UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB



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

For the quarterly period ended SEPTEMBER 30, 1997

                                       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 0-27378

                                   NUCO2 INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)


            Florida                                         65-0180800
(State or Other Jurisdiction of                          (I.R.S. Employer
 Incorporation or Organization)                       Identification Number)

                           2800 Southeast Market Place
                              Stuart, Florida 34997
                    (Address of Principal Executive Offices)

                                 (561) 221-1754
                (Issuer's Telephone Number, Including Area Code)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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
            -------               --------

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:



           Class                           Outstanding at September 30, 1997
           -----                           ---------------------------------
Common Stock, $.001 par value                      7,197,718 shares



                                        1

<PAGE>



                                          NUCO2 INC.

                                      Index
                                      -----


PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

                  Balance Sheets as of                                     3
                  September 30, 1997 and June 30, 1997

                  Statements of Operations                                 4
                  for the Three Months Ended September 30,
                  1997 and September 30, 1996


                  Statement  of Shareholders'                              5
                  Equity for the Three Months Ended
                  September 30, 1997


                  Statements of Cash Flows for the                         6
                  Three Months Ended September 30, 1997 and
                  September 30, 1996

                  Notes to Financial Statements                          7-9


ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN         10-13
                  OF OPERATION

PART II.          OTHER INFORMATION

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K                        14

SIGNATURES                                                                15


                                        2

<PAGE>
PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

                                   NUCO2 INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                            ASSETS
                                            ------
                                                                       September 30, 1997         June 30, 1997
                                                                       ------------------         -------------
                                                                          (unaudited)
<S>                                                                      <C>                      <C>           
Current assets:
   Cash and cash equivalents                                             $     8,311,917          $   11,672,506
   Trade accounts receivable; net of allowance for doubtful
      accounts of $171,322 and $113,054, respectively                          2,464,570               2,120,880
   Inventories                                                                   120,408                  85,601
   Prepaid expenses and other current assets                                     782,679                 276,858
                                                                            ------------            ------------
        Total current assets                                                  11,679,574              14,155,845
                                                                            ------------            ------------

Property and equipment, net                                                   56,928,625              46,803,050
                                                                            ------------            ------------

Other assets:
   Goodwill, net                                                              13,224,128               7,580,763
   Deferred charges, net                                                         264,840                 272,608
   Customer lists, net                                                         1,725,452               1,755,919
   Restrictive covenants, net                                                  1,444,500               1,401,833
   Deferred lease acquisition costs, net                                       1,553,640               1,274,577
   Deposits                                                                      111,181                  99,863
                                                                            ------------            ------------
                                                                              18,323,741              12,385,563
                                                                            ------------            ------------

                                                                         $    86,931,940          $   73,344,458
                                                                            ============            ============



                                       LIABILITIES AND SHAREHOLDERS' EQUITY
                                       ------------------------------------
Current liabilities:
   Current maturities of long-term debt                                  $     2,145,227          $    2,180,601
   Accounts payable                                                            3,284,756               1,514,048
   Accrued expenses                                                            1,268,388                 961,544
   Other current liabilities                                                      49,540                  22,699
                                                                            ------------            ------------
      Total current liabilities                                                6,747,911               4,678,892

Long-term debt, excluding current maturities                                  19,080,326               7,365,740
Customer deposits                                                                712,963                 598,177
                                                                            ------------            ------------
        Total Liabilities                                                     26,541,200              12,642,809
                                                                            ------------            ------------

Shareholders' equity:
   Common stock; par value $.001 per share; 30,000,000 authorized;
      issued and outstanding 7,197,718 at each date                                7,198                   7,198
   Additional paid-in capital                                                 63,233,043              63,233,043
   Accumulated deficit                                                        (2,849,501)             (2,538,592)
                                                                            ------------            -------------
        Total shareholders' equity                                            60,390,740              60,701,649
Commitments and contingencies
                                                                         $    86,931,940          $   73,344,458
                                                                            ============            ============
</TABLE>
                                        3

<PAGE>
                                   NUCO2 INC.
                            STATEMENTS OF OPERATIONS

                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                    ------------------
                                                                       September 30, 1997       September 30, 1996
                                                                       ------------------       ------------------


<S>                                                                      <C>                      <C>           
Net sales                                                                $     7,114,290          $    4,071,657

Costs and expenses:
   Cost of products sold                                                       3,582,867               1,969,551
   Selling, general and administrative expenses                                2,000,323               1,230,425
   Depreciation and amortization                                               1,632,897                 821,842
                                                                            ------------            ------------
                                                                               7,216,087               4,021,818
                                                                            ------------            ------------

Operating  (loss) income, net                                                   (101,797)                 49,839

Interest expense (income), net                                                   209,112                (292,012)
                                                                            ------------            ------------

Net  (loss) income                                                       $      (310,909)         $      341,851
                                                                            ============            ============

Net (loss) income per common share                                       $         (0.04)         $         0.05
                                                                            ============            ============

Weighted average number of common and common equivalent
   shares outstanding                                                          7,375,783               7,333,148
                                                                            ============            ============
</TABLE>


                                        4

<PAGE>
                                   NUCO2 INC.

                        STATEMENT OF SHAREHOLDERS' EQUITY
                                   (UNAUDITED)




<TABLE>
<CAPTION>
                                                                     Additional                         Total
                                           Common Stock                Paid-in      Accumulated     Shareholders'
                                     Shares         Amount             Capital         Deficit         Equity


<S>                                 <C>              <C>            <C>              <C>              <C>        
Balance, June 30, 1997              7,197,718        $7,198         $63,233,043      $(2,538,592)     $60,701,649


Net (loss)                                                                              (310,909)        (310,909)
                                -------------     ---------       -------------      -----------     ------------

Balance, September 30, 1997         7,197,718        $7,198         $63,233,043      $(2,849,501)     $60,390,740
                                =============     =========       =============      ============    ============
</TABLE>




                                        5

<PAGE>
                                   NUCO2 INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                    ------------------
                                                                       September 30, 1997       September 30, 1996
                                                                       ------------------       ------------------

<S>                                                                      <C>                      <C>           
Cash flows from operating activities:
   Net (loss) income                                                     $     (310,909)          $      341,851

   Adjustments to reconcile  net (loss) income to net 
         cash provided by operating activities:
         Depreciation and amortization of property and equipment               1,162,138                 600,000
         Amortization of other assets                                            470,759                 221,842
         Loss on disposal of property and equipment                               89,413                  31,271
         Changes in operating assets and liabilities:
         Decrease (increase) in:
            Trade accounts receivable                                           (326,725)                (49,594)
            Inventories                                                          (34,807)                 (8,933)
            Prepaid expenses and other current assets                           (505,821)                 80,248
         Increase (decrease) in:
            Accounts payable                                                   1,770,708                (947,960)
            Accrued expenses                                                     306,844                 128,497
            Other current liabilities                                             26,841                 (45,907)
            Customer deposits                                                    114,786                  49,030
                                                                            ------------            ------------
            Net cash provided by operating activities                    $     2,763,227          $      400,345
                                                                            ------------            ------------

Cash flows from investing activities:
   Proceeds from disposal of property and equipment                               14,700                   -
   Purchase of property and equipment                                         (4,552,564)             (5,768,427)
   Acquisition of businesses                                                  (6,089.992)             (1,446,203)
   (Increase) decrease in deposits                                               (11,318)                189,945
   (Increase) in deferred lease acquisition costs                               (398,904)               (186,676)
                                                                            ------------            ------------ 
         Net cash (used in) investing activities                             (11,038,078)             (7,211,361)
                                                                            ------------            ------------ 

Cash flows from financing activities:
   Redemption of warrants                                                      -                      (1,143,450)
   Exercise of options                                                         -                         149,455
   Repayment of long-term debt                                                  (551,557)                (85,569)
   Proceeds from issuance of long-term debt                                    5,500,000                    -
   Increase in deferred charges                                                  (34,181)                 (1,442)
   Additional expenses - secondary offering                                    -                          (1,615)
                                                                            ------------            ------------
         Net cash provided by (used in) financing activities                   4,914,262              (1,082,621)
                                                                            ------------            ------------

Net decrease in cash and cash equivalents                                     (3,360,589)             (7,893,637)
Cash and cash equivalents at the beginning of period                          11,672,506              43,000,676
                                                                            ------------            ------------
Cash and cash equivalents at the end of period                           $     8,311,917          $   35,107,039
                                                                            ============            ============

Supplemental disclosure of cash flow information:  
   Cash paid during the period for:
         Interest                                                        $       270,219          $      226,136
                                                                            ============            ============
         Income taxes                                                    $       -                $      -
                                                                            ============            ============

Supplemental schedule of noncash investing and financing activities:
    Acquisition of businesses:
      Fair value of assets acquired                                      $     7,050,600          $      -
      Cost in excess of net assets of businesses acquired                      5,724,400                 -
      Liabilities assumed or incurred                                         (6,750,000)                -
                                                                            ------------            -----------
         Cash paid                                                       $     6,025,000          $      -
                                                                            ============            ===========
</TABLE>


      In July 1997, the Company wrote-off a restrictive covenant and the related
liability in the amuont of $19,231 due to the employee resigning.

                                        6
<PAGE>
                                   NUCO2 INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

Note 1.  Basis of Presentation
-------  ---------------------

         The accompanying  unaudited consolidated financial statements have been
prepared in accordance with the  instructions to Form 10- QSB used for quarterly
reports under Section 13 or 15 (d) of the  Securities  Exchange Act of 1934, and
therefore,  do not include all  information  and footnotes  necessary for a fair
presentation  of financial  position,  results of  operations  and cash flows in
conformity with generally accepted accounting principles.

         The financial  information included in this report has been prepared in
conformity  with  the  accounting  principles  and  methods  of  applying  those
accounting principles, reflected in the financial statements for the fiscal year
ended June 30,  1997  included  in Form  10-KSB  filed with the  Securities  and
Exchange Commission.

         All  adjustments  necessary for a fair statement of the results for the
interim  periods  presented  have been recorded.  This quarterly  report on Form
10-QSB  should  be read in  conjunction  with the  Company's  audited  financial
statements  for the fiscal year ended June 30, 1997.  The results of  operations
for the periods  presented are not  necessarily  indicative of the results to be
expected for the full fiscal year.

Note 2.  Net Income or Loss Per Common Share
-------  -----------------------------------

         The net  income  or loss per share  computations  for the 1997 and 1996
periods  presented are based on the weighted average number of common shares and
dilutive common equivalent shares outstanding during each period.  Fully diluted
and  primary  income  or loss per  common  share are the same  amounts  for each
period.

Note 3.  Acquisitions
-------  ------------

         In August 1996,  the Company  acquired the bulk CO2  operations  of two
affiliated  companies  operating in Ohio,  Kentucky and Indiana for an aggregate
purchase  price of  approximately  $1,350,000.  The Company  paid cash for these
transactions.

         Effective July 15, 1997, the Company purchased substantially all of the
assets of a bulk CO2  company  operating  in  Colorado  for a purchase  price of
$675,000.  The purchase price was funded through a borrowing under the Company's
credit facility.

         Effective July 31, 1997, the Company  purchased  certain assets from CC
Acquisition  Corp.  (Carbo Co.) for an aggregate  purchase price of $11,000,000.
Carbo Co. had operations in Nebraska, Kansas, Oklahoma, Iowa, Missouri, Arkansas
and South Dakota.  The Company funded  $5,000,000  through a borrowing under its
$30 million credit facility and paid cash for the balance.

         In September 1997, the Company  purchased  certain assets of a bulk CO2
company  with  operations  in  Arizona  for  an  aggregate   purchase  price  of
$1,100,000.  The Company funded $1,075,000  through a borrowing under its credit
facility and paid cash for the balance.

         These  acquisitions  were  accounted  for by  the  purchase  method  of
accounting  and,  accordingly,  the  purchase  prices  and  direct  costs of the
acquisitions have been allocated to the respective assets and liabilities of the
acquired companies based upon their estimated fair market values at the dates of
acquisition. This resulted in goodwill of approximately $5,772,745 for the three
months ended  September 30, 1997,  which is being  amortized on a  straight-line
basis over twenty years. The results of operations of the acquired companies are
included in the Company's financial  statements since the effective dates of the
acquisitions.

Note 4.  Long-Term Debt
-------  --------------

         As of  September  30,  1997,  a total of  $20,952,270  was  outstanding
pursuant to the  Company's  $30 million  credit  facility  with  NationsBank  of
Florida,  N.A.. The original  principal  balance was comprised of a $6.0 million
term loan and  $16,406,465  of  drawings  pursuant  to the tank and  acquisition
revolvers of the credit  facility.  The term loan was payable  interest only for
twelve months.  Principal  payments of $100,000 plus interest at a fixed rate of
8.51%, are payable monthly for twenty-three  months commencing January 1997. The
tank and  acquisition  revolvers  are interest only for 12 months at two hundred
seventy-five  basis  points  above the 30-day  London  InterBank  Offering  Rate
("LIBOR") (8.41% at September 30, 1997),  with the principal amount  outstanding
at the end of 12 months  (December 1996) and 24 months (December 1997) converted
to term loans calculated on a 60 month amortization  schedule.  In January 1997,
drawings

                                        7
<PAGE>
pursuant  to the tank and  acquisition  revolvers  in the amount of  $4,156,465,
converted to term loans with aggregate  monthly  principal  payments of $69,274.
Any accrued  interest and one final  payment of all unpaid  principal is due and
payable on November 30, 1998.

         In September  1997,  the  Company's  existing $30 million  facility was
amended  to adjust the funded  debt ratio to 3.5 times  EBITDA on a three  month
rolling average annualized. (See Note 8)

Note 5.  Stock Option Plan
-------  -----------------

         In 1995,  the board of  directors  approved  the 1995 Stock Option Plan
(the "1995 Plan").  Under the 1995 Plan, the Company has reserved 350,000 shares
of Common Stock for employees of the Company.  Under the terms of the 1995 Plan,
options  granted may be either  incentive stock options or  non-qualified  stock
options. The exercise price of incentive options shall be at least equal to 100%
of the fair market value of the Company's Common Stock at the date of the grant,
and the exercise  price of  non-qualified  stock options issued to employees may
not be less than 75% of the fair market value of the  Company's  Common Stock at
the date of the grant. The maximum term for all options is 10 years. All options
granted to date vest  one-third per annum  commencing  one year from the date of
grant. As of September 30, 1997, options for 41,437 shares are exercisable.

         The following  table  summarizes the  transactions pursuant to the 1995
Plan.

                                                    Shares      Exercise Price
                                                    ------      --------------

          Outstanding at June 30, 1995                   -0-             -0-
          Granted                                    130,991       $9-$17.50
          Expired or canceled                            340              $9
          Exercised                                      -0-             -0-
                                                  ----------      ----------
          Outstanding at June 30, 1996               130,651       $9-$17.50
          Granted                                    222,500          $11.25
          Expired or canceled                          6,225       $9-$11.25
          Exercised                                      322              $9
                                                  ----------      ----------
          Outstanding at June 30, 1997               346,604       $9-$17.50
          Expired or canceled                            300          $11.25
                                                  ----------      ----------
          Outstanding at September 30, 1997          346,304       $9-$17.50
                                                  ==========      ==========

         The board of  directors  of the Company  adopted the  Directors'  Stock
Option Plan (the "Directors' Plan").  Under the Directors' Plan, the Company has
reserved  60,000 shares of Common Stock.  Under the terms of the Directors' Plan
each non-employee director will receive options for 6,000 shares of Common Stock
on the date of his or her first election to the board of directors. In addition,
on the third  anniversary of each director's first election to the Board, and on
each three year anniversary thereafter,  each non-employee director will receive
an  additional  option to purchase  6,000 shares of Common  Stock.  The exercise
price per share for all options  granted under the Directors' Plan will be equal
to the fair  market  value of the  Common  Stock  as of the date of  grant.  All
options  vest  in  three  equal  annual  installments  beginning  on  the  first
anniversary of the date of grant. As of September 30, 1997,  options to purchase
a total of 20,000  shares of Common  Stock at an exercise  price of $9 per share
had been issued. Of these options, 8,000 are currently exercisable.

Note 6.  Operating Leases
-------  ----------------

         The  Company  entered  into 25  operating  leases  from  July 1 through
September 30, 1997.  Seven leases were for warehouse  facilities  with aggregate
annual rentals of approximately $132,519 expiring at various dates through 2000.
Eighteen leases were for trucks with aggregate  annual rentals of  approximately
$194,400 expiring at various dates through 2003.

Note 7.  Contingencies
-------  -------------

         Carbonic  Designs,  Inc. ("CDI") v. MVE, Inc., The  Taylor-Wharton  Gas
Equipment  Division of Harsco  Corporation,  Welders  Supply Co. and NuCo2 Inc.,
filed on or about  December 31, 1996 asserted  claims for violation of the Texas
Free  Enterprise  and AntiTrust Act of 1983,  business  disparagement,  tortious
interference  with contract,  tortious  interference  with prospective  business
relations and civil  conspiracy.  CDI seeks various damages,  all in unspecified
amounts.  The Company has been  contesting  the case  vigorously  and intends to
continue to do so.

                                        8
<PAGE>
Note 8.  Subsequent Events
-------  -----------------

         (a)   Acquisitions

         Effective  October 1, 1997, a newly formed  wholly-owned  subsidiary of
the Company  purchased all of the issued and outstanding  shares of common stock
of Koch  Compressed  Gases,  Inc.,  ("Koch") for an aggregate  purchase price of
$5,500,000 subject to adjustments.  Koch operated a bulk CO2 business as well as
provided carbon dioxide and other gases in  high-pressure  cylinders  throughout
the  tri-state  New York  metropolitan  area.  The  Company  paid  cash for this
transaction.

         Effective November 3, 1997, the Company purchased  substantially all of
the assets of a bulk CO2  company  operating  in Texas for a  purchase  price of
$1,275,000.  The Company paid  approximately  $1,000,000  cash and issued 18,835
shares of common stock at market for a value of $275,000.

         (b)   Credit Facility

         On October 31, 1997,  the Company closed a $50.0 million senior secured
revolving   credit  facility  with  SunTrust  Bank,   South  Florida,   National
Association (the "Sun Trust  Facility").  The facility includes a trigger for an
automatic request by the Company to increase the facility by an additional $50.0
million to a total of $100.0 million upon the happening of certain  events.  The
facility expires on October 31, 2000 and contains a two year renewal option.  No
funds were borrowed at closing.

         (c)   Senior Subordinated Promissory Notes

         On October 31, 1997, the Company closed $25.0 million of its 12% Senior
Subordinated Promissory Notes due 2004. Montgomery Securities acted as placement
agent.  The  purchasers of the Notes were  institutional  investors led by Chase
Equity  Associates  L.P..  The  Company  expects  to  close  on the  sale  of an
additional  $5.0 million of Notes in the near  future.  The Notes were sold with
seven year warrants to purchase an aggregate of 546,448  shares of the Company's
Common Stock at an exercise price of $16.40 per share. Approximately $20,800,000
of  the  proceeds  of the  Notes  was  used  to  repay  the  Company's  existing
indebtedness  with its lending  institution.  The  NationsBank of Florida,  N.A.
facility was terminated concurrently with the closing of the SunTrust Facility.



                                        9

<PAGE>
ITEM 2.              MANAGEMENT'S DISCUSSION AND ANALYSIS OR
                                PLAN OF OPERATION

         This Management's Discussion and Analysis or Plan of Operation contains
forward-looking  statements that involve risks and uncertainties.  The Company's
actual  results  could  differ   materially  from  those  anticipated  in  these
forward-looking statements. Factors that may cause such differences include, but
are not limited  to, the  Company's  expansion  into new  markets,  competition,
technological advances and availability of managerial personnel.

Overview

         During the quarter ending September 30, 1997, the Company  continued to
take major steps towards becoming the national  supplier of bulk CO2 systems and
liquid carbon dioxide to the restaurant and  convenience  store  industries.  In
July 1997, the Company finalized two separate  acquisitions.  One had operations
in Colorado and the other had operations  throughout the Midwest.  Through these
two acquisitions,  the Company continued its expansion by adding four additional
states,  Colorado,  Nebraska,  Iowa and South  Dakota to its service  area while
adding to its current service area in four others,  Arkansas,  Kansas,  Missouri
and Oklahoma.  Additionally,  in September 1997, the Company  purchased  certain
assets  of a bulk CO2  distributor  and added  another  state,  Arizona,  to its
service territory. The acquisitions during the quarter contributed approximately
2,900 bulk CO2 customers.

         Additionally,  during  the  quarter,  the  Company  reached  multi-unit
placement  agreements  with  Conoco,  Inc. and Apple  South,  Inc.  which helped
"back-fill" and add route density to markets in the South and Midwest.

         The layering effect of both the acquisitions  and multi-unit  placement
agreements  combined  with the  Company's  largest  increase  in new  internally
generated placements in a quarter (2,026) strengthened the Company's position as
the leader in the industry.  The  Company's  growth plan is to  consolidate  its
position in  existing  markets and expand  into  additional  geographic  markets
through  internal  market  development  facilitated  initially by national chain
customers and by strategic acquisitions.

General

         At September 30, 1997 the Company leased 26,584 bulk CO2 systems to its
customers,  principally  pursuant to five year  noncancelable  lease  contracts.
These customers include restaurants,  convenience stores, theaters,  taverns and
other businesses which dispense carbonated beverages. Generally, these contracts
are classified as one of two types:  "budget-plan" service contracts and "rental
plus per pound charge" contracts.  Pursuant to budget plan contracts,  customers
pay a fixed  monthly  charge for the lease of a Company owned bulk CO2 system on
the  customer's  premises and refills of bulk CO2  according to a  predetermined
schedule.  The  bulk  CO2 is  included  in the  monthly  rental  charge  up to a
predetermined  maximum annual volume.  If the maximum annual volume is exceeded,
the customer is charged for additional  bulk CO2  delivered.  Pursuant to rental
plus per pound  charge  contracts,  the Company also leases a bulk CO2 system to
the customer,  but the customer is charged on a per pound basis for all bulk CO2
delivered.  The Company's  contracts generally provide for price increases based
upon increases in the consumer price index.

         The Company  provides  some  services  besides  those offered under the
above two types of  contracts.  As of September 30, 1997,  the Company  provided
"fill only" service to approximately 5,000 customers.

         As of September 30, 1997,  approximately 11,700 of the Company's 31,741
bulk CO2  customers  were  billed on a per pound  basis  which  varies  with the
quantity of bulk CO2 delivered. These customers will tend to consume less CO2 in
the winter  months,  and this may cause the Company's  revenues and earnings for
its fiscal quarters ending in December and March to be relatively lower than for
its other  quarters.  As of  September  30,  1997,  approximately  20,200 of the
Company's  31,741 bulk  customers  were billed at a flat monthly rate which does
not vary throughout the year.

         The  Company  intends to  continue  to grow  through a  combination  of
internal growth and acquisitions.  The Company requires  significant  capital to
purchase and install bulk CO2 systems at  customers'  locations  and to grow the
network of service  and supply  depots and  specialized  CO2  delivery  vehicles
required to service these  installations.  Once  installed,  however,  there are
minimal additional capital requirements for bulk CO2 systems in service, and the
Company has generally experienced  significant positive cash flows on a per-unit
basis.  These cash flows  stem from  per-unit  operating  income  combined  with
per-unit  non-cash  charges  for  depreciation  and  amortization.  The  Company
believes its current installed base of bulk CO2 systems is stable, partly due to
the existence of long-term contracts with its customers.  In fiscal 1997 and the
three months ended  September  30, 1997,  less than 5% of Company owned bulk CO2
systems experienced service termination. Service termination is typically caused
by  restaurant  closure.  Affected  bulk CO2  systems  are  either  removed  and
reconditioned for use with other customers,  or left in place when prospects for
a new restaurant in the same location are deemed favorable.

                                       10
<PAGE>
Results of Operations

         The  following  table  sets  forth,  for  the  periods  indicated,  the
percentage relationship which various items bear to net sales:

                                                           Three Months Ended
                                                             September 30,

                                                             1996       1997
                                                             ----       ----
Income Statement Data:
Net sales ................................................  100.0%      100.0%
Cost of products sold.....................................   48.4%       50.4%
Selling, general and administrative expenses..............   30.2%       28.1%
Depreciation and amortization.............................   20.2%       23.0%
                                                             -----       -----
Operating income (loss)...................................    1.2%       (1.5%)
Interest (income) expense, net............................   (7.2%)       2.9%
                                                            ------       -----
Net income (loss) ........................................    8.4%       (4.4%)
                                                            ======      ======

Other Data:
Operating income before depreciation and amortization
 (EBITDA).................................................   21.4%       21.5%
                                                             =====       =====

Three Months Ended  September 30, 1997 Compared to Three Months Ended  September
30, 1996

         Net sales increased by $3.0 million, or 74.7%, from $4.1 million in the
1996 period to $7.1  million in the 1997 period.  Approximately  $387,000 of the
increase  represented  net  sales  resulting  from the May 1997  acquisition  of
certain assets of the BOC Group,  Inc. and $385,000 of the increase  represented
net sales  resulting  from the July 1997  acquisition  of CC  Acquisition  Corp.
(Carbo Co.). In addition,  approximately  $837,356 and $68,830  represented  net
sales  from  seven  acquisitions  during  year  ended  June  30,  1997  and  two
acquisitions  during  the  first  fiscal  quarter  of  1998,  respectively.  The
remainder of the increase in net sales was primarily  due to internal  growth in
the number of Company owned and customer owned bulk CO2 systems in service.

         Cost of products sold  increased by $1.6 million,  from $2.0 million in
the 1996 period to $3.6 million in the 1997 period and increased as a percentage
of net sales from 48.4% to 50.4%.  The dollar  increase was  attributable to the
expansion  of the Company  into new  territories.  The  percentage  increase was
primarily  attributable to overtime incurred and tank repairs in connection with
the Carbo Co.  acquisition in July 1997. Fully loaded route drivers increased by
$545,000 from $659,000 in the 1996 period to $1.2 million in the 1997 period and
increased  as a  percentage  of net sales  from  16.2% to  16.9%.  Additionally,
repairs and maintenance on bulk CO2 cylinders  increased by $75,000 from $34,000
in the 1996 period to $109,000 in the 1997 period and  increased as a percentage
of net sales from .8% to 1.7%.  The number of depots  operated by the Company at
September 30, 1997,  increased to 45, compared to 30 at September 30, 1996. When
the  Company  opens new  depots  and  expands  into new  markets,  higher  costs
expressed  as a  percentage  of net sales are  incurred  until route  density is
achieved.  The  Company  typically  services  approximately  350  customers  per
delivery vehicle in its mature markets.  In new territories,  a delivery vehicle
can initially service as few as 100 customers.

         Selling, general and administrative expenses increased by $770,000 from
$1.2 million in the 1996 period to $2.0 million in the 1997 period and decreased
as a  percentage  of net sales from  30.2% to 28.1%.  The  dollar  increase  was
primarily  attributable to growth in the number of marketing and  administrative
personnel and their associated  expenses,  as well as the costs of expanding the
Company's  geographic areas of service.  The percentage decrease is attributable
to the economies of scale.  At September 30, 1996, the Company had operations in
18 states and employed 33 marketing  personnel  and at September  30, 1997,  the
Company had operations in 36 states and employed 75 marketing personnel.

          Depreciation and  amortization  increased by $811,000 from $822,000 in
the 1996  period to $1.6  million in the 1997  period.  As a  percentage  of net
sales,  such  expenses  increased  from 20.2% in the 1996 period to 23.0% in the
1997 period.  Depreciation  expense  increased by $562,000  from $600,000 in the
1996 period to $1.2 million in the 1997 period  principally  due to the increase
in bulk CO2 systems  leased to customers.  Expressed as percentage of net sales,
depreciation  expense  increased  from 14.7% in the 1996  period to 16.3% in the
1997 period.  Amortization  expense  increased by $249,000  from $222,000 in the
1996 period to $471,000 in the 1997  period  primarily  due to the  amortization
related to restrictive  covenants,  goodwill and customer lists. As a percentage
of net sales, amortization expense increased from 5.4% to 6.6%, respectively.

         Net  interest  income in the 1996 period was  $292,000  compared to net
interest expense in the 1997 period of $209,000. This

                                       11
<PAGE>
change is attributable  to the decreased level of cash and cash  equivalents and
the increased level of long-term debt in the 1997 period as compared to the 1996
period.

         For the reasons described above, EBITDA,  representing operating income
plus  depreciation  and  amortization,  increased  by $659,000,  or 75.6%,  from
$872,000 in the 1996 period to $1.5 million in the 1997 period and  increased as
a  percentage  of net sales  from  21.4% to  21.5%,  respectively.  The  Company
believes  EBITDA is useful as a means of measuring  the growth and earning power
of its  business.  In addition,  the Company uses EBITDA to measure how well the
Company is generating cash flow.  EBITDA excludes  significant  costs and should
not be considered in isolation from GAAP measures.

Liquidity and Capital Resources

         The  Company's  cash  requirements   consist   principally  of  capital
expenditures  associated  with  placing  new bulk CO2  systems  into  service at
customers'  locations;  payments of principal  and  interest on its  outstanding
indebtedness;  payments for acquired businesses;  and working capital.  Whenever
possible, the Company seeks to obtain the use of vehicles,  land, buildings, and
other  office  and  service  equipment  under  operating  leases  as a means  of
conserving capital.  The Company anticipates making cash capital expenditures of
approximately $15.0 million to $20.0 million during the remaining nine months of
fiscal 1998,  primarily for the purchases of bulk CO2 systems that it expects to
place into  service  during  this time.  Once bulk CO2  systems  are placed into
service, the Company has generally  experienced  significant positive cash flows
on a  per-unit  basis,  as there are  minimal  additional  capital  expenditures
required  for  ordinary  operations.  In addition  to the  capital  expenditures
related to internal growth,  the Company  continually  reviews  opportunities to
acquire bulk CO2 service businesses,  and may require cash in an amount dictated
by the scale  and  terms of any such  transactions  successfully  concluded.  In
August 1996 and July and September of 1997, certain assets, primarily consisting
of bulk CO2  systems,  were  acquired  for $7.4 million in cash and $6.8 million
borrowings under the Company's credit facility.

         During the quarter  ended  September 30, 1997,  the  Company's  capital
resources  included cash flows from operations and available  borrowing capacity
under the Company's  credit  facility  with  NationsBank  of Florida,  N.A. (the
"NationsBank  Facility").  The  Company  had  available  under  the  NationsBank
Facility an  aggregate of $30.0  million,  including a $6.0 million term loan; a
$13.0 million "tank  revolver" to finance the purchase and  installation  of new
bulk CO2 service systems;  a $10.0 million  acquisition  revolver to finance the
purchase of bulk CO2 service  businesses;  and a $1.0 million line of credit for
general  working capital needs. As of September 30, 1997, a total of $20,952,270
was outstanding pursuant to the credit facility.  Principal payments of $100,000
plus  interest at a fixed rate of 8.51% were  payable  monthly for  twenty-three
months  commencing  January 1997 on the $6.0 million term loan.  In January 1997
drawings pursuant to the tank and acquisition  revolvers converted to term loans
with  aggregate  monthly  principal  payments of $ 69,274  plus  interest at two
hundred  seventy-five  basis points above the 30-day London  InterBank  Offering
Rate ("LIBOR")  (8.41% at September 30, 1997).  All portions of the  NationsBank
Facility  required full repayment of all  outstanding  principal and interest on
November 30, 1998, the maturity date of the  NationsBank  Facility.  The Company
was required to meet certain  financial  covenants  and in September  1997,  the
NationsBank  Facility  was  amended to adjust the funded debt ratio to 3.5 times
EBITDA on a three month rolling average annualized.

         On October 31,  1997,  the Company  finalized  a $50.0  million  senior
secured  revolving credit facility with SunTrust Bank,  South Florida,  National
Association (the "SunTrust  Facility").  The facility  includes a trigger for an
automatic request by the Company to increase the facility by an additional $50.0
million to a total of $100.0  million upon the  achievement of the Company of an
annualized  one quarter  EBITDA of $15.0  million.  Additionally,  the  facility
contains  interest and an unused facility fee based on a pricing grid calculated
quarterly on senior  funded debt to  annualized  EBITDA.  The pricing grid is as
follows:
<TABLE>
<CAPTION>

<S>                                              <C>               <C>                    <C>                         <C> 
Senior Funded Debt to Annualized EBITDA    Under 1.50              1.50 and  2.25         2.25 and  3.00         Over 3.00
Commitment Fee                                 0.1875%                 0.25%                 0.375%                  0.50%
Applicable LIBOR Margin                         1.25%                  1.75%                  2.25%                  2.75%
Applicable Base Rate Margin                     0.00%                  0.00%                  0.00%                  0.50%
</TABLE>

         The  Company  is  entitled  to  select  the Base  Rate or  LIBOR,  plus
applicable margin, for principal drawings under the SunTrust Facility. Base Rate
is defined as the higher of the prime  lending  rate or the  Federal  Funds rate
plus  one-half  of one  percent  (1/2%)  per  annum.  Interest  only is  payable
periodically  until the  expiration  of the SunTrust  Facility at which time all
outstanding  principal  and interest is due. The  SunTrust  Facility  expires on
October 31, 2000; however, it contains a two year renewal option.  Additionally,
it is collateralized by substantially all of the assets of the Company. No funds
were borrowed at closing.

                                       12
<PAGE>
         On October 31, 1997, the Company closed $25.0 million of its 12% Senior
Subordinated Promissory Notes due 2004. Montgomery Securities acted as placement
agent.  The  purchasers of the Notes were  institutional  investors led by Chase
Equity  Associates  L.P..  The  Company  expects  to  close  on the  sale  of an
additional  $5.0 million of Notes in the near  future.  The Notes were sold with
seven year warrants to purchase an aggregate of 546,448  shares of the Company's
Common Stock at an exercise price of $16.40 per share. Approximately $20,800,000
of  the  proceeds  of the  Notes  was  used  to  repay  the  Company's  existing
indebtedness  under the  NationsBank  Facility,  which  facility was  terminated
concurrently with the closing of the SunTrust Facility.

         The Company believes that cash from operating  activities and available
borrowings  under the SunTrust  Facility  will be  sufficient  to fund  proposed
operations for at least the next twelve months at its current rate of growth.

         Working  Capital.  At June 30, 1997 the Company had working  capital of
$9.5  million.  At September 30, 1997,  the Company had working  capital of $4.9
million.

         Cash  Flows  from  Operating  Activities.  For the three  months  ended
September  30,  1996 and  September  30,  1997 net cash  provided  by  operating
activities  was $400,000 and $2.8 million,  respectively.  The increase from the
1996 period to the 1997 period of $2.4 million is  primarily  due to an increase
in depreciation and amortization and an increase in accounts payable.

         Cash  Flows  from  Investing  Activities.  For the three  months  ended
September 30, 1996 and September 30, 1997 net cash used in investing  activities
was $7.2 million and $11.0 million,  respectively.  These  investing  activities
were attributable to the installation and direct placement costs and acquisition
of bulk CO2  systems,  and the  cash  expended  in  connection  with  the  asset
acquisitions.

         Cash  Flows  from  Financing  Activities.  For the three  months  ended
September  30, 1996 cash flows used in financing  activities  were $1.1 million.
For the three months ended  September 30, 1997, cash flows provided by financing
activities were $4.9 million. For the three months ended September 30, 1996, net
cash  used in  financing  activities  are  primarily  from  the  redemption  and
cancellation of a warrant issued to a representative  of the underwriters in the
Company's  initial public  offering in December 1995. For the three months ended
September 30, 1997 net cash provided by financing  activities was primarily from
the issuance of long-term debt..


Inflation

         The modest levels of inflation in the general economy since the Company
began   business  in  1990  have  not  affected   its  results  of   operations.
Additionally, the Company's contracts with its customers contain an annual lease
rate  adjustment  clause based on any increase in the consumer price index.  The
Company  believes that inflation will not have a material  adverse effect on its
future results of operations.



                                       13

<PAGE>
Part II           OTHER INFORMATION

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

                  (a)      Exhibit 27 - Financial data schedule

                  (b)      No  reports  on Form 8-K were  filed for the  quarter
                           ended September 30, 1997






                                       14

<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.


                                            NuCo2 Inc.


Dated November 14, 1997                  By:  /s/ Joann Sabatino
                                            -----------------------
                                            Joann Sabatino
                                            Chief Financial Officer



                                       15