U. S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   FORM 10-QSB

         [X]  Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934

         For the quarterly period ended June 30, 1998

         [   ]  Transition report under Section 13 or 15(d) of the Exchange Act

         For the transition period from __________ to __________

                         Commission File Number 0-21279

                          THERMACELL TECHNOLOGIES, INC.
                          ---------------------------- 
        (Exact Name of Small Business Issuer as Specified in Its Charter)

          FLORIDA                                                59-3223708
     -----------------                                      --------------------
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

                     1125 Commerce Blvd., Sarasota, FL 34243
                     ---------------------------------------
                    (Address of Principal Executive Offices)

                                 (941) 358-0306
                                 --------------
                           (Issuer's Telephone Number)


         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 a
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 
    ---     ---
     The number of shares  outstanding of the Issuer's Common Stock,  $.0001 Par
Value, as of June 30, 1998 was 4,245,021.

         Transitional Small Business Disclosure Format:

Yes      No X
   ---     ---
                                        

<PAGE>

                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY


                                      Index



                                                                         Page
Part I - Financial Information                                           ----  

Item 1.  Consolidated Financial Statements

         Consolidated Balance Sheets -
           September 30, 1997 and June 30, 1998........................ 1 - 2

         Consolidated Statements of Operations -
           Three months and nine months ended June 30, 1997 and 1998...     3

         Consolidated Statements of Cash Flows -
           Nine months ended June 30, 1997 and 1998....................     4

         Notes to Consolidated Financial Statements....................     5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations......................... 6 - 9

Part II - Other Information

Item 1. Legal Proceedings..............................................    10

         Signatures....................................................    10

Exhibit 11.............................................................    11

                                       i

<PAGE>

                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets


                                     Assets


<TABLE>
<CAPTION>

                                                                                        June 30,           September 30,
                                                                                          1998                 1997
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------
                                                                                       (unaudited)
<S>                                                                             <C>                   <C>    
Current assets
   Cash                                                                           $           506,079  $           580,522
   Accounts receivable, net                                                                   399,766              384,351
   Notes receivable                                                                            50,000                    -
   Other                                                                                       18,187                1,676
   Inventories                                                                                556,481              410,972
   Prepaid expenses and other                                                                  14,182                8,886
   Prepaid stockholder relations expenses                                                     185,387                    -
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------

         Total current assets                                                               1,730,082            1,386,407
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------

Property and equipment                                                                      1,028,859              697,671
   Less - accumulated depreciation                                                            186,603               86,773
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------
                                                                                              842,256              610,898
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------

Other assets
   Deposits                                                                                    20,757               14,795
   Deferred income tax benefit, net                                                           690,961              631,372
   Goodwill, net                                                                              842,053              819,199
   Other intangibles, net                                                                     101,856               80,004
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------
                                                                                            1,655,627            1,545,370
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------




         Total assets                                                             $         4,227,965 $          3,542,675
                                                                                    ==================   ==================
                                                                                    ==================   ==================


</TABLE>


See notes to consolidated financial statements.


                                       1
<PAGE>

                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets


                      Liabilities and Stockholders' Equity

<TABLE>
<CAPTION>


                                                                                        June 30,           September 30,
                                                                                          1998                 1997
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------
                                                                                       (unaudited)
<S>                                                                             <C>                   <C>  
Current liabilities
   Accounts payable                                                               $           390,102  $            551,572
   Accrued expenses                                                                           148,891              277,192
   Accrued payroll and payroll taxes                                                                -              187,321
   Current maturities of long-term debt
     Notes payable                                                                             11,905               18,434
     Capital leases                                                                            12,882               16,977
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------

         Total current liabilities                                                            563,780            1,051,496
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------

Long-term debt, net of current maturities
   Notes payable                                                                               65,113               41,856
   Capital lease obligations                                                                   59,383               21,233
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------
         Total long-term debt, net of current maturities                                      124,496               63,089
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------

         Total Liabilities                                                                    688,276            1,114,585
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------

Stockholders' equity
   Preferred stock, par value $.0001
     5,000,000 shares, authorized, issued
     and outstanding                                                                              500                  500

   Preferred  stock,  Series B  convertible,  $1,000 stated  value,  8% dividend
     Authorized 1,500 shares,
     570 outstanding June 30, 1998                                                            570,000                    -

   Common stock, par value $.0001
     Authorized 20,000,000 shares,
     4,245,021 and 3,021,139 issued, respectively                                                 425                  301

   Additional paid-in capital                                                               6,277,152            5,564,319
   Deduct notes receivable associated with stockholder loan                                  (449,974)            (550,460)
   Accumulated deficit                                                                     (2,858,412)          (2,586,570)
   Less - Treasury stock                                                                           (2)                   -
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------

         Total stockholders' equity                                                         3,539,689            2,428,090
                                                                                    ------------------   ------------------
                                                                                    ------------------   ------------------


         Total liabilities and stockholders' equity                               $         4,227,965 $          3,542,675
                                                                                    ==================   ==================
                                                                                    ==================   ==================

</TABLE>


See notes to consolidated financial statements.

                                       2
<PAGE>


                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                            For the Three Months Ended              For the Nine Months Ended
                                                          --------------------------------        -------------------------------
                                                            June 30,           June 30,             June 30,           June 30,
                                                              1998               1997                 1998               1997
                                                          --------------      ------------        -------------       -----------
<S>                                                    <C>                 <C>                 <C>                 <C>   
Revenue
     Sales                                               $      789,183      $    287,468       $    2,259,814      $    691,011   

Less cost of sales                                              497,462           163,265            1,464,318           400,076
                                                          --------------      ------------        -------------       -----------

     Gross profit                                               291,721           124,203              795,496           290,935

Selling, general and administrative
     expenses                                                   430,055           399,779            1,178,124         1,129,144
                                                          --------------      ------------        -------------       -----------

                 Loss from operations                          (138,334)         (275,576)            (382,628)         (838,209)
                                                          --------------      ------------        -------------       -----------

Other income (expense)
     Commissions                                                      -                 -                    -           (34,883)
     Interest income                                             15,405            19,755               40,471            27,176
     Interest expense                                                 -           (85,432)              (6,894)         (183,157)
     Other                                                        4,368           (11,696)              51,108           (14,006)
                                                          --------------      ------------        -------------       -----------

                 Total other income (expense)                    19,773           (77,373)              84,685          (204,870)
                                                          --------------      ------------        -------------       -----------

                 Loss before income taxes                      (118,561)         (352,949)            (297,943)       (1,043,079)

Income taxes
     Deferred income tax benefit                                 23,712            70,339               59,589           176,975
                                                          --------------      ------------        -------------       -----------

                 Net loss                                $      (94,849)      $  (282,610)      $     (238,354)     $   (866,104) 
                                                          ==============      ============        =============       ===========


Basic loss per common share                              $        (0.03)      $     (0.10)      $        (0.08)     $      (0.50) 
                                                          ==============      ============        =============       ===========


</TABLE>

See notes to consolidated financial statements.


                                       3
<PAGE>

                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                  For the Nine Months Ended
                                                                              ----------------------------------
                                                                                 June 30,           June 30,
                                                                                   1998               1997
                                                                              ---------------    ---------------
<S>                                                                      <C>                 <C>
Cash flows from operating activities:
   Reconciliation of net loss to net cash
     used in operating activities
       Net loss                                                           $         (271,842) $        (866,104)
       Adjustments to reconcile net loss to net
         cash used in operating activities
         Depreciation                                                                 99,830             30,017
         Amortization                                                                 58,634             20,334
         Deferred income tax benefit                                                 (59,589)          (177,738)
         (Increase) decrease in accounts and notes receivable                        (65,415)           106,376
         (Increase) decrease in inventories                                         (145,509)            14,081
         (Increase) in prepaid and other assets                                     (213,156)           (19,801)
         Increase (decrease) in accounts payable                                    (161,470)          (143,309)
         Increase (decrease) in accrued expenses                                    (315,622)           107,114
                                                                              ---------------    ---------------
               Net cash used in operating activities                              (1,074,139)          (929,030)
                                                                              ---------------    ---------------

Cash flows from investing activities
   Capital expenditures                                                             (331,188)           (66,631)
   Capital expenditure acquisitions, goodwill                                        (73,340)                 -
   Expenditures for patent, net                                                      (30,000)           (30,000)
                                                                              ---------------    ---------------
               Net cash used in investing activities                                (434,528)           (96,631)
                                                                              ---------------    ---------------

Cash flows from financing activities
   Proceeds from issuance of common stock                                            122,955          5,613,027
   Proceeds from issuance of Series B preferred stock                              1,500,000                  -
   Proceeds from issuance of notes payable                                            61,407                  -
   Principal payments on notes payable                                               (10,624)        (1,798,181)
   Principal advances on stockholder loan                                                  -           (671,285)
   Proceeds from payments on stockholder loan                                        100,486                  -
   Costs associated with obtaining financing                                        (300,000)                 -
   Purchase of treasury stock                                                        (40,000)                 -
                                                                              ---------------    ---------------
               Net cash provided by financing activities                           1,434,224          3,143,561
                                                                              ---------------    ---------------
                                                                              ---------------    ---------------

               Net increase in cash                                                  (74,443)         2,117,900

Cash beginning                                                                       580,522             24,278
                                                                              ---------------    ---------------

Cash ending                                                               $          506,079  $       2,142,178
                                                                              ===============    ===============


</TABLE>

See notes to consolidated financial statements.

                                       4
<PAGE>

                                                                 
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

Note 1 - Basis of presentation

The accompanying  unaudited  consolidated  financial  statements,  which are for
interim  periods,  do  not  include  all  disclosures  provided  in  the  annual
consolidated  financial statements.  These unaudited financial statements should
be read in conjunction with the financial  statements and the footnotes  thereto
contained  in Form  10-KSB for the fiscal  period  ended  September  30, 1997 of
ThermaCell Technologies,  Inc. (the "Company"), as filed with the Securities and
Exchange Commission.

In the opinion of management,  the accompanying  unaudited financial  statements
contain all adjustments  (which are of a normal and recurring  nature) necessary
for a fair presentation of the financial  statements.  The results of operations
for the three  months and nine months  ended June 30, 1998 and June 30, 1997 are
not necessarily indicative of the results to be expected for the full year.

Note 2 - Basic loss per share calculations

<TABLE>
<CAPTION>


                                      For the Quarter Ending June 30, 1998              For the Quarter Ending June 30, 1997
                                 -----------------------------------------------   ----------------------------------------------
                                 -----------------------------------------------   ----------------------------------------------
                                      Loss           Shares        Per Share             Loss          Shares       Per Share
                                   (Numerator)    (Denominator)     Amount           (Numerator)   (Denominator)      Amount
                                 -----------------------------------------------   ----------------------------------------------
                                 -----------------------------------------------   ----------------------------------------------
<S>                           <C>                                                <C>   

Net Loss                               $ (94,849)                                      $ (282,610)
Less: Preferred stock dividends           16,836
                                 -----------------------------------------------   ----------------------------------------------
                                 -----------------------------------------------   ----------------------------------------------
Income available to common
 shareholders                           (111,685)     3,902,338                          (282,610)      2,859,551
Effect of exercise of Options                           251,282
                                 -----------------------------------------------   ----------------------------------------------
                                 -----------------------------------------------   ----------------------------------------------

Income available to common
 shareholders                         $ (111,685)     4,153,620    $ (0.03)            $ (282,610)      2,859,551   $ (0.10)
                                 ===============================================   ==============================================
                                 ===============================================   ==============================================


                                  For the Nine Months Ending June 30, 1998            For the Nine Months Ending June 30, 1997
                                 -----------------------------------------------   ----------------------------------------------
                                 -----------------------------------------------   ----------------------------------------------
                                       Loss         Shares        Per Share             Loss          Shares        Per Share
                                   (Numerator)    (Denominator)     Amount           (Numerator)   (Denominator)      Amount
                                 -----------------------------------------------   ----------------------------------------------
                                 -----------------------------------------------   ----------------------------------------------
Net Loss                              $ (238,354)                                      $ (866,104)
Less: Preferred stock dividends           33,488                                                -
Income Available to common              (271,842)     3,181,202                          (866,104)      1,745,345
                                 -----------------------------------------------   ----------------------------------------------
                                 -----------------------------------------------   ----------------------------------------------
 shareholders
Effect of exercise of Options                           251,282
                                 -----------------------------------------------   ----------------------------------------------
                                 -----------------------------------------------   ----------------------------------------------
Income available to common
 shareholders                         $ (271,842)     3,432,484   $ (0.08)            $ (866,104)      1,745,345    $ (0.50)
                                 ===============================================   ==============================================

</TABLE>

Note 3 - Accounting Change

The Company adopted Statement of Accounting  Standards #128, Earnings per Share,
during the quarter  ended  December 31,  1997.  Since the Company has reported a
loss  only the  basic  earnings  (loss)  per share is  thereby  reported  as the
reporting of diluted earnings per share would be anti-dilutive. The inclusion of
converted  preferred  shares in the  calculation of weighted  average shares for
diluted loss per share purposes would be anti-dilutive  and per FASB 128, cannot
be included in the financial statements.

                                       5
<PAGE>

                          THERMACELL TECHNOLOGIES, INC.


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

This Form 10-QSB contains forward looking  information and statements within the
meaning of Section  27A of the  Securities  Act of 1933 and  Section  21E of the
Securities  Exchange Act of 1934.  Actual results could differ  materially  from
those projected in the forward looking statements contained in this Form 10-QSB.

GENERAL

The  Company was  incorporated  in Florida in August,  1993,  for the purpose of
developing,  manufacturing and marketing insulating materials and coatings using
partially  evacuated glass  microspheres  ("shells").  The Company's  technology
utilizes the  insertion  of the shells in various  materials  and products  that
improve the thermal resistive characteristics of such products.

The Company's  business strategy is to (i) expand the marketing and distribution
of  ThermaCool(TM)  paints  and  coatings,  (ii)  develop  and  manufacture  the
Company's own shells and (iii) expand the shell  technology  to other  products,
such as drywall, gypsum board, home siding materials, and space foam insulation,
among others.

On November 30, 1995,  the Company  acquired the assets of C.F.  Darling Paint &
Chemicals,  Inc.,  a paint  manufacturing  company,  located in New Port Richey,
Florida.  The Company  acquired these assets so that it would have a facility to
produce and develop paints and coatings for its ThermaCool(TM) product line.

On March 19, 1997, the Company  completed a public offering for 1,375,000 Units,
each Unit  consisting  of one share of Common Stock,  $.0001 par value,  and one
Series A Redeemable Common Stock Purchase Warrant, at a price of $4.00 per Unit.
In addition,  the underwriter  exercised its over-allotment  purchase option and
purchased 206,250 additional Units at the initial per Unit public offering price
less the underwriting discounts and commission.

On July 28,  1997,  the  Company  acquired  all the  outstanding  common  stock,
representing 100% ownership of Atlas Chemical Company,  a paint manufacturer and
distributor,  located in Miami,  Florida. The Company acquired this firm so that
it would have a larger  manufacturing  facility  to both  expand  production  of
coatings  and to obtain an  established  marketing  distribution  channel  which
included  major accounts such as Builders  Square,  Ace Hardware,  Kmart,  among
others.

On  March  2,  1998,   the  Company   acquired  the  assets  of  Ladehoff  Paint
Manufacturing Co., Inc. of Mesa, Arizona for $115,000. This acquisition included
property and  equipment,  inventory and goodwill along with its  trade-name.  No
liabilities were acquired in this acquisition.

The Company has  sustained  significant  operating  losses since its  inception.
Management's strategy of expanding the ThermaCool(TM) product line, developing a
commercially  viable  manufacturing  process for shells and  expansion  into new
markets for its shell technology may result in the Company incurring  additional
losses due to the costs associated with these strategies. The Company expects to
incur losses until it is able to increase its sales, expand its product line and
increase its distribution  capabilities to a sufficient  revenue level to offset
ongoing  operating and expansion costs.  To-date,  the Company has realized some
operating benefits with this strategy.

                                       6
<PAGE>

RESULTS OF OPERATIONS

Three months ended June 30, 1998 compared to Three months ended June 30, 1997

Total revenue for the three months ended June 30, 1998 was $789,183  compared to
$287,468 for the same period of 1997,  which  represents an increase of $501,715
or 275%.  The increase was a result of both expanded sales of paint products and
coatings  produced by the Company's paint  manufacturing  facility and the sales
contribution  for the period of both the Atlas  Chemical Co. and Ladehoff  Paint
operations.

Gross profit margins were 36.9% and 43.29%,  respectively,  for the  three-month
period  ending June 30, 1998 as  compared  to the prior  period  ending June 30,
1997.  This  decrease  is the  result of a change  in mix of paint and  coatings
products sold by the Company and the  continuing  lower margin  contribution  of
both the Atlas  Chemical and Ladehoff  operations.  It is expected that with the
higher  levels of  materials  purchases,  economies  of scale from the  combined
business,  and  higher  margins  with  ThermaCool  product  lines will allow the
Company to benefit from higher gross profit margins in the future.

For  the  three  months  ended  June  30,  1998,  total  selling,   general  and
administrative  expenses  were  $430,055,  as compared to $399,779  for the same
period of the previous  year,  an increase of $30,276,  or 8%. This increase was
due to higher expenses incurred by the company in marketing,  staffing and other
expenses associated with the Company's operations, additional costs for S, G & A
of the Atlas  Chemical  operation and a recently  initiated  investor  relations
program the Company undertook.  Without this investor  relations program,  these
costs would have declined over the year ago period.

The Company  continued to experience a loss from  operations of $138,334 for the
period ending June 30, 1998 as compared to a loss of $275,576 for the same prior
year period. The higher consolidated gross profit for this period was offset, in
part,  by a higher  level of S, G & A expense  incurred  during this three month
period that contributed to the lower operating loss. Management anticipates that
further  increasing levels of sales,  including  continuing  contributions  from
Atlas Chemical and Ladehoff Paint will result in improvement in future operating
performance.

Other  income for the recent  period  ended June 30, 1998  included net interest
income of  $15,405  from the  Company's  cash  balances.  There was  $85,432  of
interest  expense in the prior year's quarter.  Interest  expense is nominal for
the present  quarter.  The expense for the year ago period  reflected the bridge
loans that were outstanding  during that time and the resultant interest charges
for that debt.

Based upon management's  current estimates of future taxable income,  management
has determined that a valuation  allowance of fifty percent (50%) is appropriate
during the current  period  ending June 30, 1998 to  represent  that  portion of
deferred taxes that may be realized in the future.

The net loss, after income taxe benefit but before dividends on preferred stock,
was $94,849 for the three  months  ended June 30, 1998 as compared to a net loss
of  $282,610  for the same period in 1997.  During  February  1998,  the Company
completed a placement of preferred stock bearing an 8% dividend. The dividend on
this outstanding issue was $16,836 for the quarter. There was no preferred stock
outstanding  in the year ago  period.  The  basic  earnings  (net  loss),  after
dividends  on  preferred   stock,   and  the  basic  per  share   earnings  (net
loss)attributable  to common  shares were $111,685 and $0.03 or the three months
ended June 30, 1998 as compared to a net loss of $282,610  and $0.10 on the same
basis for the same period in 1997.

                                        7
<PAGE>

Nine months ended June 30, 1998 compared to Nine months ended June 30, 1997

Total revenue for the nine months ended June 30, 1998 was $2,259,814 compared to
$691,011  for  the  same  period  of  1997,  which  represents  an  increase  of
$1,568,803,  or 327%. The increase was primarily the result of the contributions
of both the Atlas Chemical and Ladehoff Paint.

Gross profit margins were 35% and 42%, respectively,  for the present Nine month
period  ending June 30, 1998 as  compared  to the prior  period  ending June 30,
1997.  This  decrease  was the  result of a change in mix of paint and  coatings
products  sold  with the lower  margined  products,  principally  from the Atlas
Chemical and Ladehoff product lines,  contributing more significantly during the
period.

For  the  nine  months  ended  June  30,  1998,   total  selling,   general  and
administrative expenses were $1,178,124,  as compared to $1,129,144 for the same
period of the previous year, an increase of approximately  $48,980,  or 4%. This
slight  increase is the result of the Company's  efforts to control its overhead
expense within its existing operations  including the recently acquired Ladehoff
Paint business.

The Company  continued to experience a loss from  operations of $382,628 for the
period nine month ending June 30, 1998 as compared to a loss of $838,209 for the
same prior year  period.  The gross  profit  increase  over the prior period was
$504,561,  or 173%,  primarily  resulting from the profit contribution of higher
revenues as compared to the year ago period.  This higher  margin  contribution,
while  maintaining  S G & A  expense,  resulted  in a lower  reported  loss from
operations  for the period.  Management  anticipates  that further  increases in
sales while  controlling its S G & A expense  levels,  will result in additional
improvement in its future operating performance.

Based upon management's  current estimates of future taxable income,  management
has determined that a valuation  allowance of fifty percent (50%) is appropriate
during the current  period  ending June 30, 1998 to  represent  that  portion of
deferred taxes that may be realized in the future.

The net loss,  after  income  taxes  benefit but before  dividends  on preferred
stock, was $238,354 for the nine months ended June 30, 1998 as compared to a net
loss of $866,104 for the same period in 1997.  This  represented  a reduction in
the loss of $627,750  for this period as compared to the year before  nine-month
period  ended June 30,  1997.  During  February  1998,  the Company  completed a
placement  of  preferred  stock  bearing a 8%  dividend.  The  dividend  on this
outstanding issue was $33,488 for the present  nine-month  period.  There was no
preferred stock bearing a dividend outstanding in the year ago period.

Basic earnings (net loss)after  preferred  dividends on preferred stock, and the
basic earnings per share earnings or net loss attributable to common shares were
$271,842  and $0.08,  respectively,  for the nine months  ended June 30, 1998 as
compared  to a net loss of $866,104  and $0.50 on the same basis,  respectively,
for the same period in 1997.

This current nine-month period loss per share was lower, in part, because of the
effect of more common shares  outstanding.  During these two comparable periods,
the weighted average shares  outstanding  increased from 1,745,345 to 3,432,484.
This increase is directly  attributed to the Company's  successful  IPO that was
concluded in March 1998,  the  conversion of  convertible  preferred  stock into
common stock, and the dilutive effect of exercisable stock options.

                                       8

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

To  date,  the  Company  has  funded  its  operations  and  product  development
activities  with capital  provided by issuing  securities  and from  borrowings.
During the nine months ending June 30, 1998,  the Company  raised  approximately
$1.3 million through the placement of convertible preferred stock, after related
expenses.

On February  19,  1998,  the Company  completed  an offering of 1,500  shares of
Series B Preferred Stock to Thomson Kernaghan & Co., Ltd. pursuant to Regulation
S. The principal placement agent for the offering was London Select Enterprises,
Ltd.  The  total   offering   price  for  the  Series  B  Preferred   Stock  was
$1,500,000.00.  This preferred issue has a 8% yield.  This placement  allows the
holder to convert such  preferred  stock into the Company's  common stock at the
lower of the  common  stock bid price  five days  prior to  funding or five days
prior to exercise of the conversion  election.  As of June 30, 1998, $930,000 of
preferred  stock was converted  into 980,569  shares of common stock,  including
dividends paid in common stock.

The Company  will  continue to focus its  marketing  efforts  within the Sunbelt
Region of the United States and with the Ladehoff acquisition an effort with the
western region of the country. These efforts will be increase consumer awareness
and  acceptance  of both its  existing  and new  products.  In  addition to this
marketing effort, the Company has expanded its manufacturing capabilities at its
Miami location that will enable it to produce higher production volumes.

For the nine month period ended June 30, 1998,  the  Company's  net cash used in
operating activities was $1,074,139 in the current period compared with $929,030
used in operating activities in the comparable period last year. In this period,
cash used in operating  activities  principally resulted from supporting its net
loss and the expansion of account receivables,  inventory and other assets while
reducing accounts payable and accrued expenses.

Net cash used in investing  activities  for the nine month period ended June 30,
1998 was  $434,528  as  compared  to $96,631  in the prior  year,  is  primarily
attributed  to higher  levels of capital  expenditures  and the  acquisition  of
Ladehoff Paint.

Net cash from financing activities for the nine-month period ended June 30, 1998
was  $1,434,224  compared to $3,143,561 in the prior period.  The present period
included the preferred  stock equity  placement  while the prior period included
the successful underwriting in which the Company raised approximately $5 million
and repaid its outstanding debt. During the present period, a net of $100,486 of
officer loans were repaid.

As of June 30,  1998,  the  Company  had net working  capital of  $1,166,302  as
compared to a net working  capital  position of $334,911 at fiscal period ending
September 31, 1997. The Company's  working capital position  improved  primarily
because of its $1.5 million  preferred  stock  placement in February  1998.  The
Company's  ratio of current  assets to current  liabilities  was 3.1 at June 30,
1998.

The preferred  stock placement  completed  during February 1998 has provided the
Company with  sufficient  capital to meet its present  working capital needs and
provides  funds for  expansion  of its  operations  for at least the next twelve
months. The primary motivation for this equity infusion was to allow the Company
to meet the new tangible net worth  requirements  for  continued  listing of its
securities on NASDAQ.

                                       9
<PAGE>

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings.

         On May 2, 1997, the Company was served with a summons regarding a civil
action filed in the United States District Court,  Eastern  District of Michigan
by IA, Inc., as plaintiff,  that alleges the Company,  and its  president,  John
Pidorenko,  and Monroe  Parker  Securities,  Inc.,  the  Company's  underwriter,
breached a  marketing  agreement  executed  by Mr.  Pidorenko  on March 26, 1992
relating to  technologies  developed  by IA,  Inc.  This  agreement  contained a
confidentiality and non-disclosure clause for technologies purportedly developed
by IA, Inc. The Company was not a party to that agreement.  The Company believes
that it has not infringed on any patents held by IA, Inc.,  non-withstanding the
validity of such patents  and/or their claims.  The petition  requested  various
court actions  including a jury trial, but no specific request for damages.  The
Company intends to vigorously defend itself in this action. The Company believes
it has meritorious  defenses in this matter which is in a preliminary  stage and
which will not be resolved until a considerable period of time has elapsed.  The
Company has previously agreed to indemnify the Monroe Parker  Securities,  Inc.,
its former underwriter, against any claims asserted by this party.

     On or about February 11, 1998, Mr. Kevin Horrell filed an amended complaint
against the Company and Mr.  Pidorenko,  the Company's  president.  The previous
complaint had been dismissed in the Circuit court of the 12th Judicial  Circuit,
in and for Sarasota County,  Florida. Mr. Horrell alleges that he is due certain
unrestricted  securities  of the  Company in  connection  with  prior  financing
activities. Mr. Horrell alleges breach of contract, fraud in the inducement of a
contract and violations of Rule 10b-5.  The Company  believes it has meritorious
defenses in this  matter  which is in the  preliminary  stage and is prepared to
vigorously defend in this action.



SIGNATURES

Pursuant to the  requirements  of the Securities Act of 1934, the Registrant had
duly caused the report to be signed on its behalf by the  undersigned  thereunto
duly authorized.


                                             ThermaCell Technologies, Inc.

Dated : 8/14/98                              /s/ Gerald Couture
                                             -------------------------
                                             Gerald Couture
                                             Vice-President, Finance and CFO