UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

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|                                                               |                                                                             
|-------------------------------------------------------------- | ----------------------------------------------------------------------------
|ü                                                              | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
|                                                               | ACT OF 1934                                                                 
|For the quarterly period ended: September 30, 2008            
|or                                                            
|                                                               |                                                                             
|                                                               | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
|                                                               | ACT OF 1934                                                                 
|For the transition period from: _____________ to _____________



Commission File Number: 0-10707



THERMODYNETICS, INC.

(Exact name of registrant as specified in its charter)





|                                  |                    
|--------------------------------- | -------------------
|Nevada                            | 06-1042505         
|(State or other jurisdiction      | (I.R.S. Employer   
|of incorporation or organization) | Identification No.)



651 Day Hill Road, Windsor, CT06095

(Address of Principal Executive Office) (Zip Code)

860-683-2005

(Registrants telephone number, including area code)



|                                                                                                                                                                                                                                              |   |                                   |   |                           |   |  |  |  |  | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------------------------- | - | ------------------------- | - |  |  |  |  | 
|Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
|required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                                                                                                    | ü | Yes                               |   | No                       
|                                                                                                                                                                                                                                             
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.                                                                                   
|                                                                                                                                                                                                                                              |  
|Large accelerated filer                                                                                                                                                                                                                       |   |                                   |   | Accelerated filer         |   | 
|Non-accelerated filer                                                                                                                                                                                                                         |   | (Do not check if a smaller        |   | Smaller reporting company | ü | 
|                                                                                                                                                                                                                                              |   | reporting company)                |   |                           |   | 
|                                                                                                                                                                                                                                              |  
|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                                                             
|                                                                                                                                                                                                                                              |   | Yes                               | ü | No                       
|                                                                                                                                                                                                                                              |  
|Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.                                                                                                                
|                                                                                                                                                                                                                                              |  
|Class                                                                                                                                                                                                                                         |   | Outstanding at September 30, 2008
|Common stock $.01 Par Value                                                                                                                                                                                                                   |   | 4,080,306 Shares                 













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THERMODYNETICS, INC. AND SUBSIDIARIES

INDEX

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I: FINANCIAL INFORMATION
3
Item 1.Financial Statements.
3
Item 2.Management's Discussion and Analysis Of Financial Condition and Results of Operations.
10
Item 3.Quantitative And Qualitative Disclosures About Market Risk.
12
Item 4.Controls And Procedures.
12
PART II - OTHER INFORMATION
13
Item 1.Legal Proceedings.
13
Item 1A.Risk Factors.
13
Item 2.          Unregistered Sales of Equity Securities and Use of Proceeds.
13
Item 3.          Defaults Upon Senior Securities.
13
Item 4.          Submission of Matters to a Vote of Security Holders.
13
Item 5.Other Information.
14
Item 6.Exhibits.
14
SIGNATURES
15







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PART I: FINANCIAL INFORMATION

Item 1.

Financial Statements.

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (in 000s)

|                                                                |  |                    |             |   |                |   |             |  
|--------------------------------------------------------------- |  | ------------------ | ----------- | - | -------------- | - | ----------- | -
|ASSETS                                                          |  |                    |             |   |                |  
|                                                                |  | September 30, 2008 |             |   | March 31, 2008 |  
|                                                                |  | (Unaudited)        |             |   | (Audited)      |  
|CURRENT ASSETS                                                  |  |                    |             |   |                |  
|Cash                                                            |  | $                  | 1,299       |   |                | $ | 1,062       |  
|Accounts Receivable, Net                                        |  |                    | 2,317       |   |                |   | 2,909       |  
|Inventories                                                     |  |                    | 4,035       |   |                |   | 3,136       |  
|Prepaid Expenses and Other Current Assets                       |  |                    | 314         |   |                |   | 196         |  
|Marketable Securities                                           |  |                    | 52          |   |                |   | 259         |  
|Total Current Assets                                            |  |                    | 8,017       |   |                |   | 7,562       |  
|                                                                |  |                    |             |   |                |   |             |  
|PROPERTY, PLANT AND EQUIPMENT                                   |  |                    |             |   |                |   |             |  
|Property, Plant and Equipment - At Cost                         |  |                    | 16,049      |   |                |   | 15,671      |  
|Less: Accumulated Depreciation                                  |  |                    | 8,087       |   |                |   | 7,846       |  
|Property, Plant, and Equipment  Net                            |  |                    | 7,962       |   |                |   | 7,825       |  
|                                                                |  |                    |             |   |                |   |             |  
|OTHER ASSETS                                                    |  |                    |             |   |                |   |             |  
|Intangible Assets - Net of Amortization                         |  |                    | 94          |   |                |   | 94          |  
|Investments in Unaffiliated Companies                           |  |                    | 141         |   |                |   | 110         |  
|Deferred Income Taxes                                           |  |                    | 980         |   |                |   | 980         |  
|Deposits and Other                                              |  |                    | 62          |   |                |   | 63          |  
|Total Other Assets                                              |  |                    | 1,277       |   |                |   | 1,247       |  
|TOTAL ASSETS                                                    |  | $                  | 17,256      |   |                | $ | 16,634      |  
|LIABILITIES AND STOCKHOLDERS EQUITY                            |  |                    |             |   |                |   |             |  
|CURRENT LIABILITIES                                             |  |                    |             |   |                |  
|Accounts Payable                                                |  | $                  | 2,384       |   |                | $ | 2,046       |  
|Accrued Taxes and Expenses                                      |  |                    | 655         |   |                |   | 818         |  
|Current Portion of Long-Term Debt                               |  |                    | 301         |   |                |   | 290         |  
|Notes Payable  Bank                                            |  |                    | 250         |   |                |   | 100         |  
|Total Current Liabilities                                       |  |                    | 3,590       |   |                |   | 3,254       |  
|DEFERRED INCOME TAXES                                           |  |                    | 189         |   |                |   | 296         |  
|LONG-TERM DEBT
LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS |  |                    | 1,866 2,782 |   |                |   | 1,991 2,782 |  
|MINORITY INTEREST IN SUBSIDIARY                                 |  |                    | 3,479       |   |                |   | 3,152       |  
|STOCKHOLDERS EQUITY                                            |  |                    |             |   |                |   |             |  
|Common Stock, Par Value $.01/Share,                             |  |                    |             |   |                |   |             |  
|Authorized 25,000,000 shares, issued 4,080,306 shares at        |  |                    |             |   |                |   |             |  
|9/30/08 and 3/31/08                                             |  |                    | 41          |   |                |   | 41          |  
|Additional Paid-in Capital                                      |  |                    | 7,138       |   |                |   | 7,138       |  
|Accumulated Other Comprehensive Income                          |  |                    | 26          |   |                |   | 37          |  
|Retained Earnings (Deficit)                                     |  |                    | (1,855      | ) |                |   | (2,057      | )
|Total Stockholders Equity                                      |  |                    | 5,350       |   |                |   | 5,159       |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                      |  | $                  | 17,256      |   |                | $ | 16,634      |  



The accompanying notes are an integral part of these consolidated financial statements.





3





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THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)IN (000s) EXCEPT PER SHARE DATA

|                                                            |  |      |           |   |      |   |           |  
|----------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                            |  | 2007 |           |   | 2008 |  
|Net Sales                                                   |  | $    | 7,207     |   |      | $ | 7,529     |  
|                                                            |  |      |           |   |      |   |           |  
|Cost of Goods Sold                                          |  |      | 5,230     |   |      |   | 5,180     |  
|                                                            |  |      |           |   |      |   |           |  
|Gross Profit                                                |  |      | 1,977     |   |      |   | 2,349     |  
|                                                            |  |      |           |   |      |   |           |  
|Selling, General & Administrative Expenses                  |  |      | 1,485     |   |      |   | 1,854     |  
|                                                            |  |      |           |   |      |   |           |  
|Income From Operations                                      |  |      | 492       |   |      |   | 495       |  
|                                                            |  |      |           |   |      |   |           |  
|Other Income (Expense)                                      |  |      |           |   |      |   |           |  
|Interest Expense, Net                                       |  |      | (41       | ) |      |   | (46       | )
|Other  Net                                                 |  |      | (3        | ) |      |   | (4        | )
|Total Other Income (Expense)                                |  |      | (44       | ) |      |   | (50       | )
|Minority Interest in Subsidiary                             |  |      | 152       |   |      |   | 150       |  
|Income Before Income Taxes                                  |  |      | 296       |   |      |   | 295       |  
|                                                            |  |      |           |   |      |   |           |  
|Provision for Income Taxes                                  |  |      | 70        |   |      |   | 237       |  
|Net Income                                                  |  |      | 226       |   |      |   | 58        |  
|                                                            |  |      |           |   |      |   |           |  
|Other Comprehensive Income, net of tax:                     |  |      |           |   |      |   |           |  
|Unrealized holding gains (losses) arising during the period |  |      | 40        |   |      |   | (20       | )
|Comprehensive Income                                        |  | $    | 266       |   |      | $ | 38        |  
|Earnings per Share                                          |  | $    | .06       |   |      | $ | .01       |  
|Weighted Average Shares Outstanding- Basic                  |  |      | 4,046,361 |   |      |   | 4,080,306 |  
|Weighted Average Shares Outstanding- Diluted                |  |      | 4,046,361 |   |      |   | 4,080,306 |  



The accompanying notes are an integral part of these consolidated financial statements.







4





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THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)IN (000s) EXCEPT PER SHARE DATA

|                                                                    |  |      |           |   |      |   |           |  
|------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                    |  | 2007 |           |   | 2008 |  
|Net Sales                                                           |  | $    | 14,458    |   |      | $ | 14,929    |  
|                                                                    |  |      |           |   |      |   |           |  
|Cost of Goods Sold                                                  |  |      | 10,509    |   |      |   | 10,416    |  
|                                                                    |  |      |           |   |      |   |           |  
|Gross Profit                                                        |  |      | 3,949     |   |      |   | 4,513     |  
|                                                                    |  |      |           |   |      |   |           |  
|Selling, General & Administrative Expenses                          |  |      | 2,849     |   |      |   | 3,448     |  
|                                                                    |  |      |           |   |      |   |           |  
|Income From Operations                                              |  |      | 1,100     |   |      |   | 1,065     |  
|                                                                    |  |      |           |   |      |   |           |  
|Other Income (Expense)                                              |  |      |           |   |      |   |           |  
|Interest Expense, Net                                               |  |      | (80       | ) |      |   | (82       | )
|Other  Net                                                         |  |      | (5        | ) |      |   | (11       | )
|Total Other Income (Expense)                                        |  |      | (85       | ) |      |   | (93       | )
|Minority Interest in Subsidiary                                     |  |      | 333       |   |      |   | 304       |  
|Income Before Income Taxes                                          |  |      | 682       |   |      |   | 668       |  
|                                                                    |  |      |           |   |      |   |           |  
|Provision for Income Taxes                                          |  |      | 237       |   |      |   | 466       |  
|Net Income                                                          |  |      | 445       |   |      |   | 202       |  
|                                                                    |  |      |           |   |      |   |           |  
|Other Comprehensive Income, net of tax:                             |  |      |           |   |      |   |           |  
|Unrealized holding gains from investments arising during the period |  |      | 62        |   |      |   | (14       | )
|Comprehensive Income                                                |  | $    | 507       |   |      | $ | 188       |  
|Earnings per Share                                                  |  | $    | .11       |   |      | $ | .05       |  
|Weighted Average Shares Outstanding- Basic                          |  |      | 4,046,361 |   |      |   | 4,080,306 |  
|Weighted Average Shares Outstanding- Diluted                        |  |      | 4,046,361 |   |      |   | 4,080,306 |  



The accompanying notes are an integral part of these consolidated financial statements.



5





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THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

IN (000S)

|                                                                                            |  |      |      |   |      |   |       |  
|------------------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ----- | -
|                                                                                            |  | 2007 |      |   | 2008 |  
|OPERATING ACTIVITIES:                                                                       |  |      |      |   |      |  
|Net income                                                                                  |  | $    | 445  |   |      | $ | 202   |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |      |      |   |      |   |       |  
|Unrealized (gain)/loss on marketable securities                                             |  |      | 0    |   |      |   | 14    |  
|Depreciation and amortization                                                               |  |      | 221  |   |      |   | 241   |  
|Net change in minority interest in equity of subsidiary                                     |  |      | 7    |   |      |   | 327   |  
|Deferred tax provision (benefit)                                                            |  |      | 11   |   |      |   | (107  | )
|Changes in operating assets and liabilities:                                                |  |      |      |   |      |   |       |  
|Increase (decrease) in accounts payable                                                     |  |      | (120 | ) |      |   | 338   |  
|Decrease (increase) in prepaid expenses and other assets                                    |  |      | (239 | ) |      |   | (118  | )
|Decrease (increase) in accounts receivable                                                  |  |      | 120  |   |      |   | 592   |  
|Decrease (increase) in inventories                                                          |  |      | (481 | ) |      |   | (899  | )
|Increase (decrease) in accrued taxes and expenses                                           |  |      | (203 | ) |      |   | (163  | )
|                                                                                            |  |      |      |   |      |   |       |  
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                         |  |      | (239 | ) |      |   | 427   |  
|INVESTING ACTIVITIES;                                                                       |  |      |      |   |      |   |       |  
|                                                                                            |  |      |      |   |      |   |       |  
|Purchases of property, plant and equipment, net                                             |  |      | (203 | ) |      |   | (423  | )
|Change in investments in unaffliated companies                                              |  |      | 0    |   |      |   | (31   | )
|(Purchase) sales of marketable securities                                                   |  |      | (21  | ) |      |   | 193   |  
|NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                         |  |      | (224 | ) |      |   | (261  | )
|                                                                                            |  |      |      |   |      |   |       |  
|FINANCING ACTIVITIES                                                                        |  |      |      |   |      |   |       |  
|Net proceeds (payments) on revolving debt                                                   |  |      | 13   |   |      |   | 150   |  
|Net borrowings (payments) on long-term debt                                                 |  |      | 105  |   |      |   | (79   | )
|Compensation expense from stock options                                                     |  |      | 19   |   |      |   | -0-   |  
|NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                         |  |      | 137  |   |      |   | 71    |  
|                                                                                            |  |      |      |   |      |   |       |  
|INCREASE (DECREASE) IN CASH                                                                 |  |      | (326 | ) |      |   | 237   |  
|CASH AT BEGINNING OF PERIOD                                                                 |  |      | 659  |   |      |   | 1,062 |  
|CASH AT END OF PERIOD                                                                       |  | $    | 333  |   |      | $ | 1,299 |  



The accompanying notes are an integral part of these consolidated financial statements.



6





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THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(UNAUDITED)

NOTE 1: BASIS OF PRESENTATION

The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The results of operations for the three and six months ended September 30, 2008 and 2007 are not necessarily indicative of the results to be expected for the full year.

NOTE 2: SUBSIDIARY TRANSACTIONS

On May 8, 2006, the Company completed the sale of a minority interest of its subsidiary, Turbotec Products Plc, (the Plc), whereby approximately 43.68% of the Plc was sold pursuant to an offering on the AIM Market of the London Stock Exchange. Pursuant to a Relationship Agreement (RA) between the Company and the Plc, the agreement provides for an annual administration fee; restrictions on related party transactions; restrictions on appointments to the board of the Plc and mutual confidentiality and reporting undertakings. See Part II, Item 1. As part of the transaction, the Company and the Plc established independent officers and directors and the two boards of directors act independently.

Commercial Leases:

The Company and Turbotec Products, Inc. entered into formal real estate leases effective May 8, 2006, for approximately 54,500 square feet at 651 Day Hill Road, Windsor, CT, and approximately 17,000 square feet at 50 Baker Hollow Road, Windsor, CT. See Part II, Item 1. The leases commenced April 1, 2006 with a five-year term, and one extension option for three years, and a second extension option for two years. Rent charges with respect to the 651 Day Hill Road property are equal to seven dollars per square foot in years one and two, escalating annually thereafter through each of the extension terms; monthly fixed rent in year one equals $31,792, escalating to $42,010 monthly in year ten, assuming both lease extensions are exercised. Rent charges with respect to the 50 Baker Hollow Road property are equal to $5.50 per square foot in year one, escalating annually thereafter through each of the extension terms; monthly fixed rent in year one equals $7,792, escalating to $10,979 monthly in year ten, assuming both lease extensions are exercised.

NOTE 3: INVENTORIES

Inventories consist of the following at (in 000s):

|                |  |                    |       |                |   |      
|--------------- |  | ------------------ | ----- | -------------- | - | -----
|                |  | September 30, 2008 |       | March 31,
2008
|Raw materials   |  | $                  | 2,594 |                | $ | 2,044
|Finished goods  |  |                    | 1,156 |                |   | 1,061
|Work in process |  |                    | 344   |                |   | 155  
|Less: Reserves  |  |                    | 59    |                |   | 124  
|                |  | $                  | 4,035 |                | $ | 3,136

Inventories are valued at the lower of cost or market, with cost determined on a standard cost basis which approximates a first-in, first-out basis.

NOTE 4: EARNINGS PER SHARE

The Company has adopted Statement of Accounting Standards No. 128, Earnings per Share" (SFAS 128). Earnings per share for the three and six months ended September 30, 2008 and 2007 have been computed in accordance with this pronouncement, based on the weighted average of outstanding shares during the periods.



7





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The weighted average numbers of shares outstanding used in the calculations are as follows:

|                                             |  |                                  |           |      |  |          
|-------------------------------------------- |  | -------------------------------- | --------- | ---- |  | ---------
|                                             |  | Three Months Ended September 30,
|                                             |  | 2007                             |           | 2008
|Weighted Average Shares Outstanding- Basic   |  |                                  | 4,046,361 |      |  | 4,080,306
|Assumed Conversion of Stock Options          |  |                                  | -0-       |      |  | -0-      
|Weighted Average Shares Outstanding- Diluted |  |                                  | 4,046,361 |      |  | 4,080,306



|                                             |  |                                |           |      |  |          
|-------------------------------------------- |  | ------------------------------ | --------- | ---- |  | ---------
|                                             |  | Six Months Ended September 30,
|                                             |  | 2007                           |           | 2008
|Weighted Average Shares Outstanding- Basic   |  |                                | 4,046,361 |      |  | 4,080,306
|Assumed Conversion of Stock Options          |  |                                | -0-       |      |  | -0-      
|Weighted Average Shares Outstanding- Diluted |  |                                | 4,046,361 |      |  | 4,080,306

NOTE 5: CASH FLOW INFORMATION AND NON CASH INVESTING ACTIVITIES

The following supplemental information is disclosed pursuant to the requirements of Financial Accounting Standards Board's "Statement of Accounting Standards No 95, Statement of Cash Flows.

|                           |  |                                |    |      |   |   
|-------------------------- |  | ------------------------------ | -- | ---- | - | --
|                           |  | Six Months Ended September 30,
|                           |  | (in 000s)                     
|                           |  | 2007                           |    | 2008
|Cash payments for interest |  | $                              | 80 |      | $ | 82

During the six months ended September 30, 2008, long  term debt of approximately $35,000 was incurred to acquire a vehicle.

NOTE 6: FINANCIAL ACCOUNTING STANDARDS

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of Accounting Research Bulletin No. 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact of the adoption of SFAS 160 on the consolidated financial statements.

NOTE 7: LEGAL PROCEEDINGS

(a)

The lawsuit instituted by the Company on January 8, 2008 in the High Court in England, file no. HC08C00046, against Turbotec Products Plc regarding the PLCs non-payment of dividends payable to Thermodynetics and the PLCs attempt to off-set that dividend against administrative fees payable to the Company under their Relationship Agreement of April 28, 2006. The PLC declared and paid dividends in cash to the other shareholders, but not to Thermodynetics. Thermodynetics solicitors in the United Kingdom share the view as expressed in the written opinion of the Queens Counsel representing Thermodynetics that the interpretation by Thermodynetics of the relevant clauses in the Relationship Agreement as to their meaning and effect is the correct one, and therefore Thermodynetics does not view risk of loss to be probable or material.

(b)

Turbotec Products, Inc. commenced a lawsuit against Thermodynetics on February 27, 2008 in the Connecticut Superior Court, Judicial District of Hartford, alleging that Thermodynetics breached two commercial leases because it received certain overpayments as a result of alleged encroachment of space leased to Turbotec Products and for common area and maintenance charges, and that Thermodynetics improperly withdrew funds from a sinking fund established under one of the leases. The lawsuit was transferred from the regular docket to the Housing Session and now is entitled Turbotec Products, Inc. v. Thermodynetics, Inc., Connecticut Superior Court, Judicial District of Hartford, Housing Session, Docket No. 7712. Thermodynetics denies the allegations, is



8





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vigorously defending the case which is still in its preliminary stages, and intends to advance counterclaims against Turbotec Products. Thermodynetics does not view the risk of loss in the case as probable or material.

(c)

An action was brought against Turbotec Products, Inc. by Pool Fact Industries, LLC in US District Court in the Southern District of Florida on June 14, 2007. The suit alleges among other things that Turbotec supplied product to Pool Fact that contain defects in engineering design that caused Pool Fact to sustain damages in excess of $75,000. Turbotec is defending this suit vigorously. Management of Turbotec believes that there is no merit to this suit, and thus Thermodynetics does not view the risk of loss in this case as probable or material.

(d)

There are a number of threatened and pending actions against Vulcan, and a number of material judgments obtained against Vulcan. All of Vulcans assets were liquidated and distributed in 2005. Thermodynetics and its other subsidiaries are not and have not been a party to any such Vulcan actions.



9





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THERMODYNETICS, INC. AND SUBSIDIARIES

Item 2.

Management's Discussion and Analysis Of Financial Condition and Results of Operations.

The Company held its annual shareholder meeting in October (after the close of the periods covered by this report) and reported that it had invested a nominal amount in Tower Acquisitions Limited, a UK based company. The investment is accounted for in the financial statements using the cost method. Towers business plan is to acquire companies it wishes to operate while also assisting other companies raise cash through the capital markets in the United States and the United Kingdom. As of this report, Tower has acquired a UK based corporate finance business, has made an offer to acquire the assets of a UK manufacturing company and is assisting two US based companies seeking financing.

As a result of a favorable vote at the annual shareholder meeting, the Company has since reincorporated via merger from a Delaware corporation to become a Nevada corporation.

The UK lawsuit between the Company and its Plc subsidiary is continuing. After an extensive review with the Companys solicitors, both the solicitors and management are confident of the Companys claims. In late November, the Company offered the Plc the opportunity to mediate the dispute and is awaiting a response; the trial to resolve the controversies is scheduled to be held in London during March 2009.

The Company had been working towards a sale of its buildings, but the purchaser, after extensive due diligence, has decided not to pursue the sale any further. While no reason was offered, it is believed that the general credit markets were the cause of their decision.

Three and six months ended September 30, 2008 vs. 2007

While the world wide recession is being experienced, our Turbotec subsidiary reports that its sales remained at a constant $7 million plus in each of the last several three month periods. They also report that their sales are being maintained because their customer base is expanding and thus although individual customers may be reducing their orders, the additional customers are absorbing the slowdown.

The individual components of their sales for the September period show a slight improvement in sales for water source heat pump customers as the need for systems which offer a green component is driving sales. At the same time, shipments to swimming pool heat pump manufacturers are significantly below those of the prior year and the peak of those experienced in 2006. In general, shipments of heat exchangers and titanium tubes to existing customers were below those of prior years while new customers were added.

Manufacturing costs show an improvement in gross profit margin which has occurred because of a combination of the reduced cost of raw materials, a more profitable product mix and the lean manufacturing programs that have been completed. Simultaneously, inventories have increased from $3.1 million at March 31, 2008 to $4.0 million at September 30, 2008. In the three and six month periods, the gross profit margin comparisons were 31.2% and 30.2% in the periods ended September 30, 2008 vs. the 27.4% and 27.3% for the same periods of 2007.

Offsetting this improvement in operations was an increase in Sales, General and Administrative costs affected by the on-going litigation between Turbotec and Thermodynetics. It is expected that the substantive dispute regarding the payment of $884,000 in dividends, payment of administrative fees and the interpretation of the Relationship Agreement between the parties are anticipated to be resolved at trial in London, currently scheduled for March 2009, and that thereafter the litigation costs should materially subside. The Company has offered to mediate the dispute, but as of this writing, there has not been a positive reaction to the offer.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2008 consolidated working capital was $4.4 million compared to $4.3 million at March 31, 2008.

Operating cash flow that was provided in 2008 was the result of collections of accounts receivable, inventory build up, and accounts payable increases along with significant increases in non cash items including



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depreciation and minority interest. Cash flow used in operations during 2007 was the result of net income reduced by a build up of inventory and prepaid expenses together with a reduction in accounts payable and accrued expenses.

The cash used in investing activities during 2008 was the result of the acquisition of property plant and equipment together with sales of marketable securities. This same category, during 2007, was the result of the acquisition of property plant and equipment.

Cash provided through financing activities during 2008 were obtained from revolving and long term debt facilities. In 2007, the cash provided was from long term debt borrowings.

Aggregate long-term debt on a consolidated basis at September 30, 2008 was $1.9 million as compared to $2.0 million at March 31, 2008; these obligations represent mortgages on the two buildings housing the Thermodynetics and Turbotec operations.

The current unsettled economic scene continues to affect business decisions and until the US government addresses these factors with a definitive program, the continued uncertainty will create a difficult business environment. The recent attempts by Congress to at first be sympathetic to one sector of the economy (financial institutions), while behaving quite differently towards another (automotive), has sent shocks throughout the business world and makes interpreting the next move quite difficult. Simultaneously, certain companies are favored for relief, while others have been forced into mergers or bankruptcy. As we go forward, it is expected that certain industries will fair better than others under the new Obama administration. While there are likely to be proposals for a major influx of spending for the countrys infrastructure (and other programs), until the capital becomes readily available and the programs are identified, the outlook for resuscitating the economy will likely be murky.

Significant risk factors and economic considerations associated with heat transfer products include, but are not limited to, seasonality of purchasing and building cycles, the cost of energy, the housing slowdown, incentives provided by manufacturers, marketers and municipalities to encourage the use of more efficient equipment, interest rate changes that may stimulate or depress demand, the cost and availability of materials used in manufacturing processes, and regulatory directives relating to energy consumption, conservation and the environment.

During December, the Company met with its bank and was verbally assured of the continuation of its credit facilities. Management believes its capital resources will be adequate to meet its needs.

Increases in operating costs play a meaningful role in the Companys day-to-day operations as competitive pricing pressures serve to restrict Turbotec's ability to fully recover all added expenses. The raw material adjustments and price increases that have been instituted have been a factor in the ability to maintain the sales levels. The regional labor markets for qualified skilled and semi-skilled employees is weak and a shortage of experienced technical support and engineering staff is expected to continue. Employment related costs continue to escalate and Turbotec is exploring opportunities to reduce these expenses by utilization of a facility in the southeastern states.

FORWARD LOOKING STATEMENTS

This report contains certain forward-looking statements regarding the Company, its business prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause the Companys actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: the Companys ability to successfully and timely develop and finance new projects, the impact of competition on the Companys revenues, and changes in unit prices, supply and demand for the Companys tubing product line especially in applications serving the commercial, industrial and residential construction industries.

When used, words such as "believes," "anticipates," "expects," "continue", "may", "plan", "predict", "should", "will", "intends" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company undertakes no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by the Company in this report, news releases, and other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect the Companys business.



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Item 3.

Quantitative And Qualitative Disclosures About Market Risk.

Not applicable.

Item 4.

Controls And Procedures.

(a) Evaluation of disclosure controls and procedures -

The Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures, as defined in the Securities Exchange Act of 1934 (the "Exchange Act"), as of the end of the reported period, are effective to provide the material information required to be disclosed by the Company in reports that it files or submits under the Exchange Act.

(b) Changes in internal control over financial reporting -

There were no changes made and no corrective actions taken to the Company's internal control over financial reporting or in other factors during the quarter ended for this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.



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THERMODYNETICS, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

There are no material legal proceedings known or threatened against the Company, except:

(a)

A lawsuit was instituted by the Company on January 8, 2008 in the High Court in England, file no. HC08C00046, against Turbotec Products Plc regarding the PLCs non-payment of dividends payable to Thermodynetics and the PLCs attempt to off-set that dividend against administrative fees payable to the Company under their Relationship Agreement of April 28, 2006. The PLC declared and paid dividends in cash to the other shareholders, but not to Thermodynetics, as follows: August 24, 2007 in the amount of 5.8 cents per share, December 12, 2007 in the amount of 2.3 cents per share and March 28, 2008 in the amount of 4.4 cents per share. Thermodynetics owns 7,212,407 ordinary shares of the PLC; the unpaid dividends equal $884,161.97. Thermodynetics solicitors in the United Kingdom share the view as expressed in the written opinion of the Queens Counsel representing Thermodynetics that the interpretation by Thermodynetics of the relevant clauses in the Relationship Agreement as to their meaning and effect is the correct one and is likely to prevail at trial, and therefore Thermodynetics does not view risk of loss from this lawsuit to be probable or material.

(b)

Turbotec Products, Inc. commenced a lawsuit against Thermodynetics on February 27, 2008 in the Connecticut Superior Court, Judicial District of Hartford, alleging that Thermodynetics breached two commercial leases because it received certain overpayments as a result of alleged encroachment of space leased to Turbotec Products and for common area and maintenance charges, and that Thermodynetics improperly withdrew funds from a sinking fund established under one of the leases. The lawsuit was transferred from the regular docket to the Housing Session and now is entitled Turbotec Products, Inc. v. Thermodynetics, Inc., Connecticut Superior Court, Judicial District of Hartford, Housing Session, Docket No. 7712. Thermodynetics denies the allegations, is vigorously defending the case which is still in its preliminary stages, and intends to advance counterclaims against Turbotec Products. Thermodynetics does not view the risk of loss in the case as probable or material.

(c)

There are a number of threatened and pending actions against Vulcan, and a number of material judgments obtained against Vulcan. All of Vulcan's assets were liquidated and distributed in 2005. Thermodynetics and its other subsidiaries are not and have not been a party to any such Vulcan actions.

Item 1A.

Risk Factors.

Not applicable.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of equity securities of the Company during the quarterly period covered by this Form 10-Q report.

Item 3.

Defaults Upon Senior Securities.

There have been no defaults of any terms of the Company's securities during the quarterly period covered by this Form 10-Q report.

Item 4.

Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of the Securities Holders of the Company during the quarterly period for which this report is filed, however, at the annual meeting of shareholders of the Company held on October 21, 2008, Robert A. Lerman, John F. Ferraro, John J. Hughes and Fred H. Samuelson were elected directors of the Company, to serve until their successors are elected and qualified.

|                  |  |           |  |         
|----------------- |  | --------- |  | --------
|Nominee           |  | For       |  | Withheld
|John F. Ferraro   |  | 3,101,730 |  | 391,951 
|Robert A. Lerman  |  | 3,101,590 |  | 392,091 
|John J. Hughes    |  | 3,101,330 |  | 392,351 
|Fred H. Samuelson |  | 3,101,590 |  | 392,091 



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| |  |  |  | 
| |  |  |  | 

At the annual meeting of shareholders of the Company held on October 21, 2008, the shareholders of the Company approved the reincorporation of the Company in the State of Nevada by the following vote count:



| |           |  |         |  |         |  |          
| | --------- |  | ------- |  | ------- |  | ---------
| | For       |  | Against |  | Abstain |  | Not Voted
| | 2,468,092 |  | 392,059 |  | 9,940   |  | 623,590  



Item 5.

Other Information.

(a) Termination of the Real Estate Contract.

The Company had entered into a contingent purchase and sale agreement regarding its real property. After extensive due diligence the potential buyer decided not to pursue the sale any further and terminated the contract. While no reason was offered, it is believed that the general credit markets were the cause of their decision.

(b) Nevada Reincorporation.

The Company through a reincorporation via merger on December 11, 2008 became a Nevada corporation. The Company, a Delaware corporation, was merged with and into Thermodynetics, Inc., a Nevada corporation, and each share of the Companys Common Stock, par value $.01 per share, is automatically converted into one share of common stock, par value $.01 per share, of Thermodynetics, Inc., the Nevada corporation; the name of the surviving company is "Thermodynetics, Inc."

Item 6.

Exhibits.

Rule 13a-14(a) / 15d-14(a) Certifications:



·

Exhibit 31.1

Certification of Chief Executive Officer.

·

Exhibit 31.2

Certification of Chief Financial Officer.

Section 1350 Certifications:

·

Exhibit 32.1

Certification of Chief Executive Officer.

·

Exhibit 32.2

Certification of Chief Financial Officer.



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THERMODYNETICS, INC. AND SUBSIDIARIES

SIGNATURES

In accordance with 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.

| |                      |                                                       
| | -------------------- | ------------------------------------------------------
| | THERMODYNETICS, INC.
| |                      |                                                       
| |                      |                                                       
| | By:                  | /s/ ROBERT A. LERMAN                                  
| |                      | Robert A. Lerman
President and Chief Executive Officer
| |                     

Date:  December 23, 2008

| |     |                                                      
| | --- | -----------------------------------------------------
| |     |                                                      
| |     |                                                      
| | By: | /s/ JOHN F. FERRARO                                  
| |     | John F. Ferraro
Treasurer and Chief Financial Officer



Date: December 23, 2008





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