UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB


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

For the quarterly period ended SEPTEMBER 30, 1996

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

For the transition period from ____________ to ________________

                         COMMISSION FILE NUMBER 0-27378

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


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


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

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

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

         Yes      /X/                           No / /

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


                  CLASS                   OUTSTANDING AT SEPTEMBER 30, 1996
                  -----                   ---------------------------------
Common Stock, $.001 par value                      7,163,434 shares

<PAGE>
                                   NUCO2 INC.

                                      INDEX

PART I.     FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

            Consolidated Balance Sheets as of                         3
            September 30, 1996 and June 30, 1996

            Consolidated Statements of Operations                     4
            for the Three Months Ended September 30,
            1996 and September 30, 1995

            Consolidated Statement of Shareholders'                   5
            Equity for the Three Months Ended
            September 30, 1996

            Consolidated Statements of Cash Flows for                 6
            the Three Months Ended September 30, 1996
            and September 30, 1995

            Notes to Consolidated Financial Statements              7-9

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN          10-14
            OF OPERATION

PART II.    OTHER INFORMATION

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

SIGNATURES                                                           16

                                       -2-

<PAGE>
PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

                            NUCO2 INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                          (unaudited)
                             ASSETS                                    SEPTEMBER 30, 1996            JUNE 30, 1996
                                                                       ------------------            -------------
<S>                                                                            <C>                         <C>        
Current assets:
    Cash and cash equivalents....................................              $35,107,039                 $43,000,676
    Trade accounts receivable, net of allowance for doubtful
    accounts of $263,067 and $210,629, respectively..............                1,435,236                   1,385,642
    Inventories..................................................                   61,358                      52,425
    Prepaid expenses and other current...........................                  304,700                     384,948
                                                                               -----------                 -----------
       Total current assets......................................               36,908,333                  44,823,691
                                                                                ----------                  ----------

Property and equipment, net......................................               30,679,848                  24,392,692
                                                                                ----------                  ----------

Other assets:
    Goodwill, net................................................                3,070,396                   3,064,877
    Deferred charges, net........................................                  349,022                     389,343
    Customer lists, net..........................................                  964,439                     873,512
    Restrictive covenants, net                                                     197,500                     114,167
    Deferred lease acquisition costs, net........................                  837,061                     714,040
    Deposits.....................................................                   70,418                     260,363
                                                                                ----------                  ----------
       Total other assets........................................                5,488,836                   5,416,302
                                                                                ----------                  ----------
         Total assets............................................              $73,077,017                 $74,632,685
                                                                               ===========                 ===========

                  LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Current maturities of long-term debt.........................               $1,838,872                  $1,358,447
    Accounts payable.............................................                1,278,835                   2,226,795
    Accrued expenses.............................................                  626,472                     497,975
    Other current liabilities....................................                   27,622                      73,529
                                                                                ----------                  ----------
       Total current liabilities.................................                3,771,801                   4,156,746

    Long-term debt, excluding current maturities.................                8,920,000                   9,485,994
    Customers' deposits..........................................                  354,565                     305,535
                                                                               -----------                 -----------
       Total liabilities.........................................               13,046,366                  13,948,275
                                                                                ----------                  ----------

Shareholders' Equity:
    Common stock; par value $.001 per share; 20,000,000
       authorized; issued and outstanding 7,163,434 and 7,129,467
       shares, respectively......................................                    7,163                       7,129
    Additional paid-in capital...................................               62,747,668                  63,743,312
    Accumulated deficit..........................................              (2,724,180)                 (3,066,031)
                                                                              ------------                ------------
       Total shareholders' equity................................               60,030,651                  60,684,410
    Commitments and contingencies................................
                                                                               $73,077,017                 $74,632,685
                                                                               ===========                 ===========
</TABLE>

                                       -3-

<PAGE>
                            NUCO2 INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                   THREE MONTHS ENDED
                                                                                   ------------------
                                                                       SEPTEMBER 30, 1996     SEPTEMBER 30, 1995
                                                                       ------------------     ------------------
<S>                                                                        <C>                    <C>
Net sales........................................................          $4,071,657             $2,697,698

    Costs and expenses:
    Cost of products sold........................................           1,969,551              1,117,038
    Selling, general and administrative expenses.................           1,230,425                562,816
    Depreciation and amortization................................             821,842                590,742
                                                                           ----------             ----------
                                                                            4,021,818              2,270,596
                                                                           ----------             ----------
         Operating income........................................              49,839                427,102

    Interest (income) expense, net...............................           (292,012)                502,307
                                                                           ----------             ----------
Net income (loss)................................................          $  341,851             $ (75,205)
                                                                           ==========             ==========
Undeclared dividends on Preferred Stock..........................          $        0             $ (56,975)
                                                                           ==========             ==========
Net income (loss) attributable to common stockholders............          $  341,851             $(132,180)
                                                                           ==========             ==========
Net income (loss) per common share...............................          $     0.05             $   (0.03)
                                                                            ===========           ==========
Weighted average number of common and common equivalent
    shares outstanding...........................................           7,333,148              3,379,493
                                                                           ==========             ==========
</TABLE>

                                       -4-

<PAGE>
                            NUCO2 INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                                 Common Stock
                                                 ------------                    Additional                              Total
                                                                                   Paid-in          Accumulated      Shareholders'
                                              Shares             Amount            Capital            Deficit            Equity
                                              ------             ------        -------------        -----------      -------------
<S>                                         <C>                   <C>          <C>                <C>                <C>
Balance, June 30, 1996                      7,129,467             $7,129       $63,743,312        ($3,066,031)       $60,684,410

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

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

Additional expenses - secondary
    offering                                                                       (1,615)                               (1,615)

Net income                                                                                             341,851           341,851
                                            ---------             ------       ------------       ------------       -----------

Balance, September 30, 1996                 7,163,434             $7,163       $62,747,668        ($2,724,180)       $60,030,651
                                            =========             ======       ===========        ============       ===========
</TABLE>


                                       -5-

<PAGE>
                            NUCO2 INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                     THREE MONTHS ENDED
                                                                       September 30, 1996         September 30, 1995
                                                                       -------------------        --------------------
<S>                                                                        <C>                            <C>     
Cash flows from operating activities:
    Net income (loss)............................................             $341,851                   ($75,205)

       Adjustments  to  reconcile  net  income  (loss) to net cash
         provided  by operating activities:
            Depreciation of property and equipment                             600,000                     350,294
            Amortization of other assets                                       221,842                     240,448
            (Gain) on disposal of property and equipment                             0                     (2,482)
            Changes in operating assets and liabilities:
            Decrease (increase) in:
               Trade accounts receivable                                       (49,594)                    (26,894)
               Inventories                                                      (8,933)                       (219)
               Prepaid expenses and other current assets                        80,248                       6,733
            Increase (decrease) in:
               Accounts payable                                               (947,960)                     (3,027)
               Accrued expenses                                                128,497                      40,568
               Other current liabilities                                       (45,907)                     13,869
               Customers' deposits                                              49,030                      13,410
                                                                              --------                    --------
               Net cash provided by operating activities                      $369,074                    $557,495
                                                                              --------                    --------

Cash flows from investing activities:
    Proceeds from disposal of property and equipment                                0                        3,900
    Purchase of property and equipment                                     (6,887,156)                  (1,177,367)
    Acquisition of customer list                                             (150,000)                           0
    Increase in restrictive covenant                                         (100,000)                           0
    Increase in goodwill                                                      (46,203)                           0
    (Increase) decrease in deposits                                           189,945                       (2,484)
    (Increase) in deferred lease acquisition costs                           (186,676)                    (112,501)
                                                                           -----------                  ----------
            Net cash (used in) investing activities                        (7,180,090)                  (1,288,452)
                                                                           -----------                  -----------

Cash flows from financing activities:
    Redemption of warrants                                                 (1,143,450)                           0
    Exercise of options                                                       149,455                            0
    Repayment of long-term debt                                               (85,569)                    (396,656)
    Proceeds from issuance of long-term debt                                        0                    1,004,119
    Increase in deferred charges                                               (1,442)                     (63,557)
    Increase in deferred interest payable                                           0                       51,601
    Additional expenses - secondary offering                                   (1,615)                           0
                                                                           -----------                   ---------
         Net cash (used in) provided by financing activities               (1,082,621)                     595,507
                                                                           -----------                    --------

Net decrease in cash and cash equivalents                                  (7,893,637)                    (135,450)
Cash and cash equivalents at the beginning of period                        43,000,676                     561,778
                                                                           -----------                    --------
Cash and cash equivalents at the end of period                             $35,107,039                    $426,328
                                                                           ===========                    ========

Supplemental  disclosure of cash flow  information:
    Cash paid during the period for:
       Interest                                                               $226,136                    $364,626
                                                                           ===========                    ========
       Income taxes                                                                 $0                          $0
                                                                           ===========                    ========
</TABLE>


                                       -6-

<PAGE>
                             NUCO2 INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION

         The accompanying  unaudited consolidated financial statements have been
prepared in accordance  with the  instructions to Form 10-QSB used for quarterly
reports under Section 13 or 15 (d) of the  Securities  Exchange Act of 1934, and
therefore,  do not include all  information  and footnotes  necessary for a fair
presentation  of financial  position,  results of  operations  and cash flows in
conformity  with generally  accepted  accounting  principles.  The  accompanying
unaudited  consolidated financial statements are consolidated with the Company's
newly formed (July 1996) wholly-owned subsidiary, NuAir Inc.

         The financial  information included in this report has been prepared in
conformity  with  the  accounting  principles  and  methods  of  applying  those
accounting principles, reflected in the financial statements for the fiscal year
ended June 30,  1996  included  in Form  10-KSB  filed with the  Securities  and
Exchange Commission.

         All  adjustments  necessary for a fair statement of the results for the
interim  periods  presented  have been recorded.  This quarterly  report on Form
10-QSB  should  be read in  conjunction  with the  Company's  audited  financial
statements  for the fiscal year ended June 30, 1996.  The results of  operations
for the periods  presented are not  necessarily  indicative of the results to be
expected for the full fiscal year.

NOTE 2.  NET INCOME OR LOSS PER COMMON SHARE

         The net  income  or loss per share  computations  for the 1996 and 1995
periods  presented are based on the weighted average number of common shares and
dilutive common equivalent shares outstanding during each period.  Fully diluted
and  primary  income  or loss per  common  share are the same  amounts  for each
period.

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

NOTE 3.  PUBLIC OFFERINGS

                  (a)      Initial Public Offering (IPO)

         In connection with the Company's IPO,  2,022,576 shares of Common Stock
were sold by the Company in December 1995. In addition,  Representatives  of the
Underwriters acquired warrants to purchase up to 110,000 shares of Common Stock.
Such warrants are  exercisable  for a period of five years, at an exercise price
of $10.80.  In July 1996, the Company redeemed and cancelled a  Representative's
warrant to purchase  77,000 shares for $1,143,450.  This amount  represented the
approximate market value of such warrant.

         The gross proceeds the Company  received from the sale of the 2,022,576
shares of Common  Stock were  $18,203,184.  After  deducting  the  underwriters'
discounts and  commissions  and other offering  expenses,  the net proceeds were
$16,151,364.

         Prior  to the IPO,  the  Company  had  outstanding  approximately  $2.9
million in principal amount of Senior Subordinated Notes, a portion of which was
convertible at the option of the holders thereof into Common Stock.

                                       -7-

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

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

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

                  (b)      Secondary Public Offering

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

         The net proceeds the Company  received  from the sale of the  1,761,165
shares  of  Common  Stock,  after  deducting  the  underwriters'  discounts  and
commissions  and other  offering  expenses was  $44,641,630.  The Company repaid
$1,963,486  of   indebtedness   outstanding   under  its  credit  facility  with
NationsBank of Florida, N.A. with the proceeds of the Secondary Public Offering.
The Company intends to use the remaining  proceeds to fund internal growth,  for
the  acquisition  of  additional  bulk CO2 systems  leasing  businesses  and for
general corporate purposes.

NOTE 4.           ACQUISITIONS

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

NOTE 5.           LONG-TERM DEBT

         The Company  entered into an agreement for a $30 million  dollar credit
facility with NationsBank of Florida,  N.A. simultaneous with the closing of the
IPO. Additionally, all loans with the Company's previous bank were repaid. As of
September 30, 1996, a total of $10,156,465 was  outstanding  pursuant to the new
credit facility which is comprised of a $6.0 million term loan and $4,156,465 of
drawings pursuant to the tank and acquisition  revolvers of the credit facility.
The term loan is payable interest only for twelve months and principal  payments
of  $100,000  plus  interest  at a fixed  rate of  8.51%,  payable  monthly  for
twenty-three months commencing January 1997. The tank and acquisition  revolvers
are interest only for 12 months at two hundred  seventy-five  basis points above
the 30-day  London  InterBank  Offering Rate  ("LIBOR")  (8.22% at September 30,
1996),  with the principal amount  outstanding at the end of 12 months (December
1996) and 24 months  (December 1997) converted to term loans  calculated on a 60
month amortization  schedule.  Any accrued interest and one final payment of all
unpaid principal is due and payable on November 30, 1998.

                                       -8-

<PAGE>
NOTE 6.           STOCK OPTION PLAN

         In 1995,  the board of  directors  approved  the 1995 Stock Option Plan
(the "1995 Plan").  Under the 1995 Plan, the Company has reserved 350,000 shares
of Common Stock for employees of the Company.  Under the terms of the 1995 Plan,
options  granted may be either  incentive  stock options or non qualified  stock
options,  or both.  The exercise  price of incentive  options  shall be at least
equal to 100% of the fair market value of the Company's Common Stock at the date
of the grant,  and the exercise  price of non qualified  stock options issued to
employees  may not be less than 75% of the fair  market  value of the  Company's
Common  Stock at the date of the grant.  The maximum  term for all options is 10
years.  At September 30, 1996,  50,776 options were granted at an exercise price
of $9.00 per share and  75,000  options  were  granted at an  exercise  price of
$17.50 per share.  The 50,776  options and the 75,000 options vest one-third per
annum commencing December 1996 and April 1997, respectively.

         The board of  directors  of the Company  adopted the  Directors'  Stock
Option Plan (the "Directors' Plan").  Under the Directors' Plan, the Company has
reserved  60,000 shares of Common Stock.  Under the terms of the Directors' Plan
each non-employee director will receive options for 6,000 shares of Common Stock
on the date of his or her first election to the board of directors. In addition,
on the third  anniversary of each director's first election to the Board, and on
each three year anniversary thereafter,  each non-employee director will receive
an  additional  option to purchase  6,000 shares of Common  Stock.  The exercise
price per share for all options  granted under the Directors' Plan will be equal
to the fair  market  value of the  Common  Stock  as of the date of  grant.  All
options  vest  in  three  equal  annual  installments  beginning  on  the  first
anniversary of the date of grant. As of September 30, 1996,  options to purchase
a total of 24,000  shares of Common  Stock at an exercise  price of $9 per share
had been issued. None of these options are currently exercisable.

         Statement of Financial  Standards No. 123  Accounting  for  Stock-Based
Compensation, defines a fair value based method of accounting for stock options.
It is  effective  for fiscal  years  beginning  after  December  15,  1995.  The
Statement  allows an entity to  continue  to measure  cost using the  accounting
method  prescribed  by APB  Opinion  No.  25,  Accounting  for  Stock  Issued to
Employees,  and to make pro forma  disclosures  of net income and  earnings  per
share as if the fair value based method of accounting had been applied. The fair
value  of each  option  grant  is  estimated  on the  date of  grant  using  the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  used  for  grants  in  fiscal  1996;  expected  volatility  of 57%,
risk-free  interest rate of 6.5%, and expected  lives of one to five years.  The
Company is adopting  SFAS 123 in fiscal year end June 30, 1997 and  presents the
following  pro forma  disclosures  rather  than  change  its  present  method of
accounting for employee stock options:

                                                             Three Months Ended
                                                             SEPTEMBER 30, 1996
Net income attributable to common shareholders                  $  251,034
                                                                ==========
Net income per common share                                     $     0.03
                                                                ==========
Weighted average number of common and common equivalent
   shares outstanding                                            7,300,419
                                                                ==========

         The pro forma adjustment for stock based  compensation costs recognized
under SFAS 123 is approximately $91,000.

NOTE 7.           OPERATING LEASES

         The Company entered into fifteen  operating  leases from July 1 through
September 30, 1996.  Six leases were for  warehouse  facilities  with  aggregate
annual rentals of approximately $105,000 expiring at various dates through 1999.
Nine leases  were for trucks  with  aggregate  annual  rentals of  approximately
$35,000 expiring at various dates through 2002.

                                       -9-

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

         THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION CONTAINS
FORWARD-LOOKING  STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.  THE COMPANY'S
ACTUAL  RESULTS  COULD  DIFFER   MATERIALLY  FROM  THOSE  ANTICIPATED  IN  THESE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE, BUT
ARE NOT LIMITED  TO, THE  COMPANY'S  EXPANSION  INTO NEW  MARKETS,  COMPETITION,
TECHNOLOGICAL ADVANCES AND AVAILABILITY OF MANAGERIAL PERSONNEL.

OVERVIEW

         The following  discussion  and analysis  should be read in  conjunction
with the unaudited  Consolidated Financial Statements and Notes thereto included
elsewhere in this Form 10-QSB.

          During the quarter ending September 30, 1996 the Company  concentrated
on expanding its operations in the New York, New Jersey and Connecticut markets,
which were initially  entered into through the May 1996  acquisition of the bulk
CO2 operating segment of the BevServ division of The Coca-Cola  Bottling Company
of New York,  Inc.  (BevServ),  and the Ohio market which was initially  entered
into through an agreement the Company reached with the McDonalds  Corporation in
July 1996 to service 370 of their  locations.  These events required the Company
to continue to build the necessary  infrastructure both in operations and sales.
The lack of route density in the  Company's new service areas  resulted in costs
incurred to be far in excess of normal operating expenses. The Company proceeded
to add to its account base by focusing on its internal  sales force and national
accounts  relationships.  In September  1996, the Company  acquired the bulk CO2
assets of Geer Gas, an Ohio based company servicing over 600 locations. Inasmuch
as the Ohio and New York  markets  were not mature at the time of the  Company's
entry  into  these  areas,  the  Company  did not  consider  the  acquisition  a
"tuck-in", but rather a non-contiguous addition to its expanding service area.

         Throughout  the  September  1996  quarter,  attention  was  focused  on
building the necessary  infrastructure  that would eventually lead to new sales,
helping  the  Company  succeed  in  reaching  its  placement  and route  density
objectives in the Company's  expanded  markets.  To support the growing customer
base and service areas,  the Company  relocated its  headquarters  to a building
designed to accommodate rapid growth and to withstand extreme weather conditions
and equipped it with state of the art communication and information systems.

GENERAL

         At September 30, 1996 the Company leased 14,198 bulk CO2 systems to its
customers,  principally  pursuant to five year  noncancelable  lease  contracts.
These customers include restaurants,  convenience stores, theaters,  taverns and
other businesses which dispense carbonated beverages. Generally, these contracts
are classified as one of two types:  "budget-plan" service contracts and "rental
plus per pound charge" contracts.  Pursuant to budget plan contracts,  customers
pay a fixed  monthly  charge for the lease of a Company owned bulk CO2 system on
the  customer's  premises and refills of bulk CO2  according to a  predetermined
schedule.  The  bulk  CO2 is  included  in the  monthly  rental  charge  up to a
predetermined  maximum annual volume.  If the maximum annual volume is exceeded,
the customer is charged for additional  bulk CO2  delivered.  Pursuant to rental
plus per pound  charge  contracts,  the Company also leases a bulk CO2 system to
the customer,  but the customer is charged on a per pound basis for all bulk CO2
delivered.  The Company's  contracts generally provide for price increases based
upon increases in the consumer price index.

         The Company  provides  some  services  besides  those offered under the
above two types of  contracts.  As of September 30, 1996,  the Company  provided
"fill  only"  service  to  approximately  3,400  customers,  82% of  which  were
previously serviced by acquired businesses.

                                      -10-

<PAGE>
         As of September 30, 1996,  approximately  6,625 of the Company's 17,747
customers  were billed on a per pound basis  which  varies with the  quantity of
bulk CO2 delivered.  These customers will tend to consume less CO2 in the winter
months,  and this may cause the  Company's  revenues and earnings for its fiscal
quarters ending in December and March to be relatively  lower than for its other
quarters. As of September 30, 1996, approximately 11,100 of the Company's 17,747
customers were billed at a flat monthly rate which does not vary  throughout the
year.

         The  Company  intends to  continue  to grow  through a  combination  of
internal growth and acquisitions.  The Company requires  significant  capital to
purchase and install bulk CO2 systems at  customers'  locations  and to grow the
network of services and supply  depots and  specialized  CO2  delivery  vehicles
required to service these  installations.  Once  installed,  however,  there are
minimal additional capital requirements for bulk CO2 systems in service, and the
Company has generally experienced  significant positive cash flows on a per-unit
basis.  These cash flows  stem from  per-unit  operating  income  combined  with
per-unit  non-cash  charges  for  depreciation  and  amortization.  The  Company
believes its current installed base of bulk CO2 systems is stable, partly due to
the existence of long-term contracts with its customers.  In fiscal 1996 and the
first quarter ended  September 30, 1996,  less than 5% of Company owned bulk CO2
systems experienced service termination. Service termination is typically caused
by  restaurant  closure.  Affected  bulk CO2  systems  are  either  removed  and
reconditioned for use with other customers,  or left in place when prospects for
a new restaurant in the same location are deemed favorable.

RESULTS OF OPERATIONS

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

                                                Three Months Ended September 30,
                                                --------------------------------

                                                    1995            1996
                                                    ----            ----
Income Statement Data:
Net sales ........................................  100.0%       100.0%
Cost of products sold.............................   41.4%        48.4%
Selling, general and administrative expenses......   20.9%        30.2%
Depreciation and amortization.....................   21.9%        20.2%
                                                     -----        -----
Operating income..................................   15.8%         1.2%
Interest expense (income), net....................   18.6%        (7.2%)
                                                     -----        ------

Net (loss) income.................................   (2.8%)        8.4%
                                                     ======       =====

Other Data:
Operating income before depreciation
and amortization (EBITDA).........................   37.7%        21.4%
                                                     =====        =====

THREE MONTHS ENDED  SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 1995.

         Net sales increased by $1.4 million, or 50.9%, from $2.7 million in the
1995 period to $4.1  million in the 1996 period.  Approximately  $319,000 of the
increase  represented net sales  resulting from the May 1996  acquisition of the
BevServ Division of The Coca-Cola Bottling Company of New York, Inc.  (BevServ).
In addition,  approximately  $135,000 and $44,000 represented net sales from two
acquisitions in January 1996 and one acquisition in June 1996, respectively. The
remainder of the increase in net sales was principally due to internal growth in
the number of Company owned and customer owned bulk CO2 systems in service.

                                      -11-

<PAGE>
         Cost of products  sold  increased by $853,000  from $1.1 million in the
1995 period to $2.0 million in the 1996 period and  increased as a percentage of
net sales from 41.4% to 48.4%.  This increase was  attributable to the expansion
of the  Company  into new  territories.  The  number of depots  operated  by the
Company at September 30, 1996  increased to 30,  compared to 16 at September 30,
1995.  When the Company  opens new depots and expands into new  markets,  higher
costs expressed as a percentage of net sales are incurred until route density is
achieved.  The  Company  typically  services  approximately  350  customers  per
delivery vehicle in its mature markets.  In new territories,  a delivery vehicle
can initially service as few as 100 customers.

         Selling, general and administrative expenses increased by $668,000 from
$563,000 in the 1995 period to $1.2 million in the 1996 period and  increased as
a  percentage  of net  sales,  from  20.9% to 30.2%.  The  dollar  increase  was
attributable to growth in the number of marketing and  administrative  personnel
and their associated  expenses,  as well as the costs of expanding the Company's
geographic areas of service. At September 30, 1995 the Company had operations in
seven southeastern  states and employed 11 marketing  personnel and at September
30, 1996 the  company  had  operations  in 18 states and  employed 35  marketing
personnel.  The Company also  experienced  approximately  $72,000 of  additional
insurance,  professional  fees and other  costs  associated  with being a public
company.

         The agreement  entered into in July 1996 with McDonald's to service 370
store owned bulk CO2 systems in the Ohio region resulted in additional operating
expenses estimated by the Company to be approximately  $100,000. Had the Company
purchased a customer  list  through  acquisition  this amount would have been in
excess of $100,000;  however,  it would have been capitalized and amortized over
the estimated life of the customer thus  alleviating the income statement effect
in one quarter.

         Depreciation  and  amortization  increased by $231,000 from $591,000 in
the 1995 period to $822,000 in the 1996 period.  As a  percentage  of net sales,
such  expenses  decreased  from  21.9% in the 1995  period  to 20.2% in the 1996
period.  Depreciation  expense  increased by $250,000  from $350,000 in the 1995
period to $600,000 in the 1996 period  principally  due to the  increase in bulk
CO2  systems  leased to  customers.  Expressed  as a  percentage  of net  sales,
depreciation  expense  increased  from 13.0% in the 1995  period to 14.7% in the
1996 period. Amortization expense decreased by $19,000 from $240,000 in the 1995
period to $222,000 in the 1996 period primarily due to the amortization  related
to deferred  financing  costs which were  written-off  in  December  1995.  As a
percentage  of net  sales,  amortization  expense  decreased  from 8.9% to 5.4%,
respectively.

         Net interest  expense in the 1995 period was  $502,000  compared to net
interest  income in the 1996 period of $292,000.  This change is attributable to
the  repayment  of debt from the  proceeds of the IPO in  December  1995 and the
increased  level of cash  and  cash  equivalents  in the  1996  period  from the
Secondary Public Offering in June 1996.

         For the reasons described above, EBITDA,  representing operating income
plus  depreciation  and  amortization,  decreased  from $1.0 million in the 1995
period to $872,000 in the 1996 period and decreased as a percentage of net sales
from 37.7% to 21.4%,  respectively.  The Company  believes EBITDA is useful as a
means of measuring the growth and earning  power of its  business.  In addition,
the Company uses EBITDA to measure how well the Company is generating cash flow.
EBITDA excludes significant costs and should not be considered in isolation from
GAAP measures.

LIQUIDITY AND CAPITAL RESOURCES

         The  Company's  cash  requirements   consist   principally  of  capital
expenditures  associated  with  placing  new bulk CO2  systems  into  service at
customers'  locations;  payments of principal  and  interest on its  outstanding
indebtedness;  payments for acquired businesses;  and working capital.  Whenever
possible, the Company seeks to obtain the use of vehicles,  land, buildings, and
other office and service equipment under

                                      -12-

<PAGE>
operating  leases as a means of  conserving  capital.  The  Company  anticipates
making cash capital  expenditures of approximately $9.0 million to $12.0 million
during the remaining nine months of fiscal 1997,  primarily for the purchases of
bulk CO2 systems  that it expects to place into service  during this time.  Once
bulk CO2 systems are placed into service, the Company has generally  experienced
significant  positive  cash  flows on a  per-unit  basis,  as there are  minimal
additional capital expenditures required for ordinary operations. In addition to
the capital  expenditures  related to internal growth,  the Company  continually
reviews  opportunities to acquire bulk CO2 service  businesses,  and may require
cash in an amount  dictated  by the  scale  and  terms of any such  transactions
successfully concluded.  In August 1996 certain assets,  primarily consisting of
bulk CO2 systems,  were acquired for an aggregate  cash  purchase  price of $1.4
million.

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

         Prior  to the IPO,  the  Company  had  outstanding  approximately  $2.9
million in principal amount of Senior Subordinated Notes, a portion of which was
convertible at the option of the holders thereof into Common Stock.  The holders
of the Senior  Subordinated  Notes converted,  effective upon the closing of the
IPO,  approximately  $407,000 of the principal amount of the Senior Subordinated
Notes into an aggregate of 805,209  shares of Common Stock.  The Company  repaid
the remaining  principal of the Senior  Subordinated  Notes and accrued interest
thereon  with a portion of the net  proceeds of the IPO.  The  Company  also had
outstanding  485  shares of Series A  Preferred  Stock;  500  shares of Series B
Preferred  Stock;  500  shares of Series C  Preferred  Stock and 1500  shares of
Series D Preferred  Stock.  Effective  upon  closing of the IPO, (i) the Company
redeemed  with a portion of the net  proceeds of the IPO all of the  outstanding
Series A Preferred  Stock and Series B  Preferred  Stock for an  aggregate  of $
485,500 plus  approximately  $243,000 of accrued  dividends  and (ii) all of the
outstanding Series C Preferred Stock and Series D Preferred Stock  automatically
converted into an aggregate of 455,430 shares of Common Stock.  The Company used
a  portion  of  the  net  proceeds  of  the  IPO to  pay  accrued  dividends  of
approximately  $118,000 on the Series C  Preferred  Stock and Series D Preferred
Stock. In addition,  the holders of warrants to purchase an aggregate of 118,167
shares of Common Stock exercised such warrants effective upon the closing of the
IPO.

         The Company's capital resources include cash flows from operations; the
net proceeds from the Company's sale of 1,761,165  shares of Common Stock in the
Company's  Secondary  Public  Offering  in June 1996;  and  available  borrowing
capacity under the Company's credit facility with  NationsBank of Florida,  N.A.
(the  "NationsBank  Facility").  The Company has available under the NationsBank
Facility an aggregate of $30.0 million,  including a $6.0 million term loan that
was used,  together  with a portion of the net proceeds of the IPO, to refinance
the  outstanding  balance  of  existing  indebtedness  under  its  prior  credit
facility;   a  $13.0  million  "tank  revolver"  to  finance  the  purchase  and
installation  of new bulk  CO2  service  systems;  a $10.0  million  acquisition
revolver to finance the  purchase  of bulk CO2  service  businesses;  and a $1.0
million line of credit for general  working  capital needs.  All portions of the
NationsBank  Facility  require full repayment of all  outstanding  principal and
interest on November 30, 1998,  the maturity date of the  NationsBank  Facility.
The Company believes that cash from operating activities,  the net proceeds from
the IPO and the Secondary  Public  Offering and available  borrowings  under the
NationsBank Facility will be sufficient to fund proposed operations for at least
the next 12 months at its current rate of growth.  The  NationsBank  Facility is
secured by substantially all the assets of the Company.  The Company is required
to meet certain financial covenants under the NationsBank Facility,  and may not
access borrowings which would cause its total debt to exceed 3.25 times EBITDA.

                                      -13-

<PAGE>

         Working  Capital.  At June 30, 1996 the Company had working  capital of
$40.7 million.  At September 30, 1996, the Company had working  capital of $33.1
million.

         Cash  Flows  from  Operating  Activities.  For the three  months  ended
September  30,  1995 and  September  30,  1996 net cash  provided  by  operating
activities was $557,000 and $369,000, respectively.
 The  decrease  from the 1995 period to the 1996 period of $188,000 is primarily
attributable to a reduction in accounts payable.

         Cash  Flows  from  Investing  Activities.  For the three  months  ended
September 30, 1995 and September 30, 1996 net cash used in investing  activities
was $1.3 million and $7.2 million, respectively. These investing activities were
attributable to the  installation  and direct placement costs and acquisition of
new  bulk CO2  systems,  the  additional  fixed  assets  for the  Company's  new
corporate  headquarters  and the purchase of an airplane by the Company's  newly
formed July 1996,  wholly-owned  subsidiary  NuAir,  Inc.  The airplane is to be
utilized  exclusively by the Company. It will enable the Company to reach remote
geographic   locations   which  are   inconvenient   by   commercial   means  of
transportation.

         Cash  Flows  from  Financing  Activities.  For the three  months  ended
September  30,  1995 and  September  30,  1996,  net cash  provided by (used in)
financing  activities  were $596,000 and ($1.1 million),  respectively.  For the
three months ended September 30, 1995, cash flows from financing  activities are
primarily  attributable  to the  net  increase  in  borrowings  to  finance  the
placement of bulk CO2 systems. For the three months ended September 30, 1996 net
cash  used in  financing  activities  are  primarily  from  the  redemption  and
cancellation of a warrant issued to a representative  of the underwriters in the
IPO.

INFLATION

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

                                      -14-

<PAGE>
PART II           OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

                  (a)      Exhibit 27 - Financial data schedule

                  (b)      No reports on Form 8-K were filed for the quarter
                           ended September 30, 1996

                                      -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 13, 1996                     By:   /S/ JOANN SABATINO
                                                  ------------------
                                                  Joann Sabatino
                                                  Chief Financial Officer





                                      -16-