                                 (207,498)               (164,996)
Inventory                                                                           (281,918)               (114,329)
Other current assets                                                                (388,427)                (78,221)
Other non-current assets                                                               62,097                  43,732
Accrued license agreement costs                                                         -                      14,117
Accounts payable                                                                      318,084                 144,689
Accrued expenses and other current liabilities                                        169,648                  22,686
Licenses fees payable                                                               (133,710)                 (7,446)
Deferred licenses revenues                                                              1,436                 174,000
Payments to related party                                                               -                    (10,500)
                                                                           -------------------     -------------------
Net cash used in operating activities                                              (1,601,862)              (472,750)
                                                                           -------------------     -------------------

Investing activities
Capital expenditures                                                                 (19,944)                   -
Purchases of short-term investments                                               (8,753,702)                   -
                                                                           -------------------     -------------------
Net cash used in investing activities                                             (8,773,646)                   -
                                                                           -------------------     -------------------

Financing activities
Net proceeds from exercise of convertible preferred stock option                    2,479,000                   -
Net proceeds from initial public offering                                          10,396,592                   -
Borrowings from related party                                                          -                      179,450
Borrowings from bank                                                                   -                      250,000
                                                                           -------------------     -------------------
Net cash provided by financing activities                                          12,875,592                 429,450
                                                                           -------------------     -------------------

Net increase (decrease) in cash and cash equivalents                                2,500,084                (43,300)
Cash and cash equivalents-beginning of period                                         375,222                  52,677
                                                                           -------------------     -------------------
Cash and cash equivalents-end of period                                          $  2,875,306          $        9,377
                                                                           ===================     ===================
Supplemental information
Interest paid                                                              $           1,189       $           14,269 
                                                                           ===================     ==================

</TABLE>

     See accompanying notes.


<PAGE>


                            Frisby Technologies, Inc.
                          Notes to Financial Statements
                            June 30, 1998 (Unaudited)

     1. Basis of Presentation

     The  accompanying  unaudited  financial  statements  have been  prepared in
conformity  with  generally  accepted  accounting  principles  and  reflect  all
adjustments  consisting of normal recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the results for the periods
shown. The results of operations for such periods are not necessarily indicative
of the results  expected for the full fiscal year or for any future period.  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 revenue and expenses during the reporting period. Actual
results could differ from those estimates and assumptions.

     The accompanying  financial  statements  should be read in conjunction with
the audited financial  statements of Frisby  Technologies,  Inc. (the "Company")
for the year ended  December  31, 1997 and the notes  thereto  contained  in the
Company's Registration Statement on Form SB-2, Registration No. 333-45121, filed
with the Securities and Exchange Commission on March 30, 1998, as amended.

     2. Stockholders' Equity

     On December 29, 1997,  the Company sold 441,327 shares of its common stock,
$.001 par value (the "Common Stock") and an option (the  "Convertible  Preferred
Stock Option") to purchase 587,500 shares of the Company's convertible preferred
stock, $.001 par value (the "Convertible  Preferred Stock") at an exercise price
of $4.26 per share  expiring on February  27, 1998 in a private  placement  (the
"Private  Placement") to a foreign  investor for an aggregate  purchase price of
$2,500,000. On February 27, 1998, the foreign investor exercised the Convertible
Preferred Stock Option. This transaction resulted in net proceeds to the Company
of $2,479,000, after the payment of related expenses.

     On April 1, 1998, the Company  consummated an Initial Public  Offering (the
"IPO") of 1,600,000 shares of Common Stock at a price of $7.00 per share. On May
15, 1998,  Barington Capital Group, L.P., the underwriter in connection with the
IPO (the  "Underwriter"),  exercised  its  over-allotment  option to purchase an
additional 240,000 shares of the Common Stock at a price of $7.00 per share. The
total net proceeds to the Company  amounted to approximately  $10,400,000  after
the  underwriters'  discount  and related  expenses.  The net  proceeds of these
transactions  have been invested in cash deposit accounts and cash  equivalents,
institutional  U.S.  Government  Money  Market  Funds  and  commercial  paper of
selected U.S. companies.

     In April,  1998 the Company  entered into a two year  consulting  agreement
with a company  managed  by a member of the  Company's  Board of  Directors.  In
conjunction with this agreement, the Company issued warrants to purchase 110,000
shares of the  Company's  common  stock at an  exercise  price equal to the then
market  price.   Additionally,   the  Company  issued  options  to  three  other
consultants  to  purchase  4,000  shares  of the  Company's  common  stock at an
exercise  price equal to the then market price.  The Company  estimates that the
aggregate fair market value of these warrants and options is $250,000.

<PAGE>

     3. Summary of Significant Accounting Policies

     Net Loss Per Share

     Net loss per share for the three and six month  periods ended June 30, 1998
and 1997 are based on the weighted  average number of common shares  outstanding
during the period in  accordance  with the  Statement  of  Financial  Accounting
Standard ("SFAS") No. 128 "Earnings Per Share."

     Shares used in the  computation of net loss per share for the three and six
month periods ended June 30, 1998 were  5,037,995 and  4,036,259,  respectively.
Shares used in the  computation of net loss per share for both the three and six
month periods ended June 30, 1997 were  2,839,286.  The number of shares used in
the calculation of net loss per share on a basic and diluted basis are the same.
The 587,500 shares of Convertible  Preferred  Stock represent  potential  common
stock that was not included in the computation of diluted net loss per share for
the three and six month  period  ended June 30, 1998 due to their  anti-dilutive
nature.

     Stock options  granted to employees and directors under the Company's Stock
Option  Plan  adopted in March 1998 and other  options  granted to  consultants,
would have had an effect on the number of Common Shares outstanding in 1998. The
total number of options outstanding as of June 30, 1998 was 256,000.

     Recent Accounting Pronouncements

     In June 1997, the Financial  Accounting Standards Board issued SFAS No. 130
"Reporting Comprehensive Income" and SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information." These standards are effective for fiscal
years  beginning after December 15, 1997. The adoption of these standards had no
material impact on the Company's statements of operations, cash flows or balance
sheets.



<PAGE>


     ITEM 2.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS.


     Results of  Operations  for the three and six month  periods ended June 30,
1998 compared with the three and six month period ended June 30, 1997

     Revenues.  The Company  generates  revenue from three primary sources:  (i)
sales of its Thermasorb(R)  additives and ComforTemp(R) foam products for use in
its strategic  partners'  products;  (ii) revenue from research and  development
contracts  related to the United States  government and from private  companies;
and (iii)  license  fees and  royalties  from the use of the  Thermasorb(R)  and
ComforTemp(R)  trademarks by strategic partners in end-use products,  as well as
other fees earned in connection  with its agreements  with  strategic  partners.
Total  revenues  for the three month  period  ended June 30, 1998  increased  by
$339,000 to $674,000  from  $335,000  for the three month  period ended June 30,
1997.  Total  revenues for the six month period ended June 30, 1998 increased by
$524,000 to  $1,022,000  from  $498,000  for the six month period ended June 30,
1997.


     Product sales. Product sales for the three month period ended June 30, 1998
increased by $341,000 to $547,000 from $206,000 for the three month period ended
June 30,  1997.  Product  sales for the six month  period  ended  June 30,  1998
increased by $598,000 to $818,000  from  $220,000 for the six month period ended
June 30, 1997. These increases were primarily the result of the Company bringing
its ComforTemp(R)  foams to market commencing in the second quarter of 1997 with
sales principally to one customer. Product sales for 1998 have primarily been to
five strategic partners in the apparel and footwear industry.

     Research and development  projects.  Revenues from research and development
projects for the three month period ended June 30, 1998  decreased by $14,000 to
$79,000 from  $93,000 for the three month  period ended June 30, 1997.  Revenues
from research and  development  projects for the six month period ended June 30,
1998  decreased by $102,000 to $129,000  from  $231,000 for the six month period
ended June 30, 1997.  These decreases  resulted  primarily from the shift in the
Company's  focus  away  from  obtaining  and  performing   funded  research  and
development  contracts  to  the  commercialization  of  its  thermal  management
products.

     Licenses and  royalties.  Revenues  from license fees and royalties for the
three month  period  ended June 30, 1998  increased  by $11,000 to $48,000  from
$37,000 for the three month period ended June 30,  1997.  Revenues  from license
fees and  royalties  for the six month period  ended June 30, 1998  increased by
$29,000 to $75,000  from  $46,000 for the six month  period ended June 30, 1997.
These increases reflect the recognition of fees received from strategic partners
for license  agreements  entered  into  beginning  in the second  quarter  1997.
License  fees are  recognized  as revenue  ratably  over the life of the license
agreement.  Additionally,  royalty fees  increased to $24,000 for the six months
ended June 30, 1998 from zero during the comparable period in 1997.

<PAGE>

     Cost of Sales.  The  Company's  cost of sales  consists  of: (i) direct and
indirect  costs  incurred in  connection  with  product  sales;  (ii) direct and
indirect costs incurred in connection with revenue from research and development
contracts relating to the United States government  programs;  and (iii) royalty
payments  required  to be  made  to  the  inventor  of  the  thermal  management
technology  or other  licensors.  Total gross  profit for the three month period
ended June 30, 1998  decreased  by $23,000 to $74,000 from $97,000 for the three
month period  ended June 30,  1997.  Total gross profit for the six month period
ended June 30, 1998  increased  by $70,000 to $163,000  from $93,000 for the six
month period ended June 30, 1997.

     Cost of sales --  Products.  The cost of sales  related to products for the
three month  period ended June 30, 1998  increased by $356,000 to $531,000  from
$175,000  for the three  month  period  ended June 30,  1997.  The cost of sales
related to products for the six month  period  ended June 30, 1998  increased by
$512,000 to $753,000 from $241,000 for the six month period ended June 30, 1997.
These increases reflect the higher volume of product sales and the corresponding
costs related to such product sales in the three and six month period ended June
30, 1998 as compared to the  corresponding  period in the prior year. Unit costs
increased  in the quarter  ended June 30, 1998 as compared to the  corresponding
period of 1997 resulting from incremental costs incurred to expedite  production
and delivery of a large customer order.

     Cost of sales  --  Research  and  development  projects.  The cost of sales
related to research  and  development  projects for the three month period ended
June 30, 1998  increased  by $18,000 to $64,000 from $46,000 for the three month
period ended June 30, 1997. This increase  reflects higher costs associated with
the contracts being worked on during the current year. The cost of sales related
to research  and  development  projects  for the six month period ended June 30,
1998  decreased  by $36,000 to $99,000  from  $135,000  for the six month period
ended June 30, 1997. This decrease is consistent with the shift in the Company's
focus  away from  obtaining  and  performing  funded  research  and  development
contracts and to the commercialization of its thermal management products.

     Cost of Sales --  Licenses  and  royalties.  The cost of sales  related  to
licenses and royalties for the three month period ended June 30, 1998  decreased
by $12,000 to $6,000  from  $18,000 for the three  month  period  ended June 30,
1997.  The cost of sales  related to licenses  and  royalties  for the six month
period  ended June 30, 1998  decreased by $21,000 to $7,000 from $28,000 for the
six month period  ended June 30, 1997.  These  decreases  primarily  reflect the
expensing  in a prior  period  of a  royalty  fee  paid to the  inventor  of the
Company's licensed technology.

     Selling and marketing expense.  Selling and marketing expense for the three
month period ended June 30, 1998  increased by $133,000 to $225,000 from $92,000
for the three month period ended June 30, 1997.  Selling and  marketing  expense
for the six month period  ended June 30, 1998  increased by $293,000 to $445,000
from $152,000 for the six month period ended June 30, 1997. These increases were
primarily the result of the Company  increasing  its  marketing and  advertising
activity  in order to build  brand name  recognition  of its  Thermasorb(R)  and
ComforTemp(R)  products  and  trademarks.   Additionally,  the  amortization  of
deferred  compensation  expense of $60,000 for options and  warrants  granted to
consultants in the current year also contributed to this increase.

     General and administrative expense.  General and administrative expense for
the three month  period  ended June 30, 1998  increased  by $382,000 to $642,000
from  $260,000  for the three  month  period  ended June 30,  1997.  General and
administrative expense for the six month period ended June 30, 1998 increased by
$612,000 to  $1,043,000  from  $431,000  for the six month period ended June 30,
1997.  These increases  reflect the increase in personnel and  personnel-related
expenses, including travel, and recruiting costs of new employees. Additionally,
fees and expenses paid to  consultants  have also  increased over the comparable
period for the prior year.  These increases are in connection with the expansion
of the Company's  operations  and  commercialization  of its thermal  management
products.

<PAGE>

     Net interest  income/expense.  The Company  earned net  interest  income of
$111,000  for the three  month  period  ended June 30,  1998 as  compared to net
interest  expense of $9,000 for the three month period ended June 30, 1997.  The
Company  earned net  interest  income of $114,000 for the six month period ended
June 30, 1998 as compared to net  interest  expense of $14,000 for the six month
period ended June 30, 1997. These changes are due to the receipt of net proceeds
from the Private  Placement in December  1997,  the exercise of the  Convertible
Preferred Stock Option in February 1998 and the Initial Public Offering in April
1998 and the interest earned on the proceeds thereof.

     Income tax provision.  The Company recorded no income tax provision for the
three month  period  ended June 30,  1998 and 1997.  For the three and six month
period ended June 30, 1998 and the three month  period ended June 30, 1997,  the
Company  recorded a  valuation  allowance  equal to the net  deferred  tax asset
recorded  in the  period.  For the six month  period  ended June 30,  1997,  the
Company  recorded a provision of $45,000 which arose from  providing a valuation
allowance against all deferred tax assets recorded as of March 31, 1997. The net
deferred tax assets as of both June 30, 1998 and 1997 arise  principally  from a
net operating loss carryforward.  The valuation  allowances  recorded are due to
uncertainties  relating to expected  future taxable income that would have to be
generated to realize such assets.

     Net loss.  As a result of the  foregoing,  the net loss for the three month
period  ended June 30, 1998  increased to $682,000  from  $264,000 for the three
month period ended June 30, 1997.  Additionally,  the net loss for the six month
period ended June 30, 1998  increased to  $1,211,000  from  $549,000 for the six
month period ended June 30, 1997.

     Liquidity and capital resources.  At June 30, 1998, the Company had working
capital of $12,190,000, including short-term investments of $8,750,000, accounts
receivable-billed  of $468,000 and  inventory  of  $529,000,  offset by accounts
payable of $672,000 and accrued expenses of $233,000.

     Cash  used  by  operating   activities   was   $1,602,000   and   $473,000,
respectively, for the six month period ended June 30, 1998 and 1997. The primary
factor  contributing to the cash used in operating  activities for the six month
period ended June 30, 1998 and 1997 was the net loss for each of the  respective
periods.  Cash used by investing  activities  was  $8,774,000  for the six month
period ended June 30, 1998. The primary factor  contributing to the cash used in
financing  activities  for the six month period was the  purchase of  short-term
investments. Cash provided by financing activities was $12,876,000 and $429,000,
receptively,  for the six month period ended June 30, 1998 and 1997. The primary
financing  activity for the six month period ended June 30, 1998 was the receipt
of the net proceeds of $2,479,000 from the exercise of the Convertible Preferred
Stock Option and $10,397,000  from the initial public  offering.  The Company is
relocating its North Carolina  operations to a newly renovated  facility located
in Winston  Salem,  North  Carolina  during the second half of fiscal 1998.  The
total cash  requirement with respect to that relocation and the related purchase
of thermal testing equipment will be expended  primarily in the third quarter of
1998 and is not expected to exceed $1,200,000.

<PAGE>

     Based on the Company's  current  operating plan, the Company  believes that
the proceeds  from the IPO,  together  with its existing  resources and revenues
from  continuing   operations,   will  be  sufficient  to  satisfy  its  capital
requirements for at least 24 months following the IPO. Such belief is based upon
certain current assumptions, and there can be no assurance that such assumptions
are correct.  Further,  depending on the Company's progress related to marketing
its product line, gaining market acceptance of its thermal management technology
and its other products and services in the business community,  and capitalizing
upon potential acquisition  opportunities,  the Company may determine that it is
advisable to raise additional capital sooner than anticipated.

     The Company renewed its line of credit with a bank as of June 30, 1998. The
$1,000,000  line of credit bears  interest at the lower of the bank's prime rate
or a two  percentage  point spread versus the London  Interbank  Overnight  Rate
("LIBOR") and expires on June 30, 1999. The full amount of the line is currently
available.


     Forward-Looking Statements

     Certain  information  contained  in this  Quarterly  Report on Form 10-QSB,
including,  without  limitation,  information  appearing  under  Part I, Item 2,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations," are  forward-looking  statements (within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities  Exchange Act of
1934).  Factors set forth in the Company's Prospectus filed April 2, 1998, or in
the Company's other Securities and Exchange Commission filings, could affect the
Company's  actual results and could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company in this Quarterly Report on Form 10-QSB.




<PAGE>


                            PART II-OTHER INFORMATION

     Item 1. Legal Proceedings

     None.

     Item 2. Changes in Securities

     On April 1, 1998,  the Company  completed an initial  public  offering (the
"Offering") of 1,600,000 shares of its Common Stock,  $.001 par value per share.
The  Company's   Registration   Statement  on  Form  SB-2  (Registration  Number
333-45121) was declared  effective by the Securities and Exchange  Commission on
April  1,  1998.  On  May  15,  1998,   Barington   Capital  Group,   L.P.  (the
"Underwriter")  exercised  its  over-allotment  option to purchase an additional
240,000 shares of Common Stock at the Offering price.

     The aggregate  offering price of the 1,840,000  shares of Common Stock sold
in the Offering to the public was $12,880,000. The Company realized net proceeds
of  approximately  $10,400,000  after  deduction of  underwriting  discounts and
commissions  and other  Offering  expenses  paid by the Company in the amount of
approximately $2,480,000.


     Item 3. Defaults Upon Senior Securities

     None.

     Item 4. Submission of Matters to a Vote of Security Holders

     None.

     Item 5. Other Information

     None.

     Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits


     10.6.1 Revised Line of Credit Agreement with European American Bank

     10.25  Consulting  Agreement  dated April 13, 1998  between the Company and
            GGC, Inc.

     11.1 Statement Re: Computation of Per Share Earnings

     27.1 Financial Data Schedule

     (b) Reports on Form 8-K

     None.




<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.

     Dated: August 14, 1998

                                            FRISBY TECHNOLOGIES, INC.



                                      By:  /s/Gregory S. Frisby
                                           -------------------------------     
                                           Gregory S. Frisby
                                           President and
                                              Chief Executive Officer



                                      By:  /s/Stephen P. Villa
                                           -------------------------------
                                           Stephen P. Villa
                                           Chief Financial Officer