SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    ---------


                                    FORM 10-Q


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

For the quarterly period ended September 30, 1999

                                       OR

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

For the transition period from ______________ to ______________

                         Commission file number 0-27378

                                   NuCo2 Inc.
             (Exact Name of Registrant as Specified in Its Charter)


     Florida                                                    65-0180800
(State or Other Jurisdiction of Incorporation                (I.R.S. Employer
or Organization)                                             Identification No.)

2800 Southeast Market Place, Stuart, FL                              34997
(Address of Principal Executive Offices)                           (Zip Code)

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


                                       N/A
              Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report.


         Indicate by check /X/ whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days   Yes  /X/  No / /

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of Common Stock, as of the latest practicable date:

          Class                                Outstanding at September 30, 1999
          -----                               ----------------------------------
Common Stock, $.001 par value                            7,216,664 shares


<PAGE>

                                   NUCO2 INC.

                                      INDEX
                                      -----

     PART I.     FINANCIAL INFORMATION

     ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS

                 Consolidated  Balance  Sheets as of  September  30,          3
                    1999 and June 30, 1999

                 Consolidated Statements of Operations for the Three          4
                    Months Ended  September 30, 1999 and September
                    30, 1998

                 Consolidated Statement of Shareholders' Equity for           5
                    the Three Months Ended  September 30, 1999

                 Consolidated Statements of Cash Flows for the Three Months   6
                    Ended September 30, 1999 and September 30, 1998

                 Notes to Consolidated Financial Statements                   7

     ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF                      10
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES                     15
                    ABOUT MARKET RISK

     PART II.    OTHER INFORMATION

     ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                             15

     SIGNATURES                                                               16




                                       2

<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS


                                   NUCO2 INC.

                           CONSOLIDATED BALANCE SHEETS

                                                    ASSETS
                                                    ------
<TABLE>
<CAPTION>
                                                                               September 30, 1999        June 30, 1999
                                                                               ------------------        -------------
                                                                                    (unaudited)
<S>                                                                           <C>                    <C>
Current assets:
   Cash and cash equivalents                                                     $       389,733        $     1,579,191
   Trade accounts receivable; net of allowance for doubtful
      accounts of $647,077 and $557,592,  respectively                                 6,561,770              6,767,716
   Inventories                                                                           223,777                213,605
   Prepaid expenses and other current assets                                           1,392,000                593,487
                                                                                   -------------          -------------
        Total current assets                                                           8,567,280              9,153,999
                                                                                   -------------          -------------
Property and equipment, net                                                          101,866,822             99,664,890
                                                                                   -------------          -------------
Other assets:
   Goodwill, net                                                                      21,342,446             21,645,293
   Deferred charges, net                                                               2,745,983              2,915,167
   Customer lists, net                                                                 2,633,783              2,897,638
   Restrictive covenants, net                                                          1,841,884              1,928,700
   Deferred lease acquisition costs, net                                               3,313,965              3,236,919
   Deposits                                                                              187,358                187,595
                                                                                   -------------          -------------
                                                                                      32,065,419             32,811,312
                                                                                   -------------          -------------
                                                                                 $   142,499,521        $   141,630,201
                                                                                   =============          =============
</TABLE>

<TABLE>
<CAPTION>
                                          LIABILITIES AND SHAREHOLDERS' EQUITY
                                          ------------------------------------
<S>                                                                           <C>                  <C>
Current liabilities:
   Current maturities of long-term debt                                          $        99,475        $        96,748
   Accounts payable                                                                    8,573,753              6,701,695
   Accrued expenses                                                                       40,325                747,631
   Accrued interest                                                                    2,294,987              1,473,704
   Accrued payroll                                                                       630,038                543,924
   Other current liabilities                                                              46,950                 45,570
                                                                                   -------------          -------------
      Total current liabilities                                                       11,685,528              9,609,272

Long-term debt, excluding current maturities                                          44,575,154             43,615,025
Subordinated debt                                                                     38,803,817             38,748,695
Customer deposits                                                                      2,082,763              1,924,528
                                                                                   -------------          -------------
        Total liabilities                                                             97,147,262             93,897,520
                                                                                   -------------          -------------

Commitments and contingencies

Shareholders' equity:
   Preferred Stock; no par value; 5,000,000 shares authorized;
      none issued                                                                        -                      -
   Common stock; par value $.001 per share; 30,000,000 authorized;
      issued and outstanding 7,216,664 shares at September 30, 1999
      and June 30, 1999                                                                    7,217                  7,217
   Additional paid-in capital                                                         64,831,748             64,831,748
   Accumulated deficit                                                               (19,486,706)           (17,106,284)
                                                                                   --------------         --------------
        Total shareholders' equity                                                    45,352,259             47,732,681
                                                                                   -------------          -------------
                                                                                 $   142,499,521        $   141,630,201
                                                                                   =============          =============
</TABLE>

                                       3
<PAGE>

                                   NUCO2 INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                         Three Months Ended
                                                                                         ------------------
                                                                               September 30, 1999      September 30, 1998
                                                                               ------------------      ------------------
<S>                                                                           <C>                      <C>
Net Sales                                                                        $   13,594,577           $  10,863,493

Costs and expenses:
   Cost of products sold                                                              6,996,345               5,752,090
   Selling, general and administrative expenses                                       2,929,258               2,445,792
   Depreciation and amortization                                                      3,614,635               2,845,719
                                                                                  -------------             -----------
                                                                                     13,540,238              11,043,601
                                                                                  -------------             -----------

   Operating Income (Loss)                                                               54,339                (180,108)

   Interest expense net                                                               2,434,761               1,560,983
                                                                                  -------------             -----------

   Net (loss)                                                                    $   (2,380,422)           $ (1,741,091)
                                                                                  ==============            ============

Basic and Diluted EPS:

   Net (loss)                                                                    $        (0.33)           $      (0.24)
                                                                                  =============             ============

   Weighted average number of common and common
       equivalent shares outstanding

      Basic and Diluted                                                               7,216,664               7,216,664
                                                                                  =============             ===========
</TABLE>

                                       4
<PAGE>

                                   NUCO2 INC.


                 CONSOLIDATED 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, 1999                   7,216,664     $   7,217       $   64,831,748    $ (17,106,284)  $   47,732,681

Net (loss)                                   -                -               -              (2,380,422)     (2,380,422)
                                        ----------      --------         ------------     --------------   -------------

Balance, September 30, 1999              7,216,664     $   7,217       $   64,831,748    $ (19,486,706)  $   45,352,259
                                        ==========      ========         ============     =============    ============
</TABLE>
                                       5

<PAGE>

                                   NUCO2 INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                         Three Months Ended
                                                                                         ------------------
                                                                                September 30, 1999     September 30, 1998*
                                                                                ------------------     -------------------
<S>                                                                              <C>                     <C>
Cash flows from operating activities:

   Net (loss)                                                                    $    (2,380,422)        $   (1,741,091)

   Adjustments  to  reconcile  net  (loss)  to net cash  provided
      by  operating activities:
           Depreciation and amortization of property and equipment                     2,496,860              1,937,502
           Amortization of other assets                                                1,117,774                908,217
           Loss on disposal of property and equipment                                      7,134                 (3,959)
           Loss on abandonment                                                           198,163                157,221
           Changes in operating assets and liabilities:
           Decrease (increase) in:
              Trade accounts receivable                                                  205,946             (1,871,934)
              Inventories                                                                (10,172)                (6,099)
              Prepaid expenses and other current assets                                 (798,514)              (342,913)
           Increase (decrease) in:
              Accounts payable                                                         1,872,058              2,200,182
              Accrued expenses                                                          (707,306)                99,013
              Accrued payroll                                                             86,114                 15,904
              Accrued interest                                                           821,283                880,499
              Other current liabilities                                                    1,381                 41,138
              Customer deposits                                                          158,234                223,504
                                                                                   -------------           ------------

              Net cash provided by operating activities                                3,068,533              2,497,184
                                                                                   -------------           ------------

Cash flows from investing activities:
   Proceeds from disposal of property and equipment                                        1,650                 26,130
   Purchase of property and equipment                                                 (4,875,303)            (7,069,137)
   Acquisition of businesses                                                                -                    30,500
   (Decrease) in deposits                                                                    238                (50,392)
   Increase in deferred lease acquisition costs                                         (362,175)              (345,132)
                                                                                   -------------           -------------
        Net cash (used in) investing activities                                       (5,235,590)            (7,408,031)
                                                                                   -------------           -------------

Cash flows from financing activities:
   Repayment of long-term debt                                                           (37,144)               (22,671)
   Proceeds from issuance of long-term debt and subordinated debt                      1,055,123              5,000,000
   Increase in deferred charges                                                          (40,380)                (1,750)
                                                                                   --------------          -------------
      Net cash provided by financing activities                                          977,599              4,975,579
                                                                                   -------------           ------------

Net decrease (increase) in cash and cash equivalents                                  (1,189,458)                64,732
Cash and cash equivalents at the beginning of period                                   1,579,191                336,510
                                                                                   -------------           ------------
Cash and cash equivalents at the end of period                                   $       389,733         $      401,242
                                                                                   =============           ============

Supplemental  disclosure of cash flow  information:
Cash paid during the period for:
      Interest                                                                   $    1,590,995          $      678,103
                                                                                   ============            ============
      Income taxes                                                               $       -               $        -
                                                                                   ============            ============


*  Restated to conform to current year's classifications.
</TABLE>
                                       6
<PAGE>

                                   NUCO2 INC.

                   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-Q 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 consolidated financial position,  results of operations and cash
flows  in  conformity  with  generally  accepted  accounting   principles.   The
accompanying unaudited consolidated financial statements include the accounts of
NuCo2 Inc. (the "Company") and its wholly-owned  subsidiary,  NuCo2  Acquisition
Corp.  which was formed during the year ended June 30, 1998 to acquire the stock
of Koch  Compressed  Gases,  Inc. in October  1997.  All  material  intercompany
accounts and transactions have been eliminated.

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 consolidated  financial statements for
the  fiscal  year  ended  June 30,  1999  included  in Form 10-K  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-Q should
be read in conjunction with the Company's audited  financial  statements for the
fiscal year ended June 30, 1999. The consolidated  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
-------  -----------------------------------

In February 1997, the FASB issued Statement 128, "Earnings Per Share". Statement
128  supersedes  APB  Opinion No. 15,  "Earnings  Per Share" and  specifies  the
computation,  presentation  and disclosure  requirements  for earnings per share
("EPS") for entities with publicly held Common Stock or potential  Common Stock.
It replaces the  presentation of primary EPS with the  presentation of basic EPS
and  replaces  fully  diluted  EPS  with  diluted  EPS.  It also  requires  dual
presentation of basic and diluted EPS on the face of the statement of operations
for all entities with complex capital  structures and requires a  reconciliation
of the numerator and  denominator of the basic EPS  computation to the numerator
and denominator of the diluted EPS  computation.  Statement 128 is effective for
financial  statements  for both interim and annual periods ending after December
15, 1997.

Incremental  shares for stock  options and warrants  calculated  pursuant to the
treasury stock method for the three months ended September 30, 1998 were 32,961.
These  shares were not  included  in diluted  EPS  because  they would have been
antidilutive  for such  period.  Additionally,  options and warrants to purchase
1,073,715 shares, 873,433 shares and 408,436 shares for $14.64-$17.00 per share,
$11.25-$12.50  per  share  and  $8.938-$11.00  per  share,  respectively,   were
outstanding  during the three months  ended  September  30,  1998,  but were not
included in the  computation  of diluted  EPS  because the options and  warrants
exercise price was greater than the average market price of the Common Stock.

Incremental  shares for stock  options and warrants  calculated  pursuant to the
treasury  stock  method  for the three  months  ended  September  30,  1999 were
162,213.  These  shares were not included in diluted EPS because they would have
been  antidilutive  for such  period.  Additionally,  options  and  warrants  to
purchase  1,073,715 shares,  255,310 shares and 385,416 shares for $14.64-$17.00
per share,  $11.25-$12.50 per share and  $8.938-$11.00 per share,  respectively,
were outstanding  during the three months ended September 30, 1999, but were not
included in the  computation  of diluted  EPS  because the options and  warrants
exercise price was greater than the average market price of the Common Stock.

                                       7

<PAGE>

NOTE 3.  LONG-TERM DEBT
-------  --------------

        The Company has a $75.0 million  amended and restated  revolving  credit
facility with a syndicate of banks led by SunTrust  Bank,  South  Florida,  N.A.
("Amended  SunTrust  Facility").  The  Amended  SunTrust  Facility  amended  and
restated the Company's  existing $50.0 million  revolving  credit facility which
had been entered into in October 1997. The Amended  SunTrust  Facility  contains
interest  rates and an unused  facility fee based on a pricing  grid  calculated
quarterly on senior funded debt to annualized EBITDA. The Company is entitled to
select the Base Rate or LIBOR, plus applicable  margin,  for principal  drawings
under the Amended SunTrust Facility. The applicable LIBOR margin pursuant to the
pricing  grid ranges from 1.75% to 3.5%.  The  applicable  unused  facility  fee
pursuant to the pricing  grid  ranges  from  0.375% to 0.50%.  Interest  only is
payable  periodically  until the expiration of the Amended SunTrust  Facility on
May 4, 2002;  there is, however,  a two year renewal option subject to approval.
The Amended SunTrust  Facility is  collateralized  by  substantially  all of the
assets of the  Company.  The Company is precluded  from  declaring or paying any
cash  dividends  and is  required  to  meet  certain  affirmative  and  negative
covenants including,  but not limited to, financial  covenants.  Pursuant to the
Amended SunTrust Facility,  drawings are limited to availability under a formula
predicated upon multiples of EBITDA.

        A total of  $44.25  million  was  outstanding  pursuant  to the  Amended
SunTrust  Facility  with  interest from 8.74% to 8.88% per annum as of September
30, 1999.

        As of September 30, 1999,  the Company  maintained an interest rate swap
transaction  (the "Swap") with SunTrust  Bank,  Atlanta,  in the amount of $10.0
million (the "Notional Amount").  The effective date of the Swap is September 2,
1998 and it terminates on September 5, 2000.  Pursuant to the Swap,  the Company
pays a fixed rate of 6% per annum and receives a LIBOR-based floating rate.


NOTE 4.  SUBORDINATED DEBT
-------  -----------------

Represents  unsecured  Senior  Subordinated   Promissory  Notes  ("Notes")  with
interest only at 12% per annum payable semi-annually on April 30 and October 31,
due October 31, 2004. The Notes were sold with detachable seven year warrants to
purchase an aggregate of 655,738  shares of Common Stock at an exercise price of
$16.40 per stock  unit.  In July 1998,  the  agreement  governing  the Notes was
amended  to  adjust  certain  financial  covenants  as  of  June  30,  1998  and
prospectively.  In exchange for the  amendment,  the exercise  price for 612,023
warrants  was  reduced  to $12.40  per  stock  unit.  Additionally,  NationsBanc
Montgomery Securities, Inc., the placement agent, received a warrant to purchase
an aggregate of 30,000 shares of Common Stock at an exercise price of $14.64 per
share which expires on October 31, 2004.

        On May 4, 1999,  the Company  sold an  additional  $10.0  million of its
Senior  Subordinated  Promissory Notes  ("Additional  Notes").  Except for their
October 31, 2005 maturity date, the Additional Notes are substantially identical
to the Notes. The Additional Notes were sold with detachable 6-1/2 year warrants
to purchase an aggregate of 372,892  shares of Common Stock at an exercise price
of $6.65 per stock unit. In connection  with the sale of the  Additional  Notes,
certain  financial  covenants  governing the Notes and the Additional Notes were
adjusted  as of March 31,  1999 and  prospectively  and the  exercise  price for
612,023  of the  warrants  issued in  connection  with the sale of the Notes was
reduced  to $6.65 per stock  unit.  Additionally,  effective  May 4,  1999,  the
interest rate on the original  $30.0 million of Notes  increased to 14% and will
continue at 14% during any quarter during which certain financial ratios are not
met.


NOTE 5.  STOCK OPTION PLAN
-------  -----------------

In 1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan"). Under
the 1995 Plan,  the  Company has  reserved  850,000  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  must be at least  equal to 100% of the fair market
value of the Common Stock at the date of the grant,  and the  exercise  price of
non-qualified stock options may not be less than 75% of the fair market value of
the Common  Stock at the date of the grant.  The maximum term for all options is
10  years.  Options  granted  to date  vest in three to five  installments  over
periods of three to four and one-half  years. As of September 30, 1998 and 1999,
options for 105,213 shares and 287,974 shares were exercisable, respectively.

                                       8
<PAGE>

        The following  table  summarizes the  transactions  pursuant to the 1995
Plan.
<TABLE>
<CAPTION>
                                                                                         Weighted-Average
                                          Shares               Exercise Price              Exercise Price
                                          ------               --------------            ----------------
<S>                                    <C>                 <C>                            <C>
Outstanding at June 30, 1998               610,926                 $9-$11.28                   $10.61
Granted                                    214,500                  $5.50-$7                    $5.74
Expired or canceled                         21,200                 $9-$11.25                   $10.40
                                         ---------              ------------                 --------
Outstanding at June 30, 1999               804,226              $5.50-$11.28                    $9.32
Granted                                          0                         0                        0
Expired or canceled                          2,500              $5.50-$11.25                    $8.95
                                         ---------             -------------                 --------
Outstanding at September 30, 1999          801,726              $5.50-$11.28                    $9.32
                                         =========             =============                 ========
</TABLE>

        In 1995,  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 receives 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 receives 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 at the date of grant. All options vest in three
equal  annual  installments  beginning on the first  anniversary  of the date of
grant.  The maximum term for all options is ten years.  As of September 30, 1998
and 1999,  options to purchase  12,000 shares and 8,000 shares were  exercisable
and options for 26,000 and 30,000, respectively, were outstanding.

NOTE 6.  OPERATING LEASES
-------  ----------------

        The  Company  entered  into 12  operating  leases  from  July 1  through
September 30, 1999 for trucks with  aggregate  annual  rentals of  approximately
$130,000 expiring at various dates through 2005.

                                       9

<PAGE>

ITEM 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        THIS  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR 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, OUR EXPANSION  INTO NEW MARKETS,  COMPETITION,
TECHNOLOGICAL   ADVANCES,  YEAR  2000  ISSUES  AND  AVAILABILITY  OF  MANAGERIAL
PERSONNEL.

OVERVIEW

        We are the largest supplier in the United States of bulk CO2 systems and
bulk CO2 for carbonating and dispensing fountain beverages. We currently operate
a national network of 88 service locations in 44 states servicing  approximately
67,000 bulk and high pressure customers.  Over 97% of fountain beverage users in
the Continental United States are within our current service area.

        Growth in our customer base has averaged 78% annually.  Our rapid growth
has been due to a  combination  of  internal  growth  and over 30  acquisitions.
Today,  the majority of our growth is driven by the  conversion of high pressure
CO2 users to bulk CO2 systems. Our success in conversions is demonstrated in the
Florida   market   where  we  continue  to  rapidly  add  new  bulk  CO2  system
installations, even after actively marketing in the state since 1990.

        Substantially  all of our revenues  have been derived from the rental of
bulk  CO2  systems  installed  at  customers'  sites,  the  sale of CO2 and high
pressure cylinder revenues.  Revenues have grown from $812,000 in fiscal 1991 to
$47.1  million in fiscal 1999, an average  increase of 68% annually.  We believe
that our revenue base is stable due to the existence of long-term contracts with
our customers which generally  roll-over without a significant  portion expiring
without  renewal in any one year.  In each of fiscal 1997,  1998 and 1999,  less
than 5% of our bulk CO2  systems in  service  experienced  service  termination.
Service termination is typically caused by restaurant closure. Affected bulk CO2
systems are either  removed and  reconditioned,  or left in place when prospects
for a new  restaurant  at the same location  appear  likely.  Revenue  growth is
largely dependent on both (1) the rate of new bulk CO2 system  installations and
(2) the  growth in bulk CO2  sales at (i)  customers  on  rental  plus per pound
charge contracts and (ii) customers that own their own bulk CO2 systems.  During
the first quarter of fiscal 2000, our customer base  increased by  approximately
2,000 new accounts.

        Cost of products sold is comprised of purchased  CO2 and labor,  vehicle
and service  location costs  associated  with the storage and delivery of CO2 to
customers.  Selling,  general and  administrative  expenses consist of salaries,
dispatch and  communications  costs,  and expenses  associated  with  marketing,
administration,  accounting and employee  training.  Consistent with the capital
intensive  nature  of  our  business,  we  incur  significant  depreciation  and
amortization expenses. These stem from the depreciation of our bulk CO2 systems;
depreciation   and   amortization  of  bulk  CO2  system   installation   costs;
amortization  of sales  commissions;  and  amortization  of  goodwill,  deferred
financing costs and other intangible assets.

        With  respect to bulk CO2  systems,  we only  capitalize  costs that are
associated  with specific  successful  placements of such systems with customers
under  noncancelable  contracts  and  which  would  not be  incurred  but  for a
successful placement. All other service,  marketing and administrative costs are
expensed as incurred.

        Since 1990,  we have devoted  significant  resources to building a sales
and marketing  organization,  adding  administrative  personnel and developing a
national  infrastructure  to  support  the  rapid  growth  in the  number of our
installed  base  of bulk  CO2  systems.  The  cost  of  this  expansion  and the
significant  depreciation  expense of our  installed  network  have  resulted in
significant operating losses to date and accumulated net losses of $19.5 million
at September 30, 1999.

        We believe  that our future  revenue  growth,  gains in gross margin and
profitability  will  be  dependent  upon  increases  in  route  density  and the
expansion and penetration of bulk CO2 system  installations  in existing and new
market regions resulting from successful ongoing marketing.

        Our  experience  has been that gross margins at service  locations  have
generally  increased  with the length of time that the  service  location  is in
operation.  Gross margins in our mature  markets are generally in the 55% to 65%
range.  As of September 30, 1999, 43% of our stationary  service  locations were
open over three years,  27% were open two to three  years,  28% were open one to
two years and 2% were open under one year. For the three months ended  September
30, 1999 and 1998,  depots open over three years averaged a 55% gross margin and
a 54% gross margin, respectively,

                                       10

<PAGE>
depots  open two to three  years  averaged  a 51% gross  margin  and a 43% gross
margin,  respectively,  and  depots  open one to two years  averaged a 35% gross
margin  and a 26%  gross  margin,  respectively.  For  the  three  months  ended
September  30,  1999,  the depot  open  under  one year had a 44% gross  margin.
Additionally,  we operate 20 mobile service  locations with an average 39% gross
margin for the quarter ended September 30, 1999 compared to eight mobile service
locations with an average gross margin of 9% for the quarter ended September 30,
1998.  Same store sales for depots open one to three years increased by 27%. New
service  locations  typically  operate at low or negative  gross  margins in the
early stages and detract from our highly profitable  service locations in mature
markets. Increases in gross margins at service locations are directly related to
increases in the number of customers  serviced.  New accounts are being added to
newer depots for which there is  substantial  excess  capacity,  and  therefore,
relatively  little  additional  cost is incurred to service new  customers.  New
multi-unit placement  agreements combined with single-unit  placements will help
us in achieving  route density.  As our customer base  increases,  we anticipate
that  our  financial  performance  on a  sequential  basis  will  improve  at an
accelerated  rate. Our route density is highest in Florida and is less developed
in the other areas where we presently have operations.

        We believe that optimal  route  density is achieved at over 400 accounts
serviced per bulk CO2 truck and we typically  employ  targeted  sales efforts to
build density within an existing  delivery  route. We maintain a "hub and spoke"
route structure and establish  additional  stationary bulk CO2 service locations
as a service area expands through  geographic growth. Our entry into many states
was  accomplished  largely through business  acquisitions  with thinly developed
route networks. We expect to benefit from route efficiencies and other economies
of  scale as we build  our  customer  base in  these  states  through  intensive
marketing  initiatives.  Greater scale may also lead to better vehicle and fixed
asset  utilization  as  well  as the  ability  to  spread  fixed  marketing  and
administrative costs over a broader revenue base.

        We believe  that  earnings  before  interest,  taxes,  depreciation  and
amortization ("EBITDA") is the principal financial measure by which we should be
measured as we continue to achieve  national  market presence and to build route
density.  Our revolving  credit facility  utilizes EBITDA for its calculation of
financial  leverage,  affecting  the amount of funds  available to us to borrow.
Information  regarding  EBITDA  is  presented  because  of its  use  by  certain
investors  as one  measure of a  corporation's  ability to  generate  cash flow.
EBITDA should not be considered as an alternative to, or more  meaningful  than,
operating  income or cash flows from  operating  activities as an indicator of a
corporation's operating performance.  EBITDA excludes significant costs of doing
business and should not be considered in isolation  from GAAP  measures.  EBITDA
has grown  from  $15,000 in fiscal  1991 to $11.3  million  in fiscal  1999,  an
average  increase of 72% annually from fiscal 1994 to fiscal 1999. For the three
months  ended  September  30,  1999,  EBITDA was $3.7  million or $14.7  million
annualized, the highest for any quarter in the our history.


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
                                                                       September 30,
                                                                       -------------
                                                                   1999           1998
                                                                   ----           ----
<S>                                                               <C>             <C>
Income Statement Data:

Net sales................................................         100.0%          100.0%
Cost of products sold....................................          51.5            52.9
Selling, general and administrative expenses.............          21.5            22.5
Depreciation and amortization............................          26.6            26.2
                                                              ---------        --------
Operating income (loss)..................................            .4            (1.6)
Interest expense, net....................................          17.9            14.4
                                                              ---------        --------

Net loss.................................................         (17.5)          (16.0)
                                                              ==========       =========

Other Data:
Operating income before depreciation and amortization
(EBITDA)..................................................         27.0%           24.5%
                                                              ==========       =========
</TABLE>

                                       11

<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998

NET SALES

        Net sales  increased $2.7 million,  or 25.1%,  from $10.9 million in the
1998 period to $13.6  million in the 1999 period.  The increase in net sales was
primarily  due to internal  growth in the number of Company  owned and  customer
owned bulk CO2 systems serviced. At September 30, 1999, there were approximately
51,000 Company owned and 10,000  customer owned bulk CO2 systems in service,  an
increase of 11,000,  or 22%,  over the  approximately  42,000  Company owned and
8,000 customer owned bulk CO2 systems in service at September 30, 1998.

COST OF PRODUCTS SOLD

        Cost of products  sold  increased by $1.2 million,  or 21.6%,  from $5.8
million in the 1998 period to $7.0 million in the 1999 period and decreased as a
percentage of net sales from 52.9% to 51.5%. The dollar increase is attributable
to our continued growth.  The percentage  decrease is attributable to a decrease
in fully loaded route drivers.  Fully loaded route drivers increased by $335,000
from $2.0  million in the 1998  period to $2.3  million  in the 1999  period and
decreased as a percentage of net sales from 18.4% to 17.2%.  Overtime  expressed
as a percentage  of net sales,  was 3.2% in the 1998 period and 1.8% in the 1999
period.  The  overtime  percentage  decrease  was  attributable  to a  proactive
approach to overtime  management enabled by new software.  Fully loaded auto and
truck  expense  increased by $364,000  from  $881,000 in the 1998 period to $1.2
million in the 1999 period and  increased as a percentage of net sales from 8.1%
to 9.2%.  Depot  expenses  decreased as a  percentage  of net sales from 5.3% to
4.2%. This percentage  decrease is attributable to an increase of only one depot
from  September  30,  1998 to  September  30,  1999 and  increased  sales at our
existing  depots.  The number of depots operated by us at September 30, 1999 was
69,  compared to 68 at September  30,  1998.  When we open new depots and expand
into new  markets,  higher  costs  expressed  as a  percentage  of net sales are
incurred  until route  density is achieved.  At September  30, 1999, we serviced
over 400 bulk CO2 customers per delivery vehicle from 71% of our depots.

SELLING, GENERAL AND AdMINISTRATIVE EXPENSES

        Selling,  general and administrative  expenses increased by $483,000, or
19.8%,  from $2.4  million in the 1998 period to $2.9 million in the 1999 period
and  decreased  as a  percentage  of net sales from  22.5% to 21.5%.  The dollar
increase is  primarily  attributable  to growth in the number of  marketing  and
administrative  personnel and their associated expenses. The percentage decrease
is  attributable to economies of scale. At September 30, 1998, we had operations
in 44 states and employed 161 marketing  employees and at September 30, 1999, we
had operations in 44 states and employed 190 marketing employees.

DEPRECIATION AND AMORTIZATION

        Depreciation and amortization  increased by $769,000, or 27.0% from $2.8
million in the 1998 period to $3.6 million in the 1999  period.  As a percentage
of net sales,  such expense  increased from 26.2% in the 1998 period to 26.6% in
the 1999 period. Depreciation expense increased by $559,000 from $1.9 million in
the 1998  period  to $2.5  million  in the 1999  period  principally  due to the
increase in bulk CO2 systems leased to customers.  As a percentage of net sales,
depreciation  expense  increased  from 17.8% in the 1998  period to 18.4% in the
1999 period.  Amortization  expense  increased by $210,000  from $908,000 in the
1998 period to $1.1  million in the 1999 period  primarily  due to  amortization
related  to  deferred  charges,  and  deferred  lease  acquisition  costs.  As a
percentage of net sales, amortization expense decreased from 8.4% to 8.2%.

OPERATING INCOME

        For the reasons described above,  operating income was $54,000,  or 0.4%
of net sales,  in the 1999 period,  compared to an operating loss of ($180,000),
or (1.6%) of net sales, in the 1998 period.

INTEREST EXPENSE

        Net interest expense increased by $874,000 from $1.6 million in the 1998
period to $2.4 million in the 1999 period,  and increased as a percentage of net
sales  from 14.4% to 17.9%.  This  increase  is  primarily  attributable  to the
increased  level of long-term debt and  subordinated  debt in the 1999 period as
compared to the 1998 period.

                                       12
<PAGE>
NET LOSS

        For the reasons  described  above,  net loss  increased by $639,000,  or
36.7%,  from $1.7 million in the 1998 period to $2.4 million in the 1999 period.
No provision for income tax expense in either the 1998 period or 1999 period has
been made due to historical net losses.

EBITDA

        For the reasons described above, EBITDA,  representing  operating income
plus  depreciation and amortization,  increased by $1.0 million,  or 37.6%, from
$2.7 million in the 1998 period to $3.7 million in the 1999 period and increased
as a percentage of net sales from 24.5% to 27.0%.

LIQUIDITY AND CAPITAL RESOURCES

        Our cash requirements  consist  principally of (1) capital  expenditures
associated  with  purchasing  and placing new bulk CO2 systems  into  service at
customers' sites; (2) payments of interest on outstanding indebtedness;  and (3)
working capital. Whenever possible, we seek to obtain the use of vehicles, land,
buildings,  and other office and service  equipment under operating  leases as a
means of conserving  capital.  As of September 30, 1999, we  anticipated  making
cash capital  expenditures of at least $15.0 million to $30.0 million during the
remaining  nine  months of fiscal  2000,  primarily  for  purchases  of bulk CO2
systems that we expect to place into  service.  Once bulk CO2 systems are placed
into service,  we generally  experience positive cash flows on a per-unit basis,
as there are minimal  additional  capital  expenditures  required  for  ordinary
operations.  In addition to capital  expenditures related to internal growth, we
review  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.

        During  fiscal  1999,  our capital  resources  included  cash flows from
operations,  available borrowing capacity under our credit facility and proceeds
from the sale of our 12%  Senior  Subordinated  Promissory  Notes  due 2005 (the
"2005 Notes").

        On May 4, 1999,  we entered  into a $75.0  million  amended and restated
revolving  credit facility with a syndicate of banks led by SunTrust Bank, South
Florida,  National  Association  ("Amended  SunTrust  Facility").   The  Amended
SunTrust  Facility contains interest rates and an unused facility fee based on a
pricing grid calculated quarterly on senior funded debt to annualized EBITDA. We
are  entitled  to select the Base Rate or LIBOR,  plus  applicable  margin,  for
principal  drawings under the Amended  SunTrust  Facility.  The applicable LIBOR
margin  pursuant to the pricing grid ranges from 1.75% to 3.5%,  the  applicable
unused facility fee pursuant to the pricing grid ranges from 0.375% to 0.50% and
the applicable  Base Rate margin  pursuant to the pricing grid ranges from 0.25%
to 2.00%.  Interest  only is payable  periodically  until the  expiration of the
Amended SunTrust  Facility.  The Amended SunTrust  Facility expires May 4, 2002,
however,   it  contains  a  two  year  renewal   option   subject  to  approval.
Additionally,  it is collateralized by substantially all of our assets. Drawings
pursuant to the Amended  SunTrust  Facility are limited to availability  under a
formula  predicated upon multiples of EBITDA. We are precluded from declaring or
paying any cash  dividends  and are  required to meet  certain  affirmative  and
negative covenants, including but not limited to financial covenants. At various
dates in the past we have been unable to meet certain  covenants and have had to
obtain waivers or modifications  of terms from our lenders.  Although we believe
that we will be able to comply  with the  current  provisions  of our  borrowing
arrangements,  circumstances  may  result in our  having to  obtain  waivers  or
further  modifications  in the  future.  We  believe  that we have an  excellent
relationship with our lenders.

        Simultaneously with the Amended SunTrust Facility, we sold $10.0 million
of our 2005 Notes.  Except for their  October 31, 2005 maturity  date,  the 2005
Notes are  substantially  identical  to our 12% Senior  Subordinated  Promissory
Notes due 2004 (the "2004  Notes").  The 2005  Notes  were sold with  detachable
6-1/2 year  warrants to purchase an  aggregate  of 372,892  shares of our Common
Stock at an exercise price of $6.65 per stock unit. In connection  with the sale
of the 2005 Notes,  certain financial covenants governing the 2004 Notes and the
2005 Notes were adjusted as of March 31, 1999 and prospectively and the exercise
price for 612,023  warrants issued in connection with the sale of the 2004 Notes
was reduced to $6.65 per stock unit.  Additionally,  effective May 4, 1999,  the
interest rate on the original $30.0 million of Notes  increased to 14% per annum
and will  continue at 14% per annum  during any  quarter  during  which  certain
financial ratios are not met.

        During the three months ended September 30, 1999, our capital  resources
included cash flows from operations

                                       13
<PAGE>
and available  borrowing  capacity under the Amended  SunTrust  Facility.  As of
September 30, 1999, a total of $44.25 million was outstanding  under the Amended
SunTrust  Facility  with  interest at three hundred fifty basis points above the
applicable London InterBank Offering Rate ("LIBOR") (8.74% to 8.88% at September
30, 1999).

        We believe  that cash flows from  operations  and  available  borrowings
under  the  Amended  SunTrust  Facility  will be  sufficient  to  fund  proposed
operations for at least the next twelve months.

        WORKING  CAPITAL.  At June 30, 1999, we had negative  working capital of
$455,000.  At  September  30,  1999,  we had  negative  working  capital of $3.1
million.

        CASH  FLOWS  FROM  OPERATING  ACTIVITIES.  For the  three  months  ended
September  30, 1998 and  September  30,  1999,  net cash  provided by  operating
activities  was $2.5 million and $3.1 million,  respectively.  The increase from
the 1998 period to the 1999 period of $571,000 is primarily due to a decrease in
accounts  receivable of $1.9 million in the 1998 period  compared to an increase
of $206,000 in the 1999 period.

        CASH  FLOWS  FROM  INVESTING  ACTIVITIES.  For the  three  months  ended
September 30, 1999 and September 30, 1998, net cash used in investing activities
was $7.4 million and $5.2 million, respectively. These investing activities were
primarily  attributable  to the  installation  and  direct  placement  costs and
acquisition of bulk CO2 systems.

        CASH  FLOWS  FROM  FINANCING  ACTIVITIES.  For the  three  months  ended
September  30, 1998 and  September  30, 1999,  cash flows  provided by financing
activities  were $5.0 million and $978,000,  respectively.  For the three months
ended  September 30, 1998 and September 30, 1999, net cash provided by financing
activities was primarily from the issuance of long-term debt.

YEAR 2000

        We have  conducted a review to identify  which of our computer and other
business  operating systems will be affected by the "Year 2000" problem and have
developed a project plan and schedule to solve this issue.  Among the  functions
and systems  impacted  could be inventory and accounting  systems,  dispatch and
delivery systems, electronic data interchange,  and mechanical systems operating
everything from office building environmental controls to telephone switches and
fax  machines.  We  believe  that  the  costs  of  modifications,  upgrades,  or
replacements  of software,  hardware,  or capital  equipment  which would not be
incurred but for Year 2000 compatibility requirements have not and will not have
a material impact on our financial position or results of operations.

        We are also  engaged in  communications  with its  significant  business
partners,  suppliers  and  customers  to  determine  the  extent to which we are
vulnerable to such third parties' failure to address their own Year 2000 issues.
Our  assessment of the impact of Year 2000 issues  includes an assessment of our
vulnerability  to  such  third  parties.  We are  seeking  assurances  from  our
significant  business  partners,  suppliers  and customers  that their  computer
applications  will not fail due to Year 2000 problems.  Nevertheless,  we do not
control,  and can give no  assurances as to the substance or success of the Year
2000 compliance  efforts of such  independent  third parties and we believe that
there is a risk that  certain of these third  parties on whom our  finances  and
operations  depend will  experience  Year 2000  problems  that could  affect our
financial  position or results of operations.  These risks include,  but are not
limited to, the potential  inability of suppliers to correctly or timely provide
necessary services,  materials and components for our operations;  the inability
of our customers to timely or correctly  process and pay our  invoices;  and the
inability  of lenders,  lessors or other  sources of our  necessary  capital and
liquidity to make funds available to us when required.

        Because we are unaware of any material Year 2000 compliance  issues,  we
lack a Year  2000-specific  contingency plan. If Year 2000 compliance issues are
discovered, we will evaluate the need for one or more contingency plans relating
to  such  issues.  If  we  are  unable  to  develop  and  implement  appropriate
contingency  plans, as needed,  in a timely manner, we may experience delays in,
or increased costs  associated  with,  implementation  of changes to address any
such issues, which could have material adverse effect on our business, operating
results or financial condition.

INFLATION

         The modest levels of inflation in the general economy have not affected
our  results of  operations.  Additionally,  our  customer  contracts  generally
provide for annual  increases  in the monthly  rental rate based on increases in
the consumer  price index.  We believe that  inflation  will not have a material
adverse effect on our future results of operations.

                                       14

<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        As discussed  under  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" above, as
of  September  30,  1999, a total of $44.25  million was  outstanding  under the
Amended  SunTrust  Facility  with  interest at three  hundred fifty basis points
above the 90 day LIBOR rate (8.74% to 8.88% at September 30,  1999).  Based upon
$44.25 million  outstanding under the Amended SunTrust Facility at September 30,
1999,  our  annual  interest  cost under the  Amended  SunTrust  Facility  would
increase by $443,000 for each one percent increase in LIBOR (i.e.,  from 9.0% to
10.0%).

        In order to reduce our exposure to increases in LIBOR,  and consequently
to increases in interest  payments,  on June 9, 1998 we entered into an interest
rate swap transaction (the "Swap") with SunTrust Bank, Atlanta, in the amount of
$10.0  million  (the  "Notional  Amount").  The  effective  date of the  Swap is
September 2, 1998 and it terminates on September 5, 2000.  Pursuant to the Swap,
we pay a fixed interest rate of 6% per annum and receive a LIBOR-based  floating
rate.  The  effect  of the Swap is to  neutralize  any  changes  in LIBOR on the
Notional  Amount.  If LIBOR  decreases below 6% during the period the Swap is in
effect,  interest  payments by us on the Notional Amount will be greater than if
we had not entered into the Swap, since by exchanging LIBOR for a fixed interest
rate,  we would not benefit from  falling  interest  rates on LIBOR,  a variable
interest  rate.  We do not enter into  speculative  derivative  transactions  or
leveraged swap transactions.


PART II.  OTHER INFORMATION


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

         (a)      Exhibit 27 - Financial Data Schedule.

         (b)      Reports on Form 8-K.

                  (1) No reports on Form 8-K were filed during the quarter ended
September 30, 1999.

                                       15

<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 10, 1999                   By:  /s/ Joann Sabatino
                                                 -------------------------------
                                                     Joann Sabatino
                                                     Chief Financial Officer

                                       16