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  MARCH 31, 1997

     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 MARCH 31, 1997
          -----                                 -----------------------------
     Common Stock, $.001 par value                   7,163,434 shares
<PAGE>
                                   NUCO2 INC.

                                      INDEX
                                      -----

PART I.     FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

            Consolidated Balance Sheets as of                                  3
            March 31, 1997 and June 30, 1996

            Consolidated Statements of Operations                              4
            for the Three Months Ended March 31,
            1997 and March 31, 1996

            Consolidated Statements of  Operations                             5
            for the Nine Months Ended March 31, 1997
            and March 31, 1996

            Consolidated Statement  of Shareholders'                           6
            Equity for the Nine Months Ended
            March 31, 1997

            Consolidated Statements of Cash Flows for the                    7-8
            Nine Months Ended March 31, 1997 and
            March 31, 1996

            Notes to Consolidated Financial Statements                      9-12

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION       3-18

PART II.    OTHER INFORMATION

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                                  19

SIGNATURES                                                                    20

                                       2
<PAGE>



PART I.     FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

                            NUCO2 INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                         ASSETS                                                     (unaudited)
                                                                                                   March 31, 1997     June 30, 1996
                                                                                                   --------------     -------------
<S>                                                                                                <C>                 <C>         
Current assets:
    Cash and cash equivalents                                                                      $ 27,355,295        $ 43,000,676
    Trade accounts receivable, net of allowance for doubtful accounts of
    $443,465 and $210,629, respectively                                                               1,825,632           1,385,642
    Inventories                                                                                          85,701              52,425
    Prepaid expenses and other current assets                                                           550,380             384,948
                                                                                                   ------------        ------------
        Total current assets                                                                         29,817,008          44,823,691
                                                                                                   ------------        ------------

Property and equipment, net                                                                          38,492,678          24,392,692
                                                                                                   ------------        ------------

Other assets:
    Goodwill, net                                                                                     5,470,326           3,064,877
    Deferred charges, net                                                                               292,364             389,343
    Customer lists, net                                                                               1,509,064             873,512
    Restrictive covenants, net                                                                          413,667             114,167
    Deferred lease acquisition costs, net                                                             1,113,802             714,040
    Deposits                                                                                             87,128             260,363
                                                                                                   ------------        ------------
       Total other assets                                                                             8,886,351           5,416,302
                                                                                                   ------------        ------------
          Total assets                                                                             $ 77,196,037        $ 74,632,685
                                                                                                   ============        ============

                        LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Current maturities of long-term debt                                                           $  2,233,383        $  1,358,447
    Accounts payable                                                                                  1,965,469           2,226,795
    Accrued expenses                                                                                  4,522,993             497,975
    Other current liabilities                                                                            27,622              73,529
                                                                                                   ------------        ------------
       Total current liabilities                                                                      8,749,467           4,156,746

Long-term debt, excluding current maturities                                                          7,900,204           9,485,994
Customers' deposits                                                                                     482,773             305,535
                                                                                                   ------------        ------------
       Total liabilities                                                                             17,132,444          13,948,275
                                                                                                   ------------        ------------

Shareholders' Equity:
    Common stock; par value $.001 per share; 30,000,000 authorized; issued and
    outstanding 7,163,434 and 7,129,467 shares, respectively                                              7,163               7,129
    Additional paid-in capital                                                                       62,690,183          63,743,312
    Accumulated deficit                                                                              (2,633,753)         (3,066,031)
                                                                                                   ------------        ------------
       Total shareholders' equity                                                                    60,063,593          60,684,410
    Commitments and contingencies
                                                                                                   ------------        ------------
                                                                                                   $ 77,196,037        $ 74,632,685
                                                                                                   ============        ============
</TABLE>
                                        3
<PAGE>
                            NUCO2 INC. AND SUBSIDIARY


                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                        Three Months Ended
                                                        ------------------
                                                  March 31, 1997  March 31, 1996
                                                  --------------  --------------

Net sales                                           $ 4,668,867    $ 2,974,376


Costs and expenses:
    Cost of products sold                             2,166,284      1,321,047
    Selling, general and administrative expenses      1,564,630        774,063
    Depreciation and amortization                     1,070,776        608,057
                                                    -----------    -----------
                                                      4,801,690      2,703,167
                                                    -----------    -----------

        Operating (loss) income                        (132,823)       271,209

    Interest (income) expense, net                     (157,432)       154,027
                                                    -----------    -----------

Net income                                          $    24,609    $   117,182
                                                    ===========    ===========


Net income per common share                         $      --      $      0.02
                                                    ===========    ===========



Weighted average number of common and common
    equivalent shares outstanding                     7,283,115      5,513,124
                                                    ===========    ===========

                                       4
<PAGE>
                            NUCO2 INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                       Nine Months Ended
                                                                                       -----------------
                                                                               March 31, 1997     March 31, 1996
                                                                               --------------     --------------

<S>                                                                             <C>                <C>         
Net Sales                                                                       $ 13,073,052       $  8,455,077

Costs and expenses:
    Cost of products sold                                                          6,231,148          3,636,566
    Selling, general and administrative expenses                                   4,196,604          1,926,981
    Depreciation and amortization                                                  2,888,417          1,736,236
                                                                                ------------       ------------
                                                                                  13,316,169          7,299,783
                                                                                ------------       ------------

        Operating income (loss)                                                     (243,117)         1,155,294

Other (Income) Expenses:
        Interest (income) expense, net                                              (675,395)         1,152,997
                                                                                ------------       ------------ 

        Income before extraordinary item                                             432,278              2,297

Extraordinary item - loss on extinguishment of debt                                     --             (859,522)
                                                                                ------------       ------------ 

        Net  income (loss)                                                      $    432,278           (857,225)
                                                                                ============       ============ 

        Dividends on Preferred Stock                                            $       --         $   (110,917)
                                                                                ============       ============ 

        Net income (loss) attributable to common stockholders                   $    432,278       $   (968,142)
                                                                                ============       ============ 

Income (loss) per common share

        Income (loss) before extraordinary item                                 $       0.06       $      (0.03)

        Extraordinary item                                                              --                 (.20)
                                                                                ------------       ------------ 

        Net income (loss)                                                       $       0.06       $       (.23)
                                                                                ============       ============ 

        Weighted average number of common and                                      7,322,850          4,166,807
          common equivalent shares outstanding                                  ============       ============
</TABLE>





                                       5
<PAGE>
                            NUCO2 INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                               Common Stock           Additional                          Total
                                                               ------------             Paid-in         Accumulated    Shareholders'
                                                          Shares        Amount          Capital           Deficit         Equity
                                                          ------        ------          -------           -------         ------

<S>                                                     <C>          <C>             <C>              <C>              <C>         
Balance, June 30, 1996                                  7,129,467    $      7,129    $ 63,743,312     $ (3,066,031)    $ 60,684,410

Exercise of options                                        33,967              34         149,421                           149,455

Redemption of warrant                                                                  (1,143,450)                       (1,143,450)

Additional expenses - secondary offering                                                  (59,100)                          (59,100)

Net income                                                                                     
                                                                                                           432,278          432,278
                                                     ------------    ------------    ------------     ------------     ------------

Balance, March 31, 1997                                 7,163,434    $      7,163    $ 62,690,183     $ (2,633,753)    $ 60,063,593
                                                     ============    ============    ============     ============     ============

</TABLE>






                                       6
<PAGE>
                            NUCO2 INC. AND SUBSIDIARY


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                            -----------------
                                                                                  March 31, 1997         March 31, 1996
                                                                                  --------------         --------------

<S>                                                                                 <C>                    <C>        
Net income before extraordinary item                                               $    432,278          $      2,297
Extraordinary item - loss on extinguishment of debt                                        --                (859,522)
                                                                                   ------------          ------------
Net income (loss)                                                                       432,278              (857,225)

Cash flows from operating activities:
Adjustments to  reconcile  net income  (loss) to net cash  provided by
  operating activities:
    Depreciation of property and equipment                                            2,156,766             1,128,617
    Amortization of other assets                                                        731,651               607,619
    Loss (gain)  on disposal of property and equipment                                   91,065                (1,823)
    Write-off of deferred financing costs                                                  --                 784,069
    Changes in operating assets and liabilities:
    Decrease (increase) in:
           Trade accounts receivable                                                   (439,990)             (356,491)
           Inventories                                                                  (33,276)                 (109)
           Prepaid expenses and other current assets                                   (165,432)             (217,682)
    Increase (decrease) in:
           Accounts payable                                                            (261,326)             (869,161)
           Accrued expenses                                                           4,025,018              (242,936)
           Other current liabilities                                                    (45,907)                9,873
           Customers' deposits                                                          177,238                57,525
                                                                                   ------------          ------------

                Net cash provided by operating activities                             6,668,085                42,276
                                                                                   ------------          ------------

Cash flows from investing activities:
    Proceeds from disposal of property and equipment                                  2,011,526                82,600
    Purchase of property and equipment                                              (18,359,342)           (5,477,718)
    Acquisition of customer lists                                                      (835,873)              (29,000)
    Increase in restrictive covenant                                                   (360,000)                 --
    Increase in deferred charges                                                           --                (643,116)
    Increase in goodwill                                                             (2,531,674)             (105,558)
    (Increase) decrease in deposits                                                     173,235                (7,484)
    Increase in deferred lease acquisition costs                                       (618,188)             (372,281)
                                                                                   ------------          ------------

            Net cash (used in) investing activities                                 (20,520,316)           (6,552,557)
                                                                                   ------------          ------------
</TABLE>


                                        7
<PAGE>
                            NUCO2 INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (continued)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                            -----------------
                                                                                  March 31, 1997      March 31, 1996
                                                                                  --------------      --------------

<S>                                                                               <C>                   <C>         
Cash flows from financing activities:

Proceeds from issuance of common stock                                            $       --            $ 16,148,474
Proceeds from issuance of long-term debt                                                11,604             9,636,637
Repayment of long-term debt                                                           (722,458)          (18,291,848)
Increase in deferred charges                                                           (29,201)                 --
Decrease in deferred interest payable                                                     --                (306,535)
Exercise of warrants and options                                                       149,455               656,902
Preferred stock dividends                                                                 --                (361,275)
Redemption of Series A preferred stock                                                    --                (485,000)
Redemption of Series B preferred stock                                                    --                    (500)
Redemption of warrants                                                              (1,143,450)                 --
Additional expenses - secondary offering                                               (59,100)                 --
                                                                                  ------------          ------------

                Net cash (used in) provided by financing activities                 (1,793,150)            6,996,855
                                                                                  ------------          ------------

(Decrease ) Increase in cash and cash equivalents                                  (15,645,381)              486,574
Cash and cash equivalents, beginning of period                                      43,000,676               561,778
                                                                                  ------------          ------------
Cash and cash equivalents, end of period                                          $ 27,355,295          $  1,048,352
                                                                                  ============          ============



Supplemental disclosure of cash flow information:
   Cash paid during the period for:
     Interest                                                                     $    691,031          $  1,027,425
                                                                                  ============          ============
     Income taxes                                                                 $          0          $          0
                                                                                  ============          ============
</TABLE>


                                       8
<PAGE>
                             NUCO2 INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED 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 accompanying
unaudited  consolidated financial statements are consolidated with the Company's
newly formed (July 1996) wholly-owned subsidiary, NuAir Inc.

            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,  1996  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, 1996.  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.

            In connection with the Initial Public  Offering  (IPO),  155,164 and
300,266  shares of Common  Stock were issued upon  conversion  of the  Company's
Series  C  Preferred  Stock  and  Series D  Preferred  Stock,  respectively.  An
additional 805,209 shares of Common Stock were issued upon the conversion of the
convertible  portion  of the Senior  Subordinated  Notes and  118,167  shares of
Common Stock were issued upon the  exercise of warrants  and options.  The above
shares  have  been  treated  as  outstanding  for the  entirety  of the  periods
presented.  Stock options and warrants to purchase an additional  152,851 shares
of Common Stock granted  during 1995 have also been treated as  outstanding  for
the entirety of those periods, using the treasury stock method.

NOTE 3.     PUBLIC OFFERING

                    (a)         Initial Public Offering (IPO)

            In connection  with the Company's  IPO,  2,022,576  shares of Common
Stock were sold by the Company in December 1995. In addition, Representatives of
the  Underwriters  acquired  warrants to purchase up to 110,000 shares of Common
Stock.  Such warrants are exercisable for a period of five years, at an exercise
price  of  $10.80.   In  July  1996,  the  Company   redeemed  and  cancelled  a
Representative's  warrant to purchase 77,000 shares for $1,143,450.  This amount
represented the approximate market value of such warrant. The gross proceeds the
Company  received  from the sale of the  2,022,576  shares of Common  Stock were
$18,203,184.  After  deducting the  underwriters'  discounts and commissions and
other offering expenses, the net proceeds were $16,151,364.

                                       9
<PAGE>
            Prior to the IPO,  the Company had  outstanding  approximately  $2.9
million in principal amount of Senior Subordinated Notes, a portion of which was
convertible at the option of the holders thereof into Common Stock.  The holders
of the Senior  Subordinated  Notes converted,  effective upon the closing of the
IPO,  approximately  $407,000 of the principal amount of the Senior Subordinated
Notes into an aggregate of 805,209  shares of Common Stock.  The Company  repaid
the remaining  principal of the Senior  Subordinated  Notes and accrued interest
thereon  with a portion of the net  proceeds  from the IPO. The Company also had
outstanding  485  shares of Series A  Preferred  Stock,  500  shares of Series B
Preferred  Stock,  500 shares of Series C  Preferred  Stock and 1,500  shares of
Series D Preferred  Stock.  Effective  upon  closing of the IPO, (i) the Company
redeemed  with a portion of the net  proceeds of the IPO all of the  outstanding
Series A  Preferred  Stock and  Series B  Preferred  Stock for an  aggregate  of
$485,500  plus  approximately   $243,000  of  dividends  and  (ii)  all  of  the
outstanding Series C Preferred Stock and Series D Preferred Stock  automatically
converted into an aggregate of 455,430 shares of Common Stock.  The Company used
a portion  of the net  proceeds  of the IPO to pay  dividends  of  approximately
$118,000  on the Series C  Preferred  Stock and  Series D  Preferred  Stock.  In
addition,  the holders of warrants to purchase an aggregate of 118,167 shares of
Common Stock exercised such warrants effective upon the closing of the IPO.

            Prior to the IPO,  the  board of  directors  approved,  among  other
things,  an increase in the number of shares  authorized  of Common Stock of the
Company to  20,000,000  shares,  reduced the par value to $ .001 per share,  and
increased  the  number of  authorized  shares of  Preferred  Stock to  5,000,000
shares.

            The  Company's  board of  directors  also  declared  an  approximate
3,866-for-1 stock split of the Company's Common Stock. This stock split resulted
in the  issuance  of an  additional  1,932,453  shares  of  Common  Stock of the
Company.  All share, per share and conversion  amounts relating to Common Stock,
stock options and warrants,  included in the accompanying consolidated financial
statements have been restated to reflect this stock split.

             In December  1996,  the  shareholders  voted and  approved  another
increase in the number of shares  authorized  of Common  Stock of the Company to
30,000,000 shares.

                    (b)         Secondary Public Offering

            In  connection  with  the  Company's   Secondary   Public  Offering,
1,425,165  shares of Common  Stock were sold by the  Company  in June  1996.  In
addition,  an over-allotment  option from the Company for an additional  336,000
shares of Common Stock was exercised.

            The net proceeds the Company received from the sale of the 1,761,165
shares  of  Common  Stock,  after  deducting  the  underwriters'  discounts  and
commissions  and other  offering  expenses was  $44,584,145.  The Company repaid
$1,963,486  of   indebtedness   outstanding   under  its  credit  facility  with
NationsBank of Florida, N.A. with the proceeds of the Secondary Public Offering.
The Company intends to use the remaining  proceeds to fund internal growth,  for
the  acquisition  of  additional  bulk CO2 systems  leasing  businesses  and for
general corporate purposes.

NOTE 4.                 ACQUISITIONS

            Effective August 30, 1996, the Company purchased certain assets from
Geer Gas Corporation  and OK Leasing Company for an aggregate  purchase price of
$1,400,000. The Company paid cash in these transactions.

             Effective  February 28, 1997, the Company  purchased certain assets
from three separate companies,  Welders Supply,  Inc., Carbon Dioxide In Action,
Inc. and Tyler Welders Supply, Inc. for an approximate  aggregate purchase price
of $2,905,000. The Company paid cash in all of these transactions.

             Effective  March 31, 1997, the Company  acquired  certain assets of
Texas  Oxygen,  Inc.  and the common  stock of Texas Co2,  Inc. for an aggregate
purchase price of $4,000,000. The Company paid cash in this transaction.

                                       10
<PAGE>
NOTE 5.                 LONG-TERM DEBT

            The Company  entered  into an  agreement  for a $30  million  dollar
credit facility with NationsBank of Florida,  N.A. simultaneous with the closing
of the IPO.  Additionally,  all  loans  with the  Company's  previous  bank were
repaid. As of March 31, 1997, a total of $9,717,916 was outstanding  pursuant to
the new credit facility.  The original principal balance was comprised of a $6.0
million  term  loan  and  $4,156,465  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") (8.19% at March 31, 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
the drawings  pursuant to the tank and acquisition  revolvers  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.

Extraordinary item - loss on extinguishment of debt

            For the nine months ended March 31, 1996 the Company  incurred a one
time  extraordinary  charge of $859,522 for the write-off of deferred  financing
costs  and  prepayment  penalties  related  to debt  which was  repaid  with the
proceeds of the IPO.

NOTE 6.                 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,  or both.  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. As of March 31, 1997, 50,576 options were granted at an exercise price of
$9.00 per share,  75,000 options were granted at an exercise price of $17.50 per
share and 222,500 options were granted at an exercise price of $11.25 per share.
The 50,576  options,  the 75,000 options and the 222,500  options vest one-third
per annum commencing  December 1996, April 1997 and October 1997,  respectively.
Of these options, 16,859 are currently exercisable.

             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 March 31, 1997,  options to purchase a
total of 24,000  shares of Common Stock at an exercise  price of $9.00 per share
had been issued. Of these options, 8,000 are currently exercisable.


                                       11
<PAGE>
            Statement of Financial  Standards No. 123 Accounting for Stock-Based
Compensation, defines a fair value based method of accounting for stock options.
It is  effective  for fiscal  years  beginning  after  December  15,  1995.  The
Statement  allows an entity to  continue  to measure  cost using the  accounting
method  prescribed  by APB  Opinion  No.  25,  Accounting  for  Stock  Issued to
Employees,  and to make pro forma  disclosures  of net income and  earnings  per
share as if the fair value based method of accounting had been applied. The fair
value  of each  option  grant  is  estimated  on the  date of  grant  using  the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used for grants in fiscal 1996 and fiscal 1997;  expected volatility
of 83%, risk-free interest rate of approximately 6.4%, and expected lives of one
to five years. The Company is adopting SFAS 123 in fiscal year end June 30, 1997
and presents the following pro forma disclosures  rather than change its present
method of accounting for employee stock options:

                                                             Nine Months Ended
                                                              March 31, 1997
                                                              --------------

     Net income attributable to common shareholders            $   82,053
                                                               ==========
     Net income  per common share                              $     0.01
                                                               ==========
     Weighted average number of common and common 
       equivalent shares outstanding                            7,277,698
                                                               ==========

            The pro forma  adjustment for stock based  compensation  costs under
SFAS 123 is approximately $350,000.

NOTE 7.                 OPERATING LEASES

            The Company entered into fifty operating  leases from July 1 through
March 31, 1997.  Thirteen  leases were for warehouse  facilities  with aggregate
annual rentals of approximately $268,000 expiring at various dates through 2000.
Thirty  seven  leases  were  for  trucks  with   aggregate   annual  rentals  of
approximately $372,000 expiring at various dates through 2003.

NOTE 8.                 SUBSEQUENT EVENTS

            In  April  1997,  the  Company  purchased  certain  assets  from two
unrelated companies for an aggregate purchase price of approximately $8,000,000.
The Company paid cash for these transactions.




                                       12
<PAGE>
                     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

             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.  With the announcement of four (4)
acquisitions in the Texas market, the Company solidified its presence there with
the addition of  approximately  1,800 accounts to its customer base. The Company
is now the dominant supplier of bulk CO2 in Texas.

             During the quarter,  the Company reached agreements with Friendly's
Ice Cream  Corporation  and Captain  D's, a division of Shoney's  Inc.  and with
Coastal Mart  convenience  store locations.  These  agreements  necessitated the
expansion of the  Company's  service  territory by adding the  Philadelphia  and
Mid-Atlantic markets. Additionally, these agreements also helped "back-fill" and
add route density to markets in the Northeast and the South.

             The  layering  effect  of  both  the  acquisitions  and  agreements
combined  with  the  Company's  largest  increase  in new  internally  generated
placements  in a quarter  (1,600)  strengthened  the  Company's  position as the
leader in the  industry as well as striving  towards  its major  objective,  the
building of route density.


GENERAL

            At March 31, 1997 the Company  leased 18,275 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 March 31,
1997, the Company provided "fill only" service to approximately 4,100 customers.

             As of March 31, 1997,  approximately  7,900 of the Company's 22,500
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 March 31, 1997,  approximately 14,600 of the Company's
22,500 bulk  customers  were billed at a flat  monthly  rate which does not vary
throughout  the year.  The Company also supplies  carbon  dioxide,  nitrogen and
helium in high pressure cylinders, to approximately an additional 700 customers.

                                       13
<PAGE>
            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 1996 and the
nine months ended March 31, 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.

RESULTS OF OPERATIONS

            The  following  table sets  forth,  for the periods  indicated,  the
percentage relationship which various items bear to net sales:
<TABLE>
<CAPTION>
                                                                              Three Months Ended             Nine Months Ended
                                                                                  March 31,                     March 31,
                                                                                  ---------                     ---------
                                                                           1996           1997            1996            1997
                                                                           ----           ----            ----            ----
Income Statement Data:
<S>                                                                       <C>            <C>             <C>             <C>   
Net sales ...........................................................     100.0%         100.0%          100.0%          100.0%
Cost of products sold ...............................................      44.4%          46.4%           43.0%           47.7%
Selling, general and administrative expenses ........................      26.0%          33.5%           22.8%           32.1%
Depreciation and amortization .......................................      20.5%          22.9%           20.5%           22.1%
                                                                           ----          -----           -----           ----- 
Operating income ....................................................       9.1%          (2.8%)          13.7%           (1.9%)
                                                                           ----          -----           -----           ----- 
Interest expense (income), net ......................................       5.2%          (3.3%)          13.7%           (5.2%)
Extraordinary item - loss on extinguishment of debt .................        --             --           (10.1%)            --
                                                                           ----          -----           -----           ----- 
Net income (loss) ...................................................       3.9%            .5%          (10.1%)           3.3%
                                                                           ====          =====           =====           ===== 

Other Data:
Operating income before depreciation and amortization
(EBITDA).............................................................      29.6%          20.1%           34.2%           20.2%
                                                                           ====          =====           =====           ===== 
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

            Net sales increased by $1.7 million,  or 57.0%, from $3.0 million in
the 1996 period to $4.7  million in the 1997 period.  Approximately  $275,000 of
the increase  represented net sales  resulting from the May 1996  acquisition of
the  BevServ  Division  of the  Coca-Cola  Bottling  Company  of New York,  Inc.
(BevServ).   In  addition,   approximately   $33,000,   $118,000,  and  $102,000
represented  net sales from one  acquisition  in June 1996,  one  acquisition in
September  1996 and three  acquisitions  in  February  1997,  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.

                                       14
<PAGE>
            Costs of products sold  increased by $845,000,  from $1.3 million in
the  1996  period  to $ 2.2  million  in the  1997  period  and  increased  as a
percentage of net sales from 44.4% to 46.4%.  This increase was  attributable to
the expansion of the Company into new territories. The number of depots operated
by the Company at March 31, 1997,  increased to 36,  compared to 23 at March 31,
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 $791,000
from  $774,000  in the  1996  period  to $1.6  million  in the 1997  period  and
increased as a percentage of net sales from 26.0% to 33.5%.  The dollar increase
was  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.  At March  31,  1996 the  Company  had
operations in seven southeastern  states and employed 20 marketing personnel and
at March 31,  1997,  the Company  had  operations  in 24 states and  employed 53
marketing  personnel.  The Company also  experienced  approximately  $123,000 of
general and  administrative  expenses in connection with the Company's  airplane
and  $66,000  of  additional  insurance,   professional  fees  and  other  costs
associated with being a public  company.  The Company sold its airplane on March
11,  1997 for  $1,875,000.  A loss of  approximately  $16,000  was  incurred  in
connection with this transaction.

             Depreciation and  amortization  increased by $463,000 from $608,000
in the 1996 period to $1.1  million in the 1997 period.  As a percentage  of net
sales,  such  expenses  increased  from 20.5% in the 1996 period to 22.9% in the
1997 period.  Depreciation  expense  increased by $390,000  from $417,000 in the
1996 period to $807,000 in the 1997 period  principally  due to the  increase in
bulk CO2 systems  leased to customers and the Company's  airplane.  Expressed as
percentage of net sales,  depreciation  expense increased from 14.0% in the 1996
period to 17.3% in the 1997 period.  Amortization  expense  increased by $72,000
from $191,000 in the 1996 period to $264,000 in the 1997 period primarily due to
the  amortization  related to deferred  lease  acquisition  costs,  goodwill and
customer lists.  As a percentage of net sales,  amortization  expense  decreased
from 6.4% to 5.7%, respectively.

            Net interest expense in the 1996 period was $154,000 compared to net
interest  income in the 1997 period of $157,000.  This change is attributable to
the  repayment  of debt from the  proceeds of the IPO in  December  1995 and the
increased  level of cash  and  cash  equivalents  in the  1997  period  from the
Secondary Public Offering in June 1996.

            For the reasons  described  above,  EBITDA,  representing  operating
income plus depreciation and  amortization,  increased from $879,000 in the 1996
period to $938,000 in the 1997 period and decreased as a percentage of net sales
from 29.6% to 20.1%,  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.

NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO NINE MONTHS ENDED MARCH 31, 1996

            Net sales increased by $4.6 million,  or 54.6%, from $8.5 million in
the 1996 period to $13.1 million in the 1997 period.  Approximately  $871,000 of
the increase  represented net sales  resulting from the May 1996  acquisition of
the  BevServ  Division  of The  Coca-Cola  Bottling  Company  of New York,  Inc.
(BevServ).  In  addition,   approximately   $113,000,   $283,000  and  $102,000,
represented  net sales from one  acquisition  in June 1996,  one  acquisition in
September  1996 and three  acquisitions  in  February  1997,  respectively.  The
remainder of the increase in net sales was principally due to internal growth in
the number of Company owned and customer owned bulk CO2 systems in service.

                                       15
<PAGE>
            Cost of products sold increased by $2.6 million from $3.6 million in
the 1996 period to $6.2 million in the 1997 period and increased as a percentage
of net  sales  from  43.0% to  47.7%.  This  increase  was  attributable  to the
expansion of the Company into new territories.  The number of depots operated by
the Company at March 31, 1997 increased to 36, compared to 23 at March 31, 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 $2.3
million  from $1.9 million in the 1996 period to $4.2 million in the 1997 period
and  increased as a  percentage  of net sales,  from 22.8% to 32.1%.  The dollar
increase  was   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.  At March 31, 1996 the
Company had  operations in seven  southeastern  states and employed 20 marketing
personnel  and at March 31,  1997 the company  had  operations  in 24 states and
employed 53  marketing  personnel.  The Company also  experienced  approximately
$263,000 of general and administrative expenses in connection with the Company's
airplane and $207,000 of additional insurance, professional fees and other costs
associated with being a public  company.  The Company sold its airplane on March
11,  1997 for  $1,875,000.  A loss of  approximately  $16,000  was  incurred  in
connection with this transaction.


            Depreciation  and  amortization  increased by $1.2 million from $1.7
million in the 1996 period to $2.9 million in the 1997  period.  As a percentage
of net sales, such expenses  increased from 20.5% in the 1996 period to 22.1% in
the 1997  period.  Depreciation  expense  increased  by $1.0  million  from $1.1
million in the 1996 period to $2.2 million in the 1997 period principally due to
the increase in bulk CO2 systems  leased to customers  and  depreciation  on the
Company's  airplane .  Expressed  as a  percentage  of net  sales,  depreciation
expense  increased  from 13.3% in the 1996  period to 16.5% in the 1997  period.
Amortization  expense  increased by $124,000 from $608,000 in the 1996 period to
$732,000 in the 1997 period  primarily due to  amortization  related to deferred
lease  acquisition  costs,  goodwill and customer  lists. As a percentage of net
sales, amortization expense decreased from7.2% to 5.6%, respectively.

            Net interest expense in the 1996 period was $1.2 million compared to
net interest income in the 1997 period of $675,000.  This change is attributable
to the  repayment of debt from the proceeds of the IPO in December  1995 and the
increased  level of cash  and  cash  equivalents  in the  1997  period  from the
Secondary Public Offering in June 1996.

             During the 1996 period,  the Company wrote-off $785,000 of deferred
financing  costs and incurred  $75,000 in prepayment  penalties  related to debt
which was repaid with the proceeds of the IPO.

            For the reasons  described  above,  EBITDA,  representing  operating
income plus  depreciation and  amortization,  decreased from $2.9 million in the
1996 period to $2.6 million in the 1997 period and  decreased as a percentage of
net sales from 34.2% to 20.2%,  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.


                                       16
<PAGE>
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  $4.0 million to $7.0 million during the remaining three months of
fiscal 1997,  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 February and March of 1997, certain assets, primarily consisting
of bulk CO2 systems,  were acquired for an aggregate cash purchase price of $8.3
million.

            Prior to the IPO, the Company's  primary  sources of liquidity  were
borrowings under its then existing credit facility with its secured lender which
was repaid and terminated upon  consummation of the IPO; equity and debt capital
obtained from various venture capital funds and individuals,  including  parties
that sold businesses to the Company; and cash flows from operations.

            Prior to the IPO,  the Company had  outstanding  approximately  $2.9
million in principal amount of Senior Subordinated Notes, a portion of which was
convertible at the option of the holders thereof into Common Stock.  The holders
of the Senior  Subordinated  Notes converted,  effective upon the closing of the
IPO,  approximately  $407,000 of the principal amount of the Senior Subordinated
Notes into an aggregate of 805,209  shares of Common Stock.  The Company  repaid
the remaining  principal of the Senior  Subordinated  Notes and accrued interest
thereon  with a portion of the net  proceeds of the IPO.  The  Company  also had
outstanding  485  shares of Series A  Preferred  Stock;  500  shares of Series B
Preferred  Stock;  500 shares of Series C  Preferred  Stock and 1,500  shares of
Series D Preferred  Stock.  Effective  upon  closing of the IPO, (i) the Company
redeemed  with a portion of the net  proceeds of the IPO all of the  outstanding
Series A Preferred  Stock and Series B  Preferred  Stock for an  aggregate  of $
485,500 plus  approximately  $243,000 of accrued  dividends  and (ii) all of the
outstanding Series C Preferred Stock and Series D Preferred Stock  automatically
converted into an aggregate of 455,430 shares of Common Stock.  The Company used
a  portion  of  the  net  proceeds  of  the  IPO to  pay  accrued  dividends  of
approximately  $118,000 on the Series C  Preferred  Stock and Series D Preferred
Stock. In addition,  the holders of warrants to purchase an aggregate of 118,167
shares of Common Stock exercised such warrants effective upon the closing of the
IPO.

             The Company's capital resources include cash flows from operations;
the net proceeds from the Company's sale of 1,761,165  shares of Common Stock in
the Company's  Secondary  Public Offering in June 1996; and available  borrowing
capacity under the Company's credit facility with  NationsBank of Florida,  N.A.
(the  "NationsBank  Facility").  The Company has available under the NationsBank
Facility an aggregate of $30.0 million,  including a $6.0 million term loan that
was used,  together  with a portion of the net proceeds of the IPO, to refinance
the  outstanding  balance  of  existing  indebtedness  under  its  prior  credit
facility;   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 March 31, 1997,
a total of $9,717,916 was outstanding pursuant to the credit facility. Principal
payments of $100,000 plus interest at a fixed rate of 8.51% are 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") (8.19% at March 31, 1997). All portions of the
NationsBank  Facility  require full repayment of all  outstanding  principal and
interest on November 30, 1998,  the maturity date of the  NationsBank  Facility.
The Company believes that cash from operating activities,  the net proceeds from
the IPO and the Secondary  Public  Offering and available  borrowings  under the
NationsBank Facility will be sufficient to fund proposed operations for at least
the next 12 months at its current rate of growth.  The  NationsBank  Facility is
secured by substantially all the assets of the Company.  The Company is required
to meet certain financial covenants under the NationsBank Facility,  and may not
access borrowings which would cause its total debt to exceed 3.25 times EBITDA.

                                       17
<PAGE>
             Working  Capital.  At June 30, 1996 the Company had working capital
of $40.7 million.  At March 31, 1997,  the Company had working  capital of $21.1
million.

            Cash Flows from  Operating  Activities.  For the nine  months  ended
March 31, 1996 and March 31, 1997 net cash provided by operating  activities was
$35,000 and $6.7 million, respectively. The increase from the 1996 period to the
1997 period of $6.6 million is primarily  due to the net income,  an increase in
depreciation and amortization and an increase in accrued expenses.

            Cash Flows from  Investing  Activities.  For the nine  months  ended
March 31, 1996 and March 31, 1997 net cash used in investing activities was $6.6
million  and  $20.5  million,  respectively.  These  investing  activities  were
attributable to the  installation  and direct placement costs and acquisition of
bulk CO2 systems,  the  additional  fixed assets for the Company's new corporate
headquarters and the increase in intangible  assets in connection with the asset
acquisitions.

            Cash Flows from  Financing  Activities.  For the nine  months  ended
March 31, 1996 and March 31,  1997,  net cash  provided  by (used in)  financing
activities  were $7.0  million and ($1.8  million),  respectively.  For the nine
months ended March 31, 1996, cash flows from financing  activities are primarily
from the issuance of Common Stock in connection  with the IPO less the repayment
of long-term debt,  redemption of Preferred Stock and additional borrowings used
to finance the placement of bulk CO2 systems into  service.  For the nine months
ended March 31, 1997 net cash used in financing activities was primarily for the
redemption of warrants.




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.


                                       18
<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 March 31, 1997


                                       19
<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 May 14, 1997               By:  /S/ JOANN SABATINO
                                      ------------------
                                      Joann Sabatino
                                      Chief Financial Officer




                                       20