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 March 31, 2000
                                       OR

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

For the transition period from _________________ to ________________________

                         Commission file number 0-27378

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

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

  2800 SE 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 March 31, 2000
                      -----                        -----------------------------
         Common Stock, $.001 par value                     7,274,682 shares



<PAGE>

                                   NuCo2 Inc.

                                   Index                                    Page
                                   -----                                    ----

PART I.     FINANCIAL INFORMATION

ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS

            Consolidated Balance Sheets as of March 31, 2000 and             3
               June 30, 1999

            Consolidated Statements of Operations for the Three Months
               Ended March 31, 2000 and March 31, 1999                       4

            Consolidated Statements of Operations for the Nine Months
               Ended March 31, 2000 and March 31, 1999                       5

            Consolidated Statement  of Shareholders' Equity for the Nine
               Months Ended March 31, 2000                                   6

            Consolidated Statements of Cash Flows for the Nine Months
               Ended March 31, 2000 and March 31, 1999                       7

            Notes to Consolidated Financial Statements                       8

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF                         11
              FINANCIAL CONDITION AND RESULTS OF
              OPERATIONS

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES                        16
              ABOUT MARKET RISK

PART II.    OTHER INFORMATION


ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                                17

SIGNATURES                                                                  18


                                       2
<PAGE>
PART I.     FINANCIAL INFORMATION

ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS

                                   NuCo2 Inc.

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>

                                                                                March 31, 2000     June 30, 1999
                                                                                --------------     -------------
                                                                                  (unaudited)

Current assets:
<S>                                                                             <C>              <C>
    Cash and cash equivalents                                                   $     148,994    $   1,579,191
    Trade accounts receivable; net of allowance for doubtful
        accounts of $965,162 and $557,592, respectively                             7,758,535        6,767,716
    Inventories                                                                       239,710          213,605
    Prepaid expenses and other current assets                                       1,693,015          593,487
                                                                                -------------    -------------
           Total current assets                                                     9,840,254        9,153,999
                                                                                -------------    -------------

Property and equipment, net                                                       106,552,974       99,664,890
                                                                                -------------    -------------

Other assets:
    Goodwill, net                                                                  20,736,585       21,645,293
    Deferred charges, net                                                           2,478,843        2,915,167
    Customer lists, net                                                             2,112,922        2,897,638
    Restrictive covenants, net                                                      1,657,092        1,928,700
    Deferred lease acquisition costs, net                                           3,512,854        3,236,919
    Deposits                                                                          308,203          187,595
                                                                                -------------    -------------
                                                                                   30,806,499       32,811,312
                                                                                -------------    -------------
                                                                                $ 147,199,727    $ 141,630,201
                                                                                =============    =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Current maturities of long-term debt                                        $      32,509    $      96,748
    Accounts payable                                                               10,893,609        6,701,695
    Accrued expenses                                                                  937,425          747,631
    Accrued interest                                                                2,561,161        1,473,704
    Accrued payroll                                                                   380,087          543,924
    Other current liabilities                                                         273,362           45,570
                                                                                -------------    -------------
        Total current liabilities                                                  15,078,153        9,609,272

Long-term debt, excluding current maturities                                       50,089,063       43,615,025
Subordinated debt                                                                  38,914,062       38,748,695
Customer deposits                                                                   2,174,406        1,924,528
                                                                                -------------    -------------
           Total liabilities                                                      106,255,684       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 7,274,682 and 7,216,664, respectively                    7,275            7,217
    Additional paid-in capital                                                     64,835,171       64,831,748
    Accumulated deficit                                                           (23,898,403)     (17,106,284)
                                                                                -------------    -------------
           Total shareholders' equity                                              40,944,043       47,732,681
                                                                                -------------    -------------
                                                                                $ 147,199,727    $ 141,630,201
                                                                                =============    =============
</TABLE>

                                       3
<PAGE>
                                   NuCo2 Inc.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



<TABLE>
<CAPTION>

                                                            Three Months Ended
                                                            ------------------
                                                     March 31, 2000     March 31, 1999
                                                     --------------     --------------

<S>                                                   <C>                <C>
Net Sales                                             $ 14,812,246       $ 12,008,422
                                                      ------------       -------------

Costs and expenses:
    Cost of products sold                                7,409,752          6,459,627
    Selling, general and administrative expenses         3,223,242          2,703,649
    Depreciation and amortization                        3,923,007          3,229,969
                                                      ------------       -------------
                                                        14,556,001         12,393,245
                                                      ------------       -------------

    Operating Income (loss)                                256,245           (384,823)

    Interest expense, net                                2,502,443          1,892,699
                                                      ------------       -------------

    Net (loss)                                        $ (2,246,198)      $ (2,277,522)
                                                      ------------       -------------

Basic and Diluted EPS:

    Net (loss)                                        $      (.31)       $       (.32)
                                                      ============       =============

    Weighted average number of common and common
         equivalent shares outstanding

        Basic and Diluted                                7,246,104          7,216,664
                                                      ============       =============
</TABLE>


                                       4

<PAGE>
                                   NuCo2 Inc.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)




                                                       Nine Months Ended
                                                       -----------------
                                                 March 31, 2000   March 31, 1999
                                                 --------------   --------------


Net Sales                                          $42,101,179   $34,123,575
                                                   -----------   -----------

Costs and expenses:
    Cost of products sold                           21,151,043    18,282,207
    Selling, general and administrative expenses     9,011,863     7,602,121
    Depreciation and amortization                   11,350,698     9,170,979
                                                   -----------   -----------
                                                    41,513,604    35,055,307
                                                   -----------   -----------

    Operating Income (loss)                            587,575      (931,732)

    Interest expense, net                            7,379,694     5,275,820
                                                   -----------   ------------

    Net (loss)                                     $(6,792,119)  $(6,207,552)
                                                   ===========   ============

Basic and Diluted EPS:


    Net (loss)                                     $      (.94)  $      (.86)
                                                   ===========   ============

    Weighted average number of common and common
         equivalent shares outstanding

        Basic and Diluted                            7,226,411     7,216,664
                                                  ============   ============


                                       5
<PAGE>

                                   NuCo2 Inc.


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

Issuance of 633 shares of Common
Stock - exercise of options                    633              1          3,480            --             3,481

Issuance of 57,385 shares of Common         57,385             57            (57)           --              --
Stock - exercise of warrants

Net (loss)                                    --             --             --        (6,792,119)     (6,792,119)
                                      ------------   ------------   ------------    ------------    ------------

Balance March 31, 2000                   7,274,682   $      7,275   $ 64,835,171    $(23,898,403)   $ 40,944,043
                                      ============   ============   ============    ============    ============
</TABLE>


                                       6

<PAGE>
                                   NuCo2 Inc.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                            Nine Months Ended
                                                                                            -----------------
                                                                                    March 31, 2000  March 31, 1999
                                                                                    --------------  --------------

<S>                                                                                 <C>            <C>
Net (loss)                                                                          $(6,792,119)   $ (6,207,552)

Cash flows from operating activities:
    Adjustments  to  reconcile  net  (loss) to net cash  provided
        by operating activities:
              Depreciation and amortization of property and equipment                 7,931,061       6,366,101
              Amortization of other assets                                            3,419,637       2,804,878
              Amortization of original issue discount                                   165,367          32,143
              Loss on disposal of property and equipment                                663,345         682,037

              Changes in operating assets and liabilities:
              Decrease (increase) in:
                   Trade accounts receivable                                           (990,819)     (2,211,838)
                   Inventories                                                          (26,105)        (17,844)
                   Prepaid expenses and other current assets                         (1,099,528)       (971,357)
              Increase (decrease) in:
                   Accounts payable                                                   4,191,914         398,241
                   Accrued expenses                                                     189,794        (146,654)
                   Accrued payroll                                                     (163,837)         29,587
                   Accrued interest                                                   1,087,457       1,110,886
                   Other current liabilities                                            227,792          28,320
                   Customer deposits                                                    249,878         584,743
                                                                                   ------------    ------------
                   Net cash provided by operating activities                          9,053,837       2,481,691
                                                                                   ------------    ------------

Cash flows from investing activities:
    Proceeds from disposal of property and equipment                                     63,110          83,980
    Purchase of property and equipment                                              (15,469,721)    (18,751,286)
    Acquisition of businesses                                                              --            45,460
    (Increase) in deposits                                                             (120,608)        (48,409)
    Increase in deferred lease acquisition costs                                     (1,137,479)     (1,285,969)
                                                                                   ------------    ------------
           Net cash (used in) investing activities                                  (16,664,698)    (19,956,224)
                                                                                   ------------    ------------

Cash flows from financing activities:
    Repayment of long-term debt                                                         (90,201)       (102,063)
    Proceeds from issuance of long-term debt and subordinated debt                    6,500,000      18,500,000
    Increase in deferred charges                                                       (232,616)        (52,852)
    Exercise of warrants and options                                                      3,481            --
                                                                                   ------------    ------------
        Net cash provided by financing activities                                     6,180,664      18,345,085
                                                                                   ------------    ------------

Net increase (decrease) in cash and cash equivalents                                 (1,430,197)        870,552
Cash and cash equivalents at the beginning of period                                  1,579,191         336,510
                                                                                   ------------    ------------
Cash and cash equivalents at the end of period                                     $    148,994    $  1,207,062
                                                                                   ============    ============

Supplemental  disclosure of cash flow  information:
  Cash paid during the period for:
        Interest                                                                   $  6,130,504    $  4,153,560
                                                                                   ============    ============
        Income taxes                                                               $          0    $          0
                                                                                   ============    ============
</TABLE>



                                       7
<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 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

            Incremental  shares  for  stock  options  and  warrants   calculated
pursuant to the treasury  stock method for the three and nine months ended March
31, 2000 were 952,879 and 502,806, respectively.  These shares were not included
in diluted  EPS  because  they would have been  antidilutive  for such  periods.
Additionally,  options and warrants to purchase  1,000,000 shares for $17.00 per
share and 43,715 shares for $14.64 per share were  outstanding  during the three
and nine months ended March 31, 2000,  but were not included in the  computation
of diluted EPS  because the  exercise  price of the  options  and  warrants  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 and nine months ended March
31, 1999 were 39,721 and 32,888, respectively. These shares were not included in
diluted  EPS  because  they  would  have  been  antidilutive  for such  periods.
Additionally,  options and warrants to purchase 1,073,715 shares, 869,833 shares
and 390,956  shares for $14.64  -$17.00 per share,  $11.25-$12.50  per share and
$8.94-$11.00 per share,  respectively,  were outstanding during all or a portion
of the three and nine months ended March 31, 1999,  but were not included in the
computation  of diluted  EPS  because  the  exercise  price of the  options  and
warrants was greater than the average market price of the Common Stock.

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 and gross margin factors.  In February 2000,
the agreements  governing the Amended SunTrust Facility,  were amended to adjust
certain  financial  covenants  for the  quarter  ending  December  31,  1999 and
prospectively.

                                       8
<PAGE>

            A total of $49.75  million was  outstanding  pursuant to the Amended
SunTrust  Facility  with  interest from 9.29% to 9.51% per annum as of March 31,
2000.

            As of March 31, 2000,  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% per annum
until such quarter that a certain financial ratio was met. For the quarter ended
December 31, 1999 and prospectively,  the ratio was met and the interest rate on
the Notes was 12% per annum.  In January 2000, the agreements  governing the 12%
Senior  Subordinated  Promissory Notes were amended to adjust certain  financial
covenants for the quarter ending December 31, 1999 and prospectively.

Note 5.     Shareholders' Equity

            In 1995,  the Company  adopted the 1995 Stock Option Plan (the "1995
Plan"). Under the 1995 Plan, the Company has reserved 1,550,000 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 March 31, 1999 and 2000,
options for 278,847 shares and 484,344 shares were exercisable, respectively.

            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                      23,179             $5.50-$11.25              $10.11
             Exercised                                   633                    $5.50               $5.50
                                                ------------       ------------------        ------------
             Outstanding at March 31, 2000           780,414             $5.50-$11.28               $9.30
                                                ============       ==================        ============
</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

                                       9

<PAGE>

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 March  31,  1999 and 2000,
options  to  purchase  12,000  shares  and  14,000  shares,  respectively,  were
exercisable  and  options  for  28,000  and 36,000  shares,  respectively,  were
outstanding.

            On February 14, 2000,  Citizens Financial Group, Inc., the successor
in  interest  to State  Street  Bank and Trust  Company,  exercised  warrants to
purchase  57,385  shares of  Common  Stock  pursuant  to the  cashless  exercise
provision  contained in the warrants.  In connection with the cashless exercise,
warrants to purchase 27,532 shares of Common Stock were cancelled.

Note 6.      Operating Leases

             The  Company  entered  into 26  operating  leases from July 1, 1999
through  March 31, 2000.  Two leases were for storage and  warehouse  facilities
with aggregate annual rentals of approximately  $16,000 expiring in 2003. Twenty
four leases  were for trucks  with  aggregate  annual  rentals of  approximately
$274,000 expiring at various dates through 2006.


Note 7.  Subsequent Events

            In May 2000,  the  Company  sold 5,000  shares of its 8%  Cumulative
Convertible  Preferred Stock, no par value (the "Convertible  Preferred Stock"),
for $1,000 per share (the "Liquidation  Preference").  Cumulative  dividends are
payable  quarterly  in arrears at the rate of 8.0% per annum on the  Liquidation
Preference,  and,  to the  extent  not  paid  in  cash,  will  be  added  to the
Liquidation  Preference.  Shares  of  the  Convertible  Preferred  Stock  may be
converted into shares of Common Stock at any time at a conversion price of $9.47
per share, which represents a 20% premium to average closing price of the Common
Stock on the Nasdaq  Stock Market for the 20 trading days prior to May 12, 2000.
Additionally,  the Company must redeem the Convertible  Preferred Stock upon the
occurrence of a change in control of the Company.

            Simultaneously with the sale of the Convertible Preferred Stock, the
agreements   governing  the  Amended  SunTrust   Facility  and  the  12%  Senior
Subordinated  Promissory Notes were amended.  The Amended SunTrust  Facility was
amended to adjust the borrowing base and to change certain  financial  covenants
for the  quarter  ending  June  30,  2000  and  prospectively.  The  12%  Senior
Subordinated Promissory Notes were amended to adjust certain financial covenants
for the quarter ended March 31, 2000 and prospectively.




                                       10
<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 89  service  locations  in 44 states  servicing
approximately  70,000  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 third 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 $23.9 million
at March 31, 2000.

            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 March 31, 2000, 52% of our stationary  service  locations were open
over  three  years,  38% were open two to three  years,  9% were open one to two
years and 1% was open under one year. For the three months ended March 31, 2000,
depots open over three years  averaged a 57% gross margin;  for the three months
ended March 31, 1999, those same depots averaged a 56% gross margin. Depots open
two to three years as of March 31, 2000 averaged a 42% gross margin for the most
recent quarter;  for the comparable period of last year, these depots averaged a
38% gross margin.  Depots open one to two years  averaged a 26% gross margin for
the quarter  ended March 31, 2000 as compared to these depots  having a 2% gross
margin for the quarter  ended March 31,  1999.  For the quarter  ended March 31,
2000, depots open less than one year had a 3% gross margin.


                                       11

<PAGE>

Additionally,  we operate 19 mobile service  locations with an average 39% gross
margin for the  quarter  ended  March 31,  2000  compared  to 14 mobile  service
locations  with an average  gross margin of 37% for the quarter  ended March 31,
1999. 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 generally
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 at our oldest
depots  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 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  March  31,  2000,  EBITDA  was $4.2  million,  or  $16.7  million
annualized, the highest for any quarter in 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  Nine Months Ended
                                                             March 31,            March 31,
                                                             ---------            ---------

                                                          2000      1999       2000     1999
                                                          ----      ----       ----     ----
Income Statement Data:

<S>                                                       <C>       <C>       <C>       <C>
Net sales                                                 100.0%    100.0%    100.0%    100.0%
Cost of products sold                                      50.0      53.8      50.2      53.5
Selling, general and administrative expenses               21.8      22.5      21.4      22.3
Depreciation and amortization                              26.5      26.9      27.0      26.9
                                                          -----     -----     -----     -----
Operating income (loss)                                     1.7      (3.2)      1.4      (2.7)
                                                          -----     -----     -----     -----
Interest expense, net                                      16.9      15.8      17.5      15.5
                                                          -----     -----     -----     -----

Net loss                                                  (15.2%)   (19.0%)   (16.1%)   (18.2%)
                                                          =====     =====     =====     =====

Other Data:
Operating income before depreciation and amortization
(EBITDA)                                                   28.2%     23.7%     28.4%     24.1%
                                                          =====     =====     =====     =====
</TABLE>


                                       12
<PAGE>

Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999

Net Sales

             Net sales increased by $2.8 million,  or 23.3%,  from $12.0 million
in the 1999  period to $14.8  million in the 2000  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 March  31,  2000,  there  were
approximately 55,000 Company owned and 10,000 customer owned bulk CO2 systems in
service, an increase of 12,000, or 21.8%, over the approximately  44,000 Company
owned and 9,000 customer owned bulk CO2 systems in service at March 31, 1999.

Costs of Products Sold

             Cost of products sold  increased by $950,000,  from $6.5 million in
the 1999 period to $7.4 million in the 2000 period and decreased as a percentage
of net sales from 53.8% to 50.0%.  The dollar  increase is  attributable  to our
continued growth. The percentage decrease is attributable to a decrease in fully
loaded route  drivers,  CO2  purchases  and depot  expenses.  Fully loaded route
drivers  increased  by  $343,000  from $2.0  million in the 1999  period to $2.3
million in the 2000 period and decreased as a percentage of net sales from 16.6%
to 15.7%.  CO2  purchases  increased  by $185,000  from $1.6 million in the 1999
period to $1.8 million in the 2000 period and  decreased as a percentage  of net
sales from 13.1% to 11.9%. Depot expenses decreased as a percentage of net sales
from 5.2% in the 1999 period to 4.3% in the 2000 period.  We operated 89 service
locations at March 31, 2000 compared to 83 service  locations at March 31, 1999.
When we open new service  locations  and expand into new  markets,  higher costs
expressed  as a  percentage  of net sales are  incurred  until route  density is
achieved.  At March  31,  2000,  we  serviced  over 400 bulk CO2  customers  per
delivery vehicle from 39% of our service locations.

Selling, General and Administrative Expenses

             Selling,  general and administrative expenses increased by $520,000
from $2.7  million in the 1999  period to $3.2  million  in the 2000  period and
decreased as a percentage of net sales from 22.5% to 21.8%.  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 March 31, 1999, we had operations in
44 states and employed 160 marketing and  administrative  employees and at March
31,  2000,  we had  operations  in 44 states  and  employed  191  marketing  and
administrative employees.

Depreciation and Amortization

              Depreciation  and  amortization  increased  by $693,000  from $3.2
million in the 1999 period to $3.9 million in the 2000  period.  As a percentage
of net sales, such expenses  decreased from 26.9% in the 1999 period to 26.5% in
the 2000 period. Depreciation expense increased by $503,000 from $2.3 million in
the 1999  period  to $2.8  million  in the 2000  period  principally  due to the
increase in bulk CO2 systems leased to customers.  As a percentage of net sales,
depreciation  expense  decreased  from 18.9% in the 1999  period to 18.7% in the
2000 period.  Amortization  expense  increased by $190,000  from $961,000 in the
1999 period to $1.2  million in the 2000 period  primarily  due to  amortization
related  to  deferred  charges  and  deferred  lease  acquisition  costs.  As  a
percentage of net sales, amortization expense decreased from 8.0% to 7.8%.

Operating Income

            For the reasons described above,  operating income was $256,000,  or
1.7%  of net  sales,  in the  2000  period,  compared  to an  operating  loss of
$385,000, or (3.2%) of net sales, in the 1999 period.

Interest Expense

            Net interest expense  increased by $610,000 from $1.9 million in the
1999 period to $2.5 million in the 2000 period and  increased as a percentage of
net sales  from 15.8% to 16.9%.  This  increase  is  primarily  attributable  to
increased  level of long-term debt and  subordinated  debt in the 2000 period as
compared to the 1999 period.

Net Loss

            For the reasons  described above, net loss decreased by $31,000,  or
1.4%,  in the 1999 period  compared to the 2000 period.  No provision for income
tax  expense in either the 1999  period or the 2000  period has been made due to
historical net losses.


                                       13

<PAGE>

EBITDA

            For the reasons  described  above,  EBITDA,  representing  operating
income plus depreciation and amortization,  increased by $1.3 million, or 46.9%,
from $2.8  million in the 1999  period to $4.2  million  in the 2000  period and
increased as a percentage of net sales from 23.7% to 28.2%, respectively.


Nine Months Ended March 31, 2000 Compared to Nine Months Ended March 31, 1999

Net Sales

            Net sales increased by $8.0 million, or 23.4%, from $34.1 million in
the 1999 period to $42.1  million in the 2000 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 March 31, 2000,  there were  approximately
55,000 Company owned and 10,000  customer owned bulk CO2 systems in service,  an
increase of 12,000, or 21.8%,  over the  approximately  44,000 Company owned and
9,000 customer owned bulk CO2 systems in service at March 31, 1999.

Cost of Products Sold

            Cost of products sold increased by $2.9 million,  from $18.3 million
in the 1999  period to $21.2  million  in the 2000  period  and  decreased  as a
percentage of net sales from 53.5% to 50.2%. The dollar increase is attributable
to our continued growth.  The percentage  decrease is attributable to a decrease
in fully loaded route drivers,  depot  expenses and CO2 purchases.  Fully loaded
route drivers increased by $884,000 from $6.1 million in the 1999 period to $7.0
million in the 2000 period and decreased as a percentage of net sales from 17.9%
to 16.6%. Depot expenses decreased as a percentage of net sales from 5.2% in the
1999 period to 4.2% in the 2000 period. CO2 purchases increased by $800,000 from
$4.5 million in the 1999 period to $5.3 million in the 2000 period and decreased
as a  percentage  of net sales  from  13.2% to 12.6%.  We  operated  89  service
locations at March 31, 2000 compared to 83 service  locations at March 31, 1999.
When we open new service  locations  and expand into new  markets,  higher costs
expressed  as a  percentage  of net sales are  incurred  until route  density is
achieved.

Selling, General and Administrative Expenses

            Selling,  general  and  administrative  expenses  increased  by $1.4
million  from $7.6 million in the 1999 period to $9.0 million in the 2000 period
and  decreased  as a  percentage  of net sales from  22.3% to 21.4%.  The dollar
increase is  primarily  attributable  to growth in the number of  marketing  and
administrative  employees and their associated expenses. The percentage decrease
is  attributable  to economies of scale. At March 31, 1999, we had operations in
44 states and employed 160 marketing and  administrative  employees and at March
31,  2000,  we had  operations  in 44 states  and  employed  191  marketing  and
administrative employees.

Depreciation and Amortization

             Depreciation and  amortization  increased by $2.2 million from $9.2
million in the 1999 period to $11.4 million in the 2000 period.  As a percentage
of net sales, such expenses  increased from 26.9% in the 1999 period to 27.0% in
the 2000  period.  Depreciation  expense  increased  by $1.6  million  from $6.4
million in the 1999 period to $7.9 million in the 2000 period principally due to
the increase in bulk CO2 systems  leased to  customers.  As a percentage  of net
sales,  depreciation expense increased from 18.7% in the 1999 period to 18.8% in
the 2000 period. Amortization expense increased by $615,000 from $2.8 million in
the 1999 period to $3.4 million in the 2000 period primarily due to amortization
related  to  deferred  charges  and  deferred  lease  acquisition  costs.  As  a
percentage of net sales, amortization expense decreased from 8.2% to 8.1%.

Operating Income

            For the reasons described above,  operating income was $588,000,  or
1.4%  of net  sales,  in the  2000  period,  compared  to an  operating  loss of
$932,000, or (2.7%) of net sales, in the 1999 period.

                                       14

<PAGE>
Interest Expense

             Net interest expense increased by $2.1 million from $5.3 million in
the 1999 period to $7.4 million in the 2000 period and increased as a percentage
of net sales from 15.5% to 17.5%. This increase is attributable to the increased
level of long-term debt and subordinated  debt in the 2000 period as compared to
the 1999 period as well as an increase of two percent in interest  rates for the
three months ended September 30, 1999 on $30.0 million of subordinated debt.

Net Loss

             For the reasons described above, net loss increased by $585,000, or
9.4%,  from $6.2  million in the 1999 period to $6.8 million in the 2000 period.
No provision for income tax expense in either the 1999 period or the 2000 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 $3.7 million, or 44.9%,
from $8.2  million in the 1999  period to $11.9  million in the 2000  period and
increased as a percentage of net sales from 24.1% to 28.4%, respectively.

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 March 31, 2000,  we
anticipated  making cash capital  expenditures of at least $5.0 million to $10.0
million  during  the  remaining  three  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 and gross margin factors. 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.

             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.

             In January and February  2000,  the  agreements  governing  the 12%
Senior  Subordinated   Promissory  Notes  and  the  Amended  SunTrust  Facility,
respectively, were amended to adjust certain financial covenants for the quarter
ending December 31, 1999 and prospectively.

                                       15

<PAGE>

            In May 2000, we sold 5,000 shares of our 8%  Cumulative  Convertible
Preferred Stock, no par value (the "Convertible  Preferred  Stock"),  for $1,000
per share (the  "Liquidation  Preference").  Cumulative  dividends  are  payable
quarterly  in  arrears  at the  rate  of  8.0%  per  annum  on  the  Liquidation
Preference,  and,  to the  extent  not  paid  in  cash,  will  be  added  to the
Liquidation  Preference.  Shares  of  the  Convertible  Preferred  Stock  may be
converted into shares of Common Stock at any time at a conversion price of $9.47
per share, which represents a 20% premium to average closing price of the Common
Stock on the Nasdaq  Stock Market for the 20 trading days prior to May 12, 2000.
Additionally, we must redeem the Convertible Preferred Stock upon the occurrence
of a change in control of the Company.

            Simultaneously with the sale of the Convertible Preferred Stock, the
agreements   governing  the  Amended  SunTrust   Facility  and  the  12%  Senior
Subordinated  Promissory Notes were amended.  The Amended SunTrust  Facility was
amended to adjust the borrowing base and to change certain  financial  covenants
for the  quarter  ending  June  30,  2000  and  prospectively.  The  12%  Senior
Subordinated Promissory Notes were amended to adjust certain financial covenants
for the quarter ended March 31, 2000 and prospectively.

            During the nine months ended March 31, 2000,  our capital  resources
included cash flows from operations and available  borrowing  capacity under the
Amended SunTrust  Facility.  As of March 31, 2000, a total of $49.75 million was
outstanding  under the Amended SunTrust  Facility with interest at three hundred
fifty basis points above the applicable London InterBank Offering Rate ("LIBOR")
(9.29% to 9.51% at March 31, 2000).

            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 March 31, 2000, we had negative working capital of $5.2 million.

            Cash Flows from  Operating  Activities.  For the nine  months  ended
March 31, 1999 and March 31, 2000, net cash provided by operating activities was
$2.5 million and $9.1 million,  respectively.  The increase from the 1999 period
to the 2000 period of $6.6  million is  primarily  due to an increase in the net
loss of $585,000 while  depreciation and amortization  increased by $2.2 million
from the 1999  period to the 2000 period and an increase of $400,000 in accounts
payable in the 1999  period  compared  to a $4.2  million  increase  in the 2000
period.

            Cash Flows from  Investing  Activities.  For the nine  months  ended
March 31, 1999 and March 31,  2000,  net cash used in investing  activities  was
$20.0 million and $16.7 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 nine  months  ended
March 31, 1999 and March 31, 2000,  cash flows provided by financing  activities
were $18.3  million and $6.2  million,  respectively.  For the nine months ended
March 31, 1999 and March 31, 2000, net cash provided by financing activities was
primarily from the issuance of long-term debt.

Year 2000

            Our computer and other business operating systems were unaffected by
the "Year 2000" problem,  having  successfully rolled over from 1999 to 2000. We
are also  unaware  of any Year  2000  issues  affecting  any of our  significant
business partners, suppliers or customers.

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.

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 March 31, 2000, a total of $49.75 million was outstanding under the
Amended  SunTrust  Facility  with  interest at three  hundred fifty basis points
above the applicable  LIBOR rate (9.29% to 9.51% at March 31, 2000).  Based upon
$49.75  million  outstanding  under the Amended  SunTrust  Facility at March 31,
2000,  our  annual  interest  cost under the  Amended  SunTrust  Facility  would
increase by $498,000 for each one percent increase in LIBOR (i.e.,  from 8.0% to
9.0%).

            In  order  to  reduce  our  exposure  to  increases  in  LIBOR,  and
consequently to increases in interest payments, on June


                                       16

<PAGE>

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)         Exhibits.

            27 - Financial Data Schedule.

(b)         Reports on Form 8-K.

            (1)   The Company filed a Form 8-K dated March 28, 2000 reporting an
                  Item 5 event.









                                       17
<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 15, 2000                          By:  /s/ Joann Sabatino
                                                   -----------------------------
                                                   Joann Sabatino
                                                   Chief Financial Officer

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