UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q





|                                                               |                                                                             
|-------------------------------------------------------------- | ----------------------------------------------------------------------------
|ü                                                              | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
|                                                               | ACT OF 1934                                                                 
|For the quarterly period ended: December 31, 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.                                                                                                                                    | Yes þ 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  þ |  | 
|                                                                                                                                                                                                                                              |             | reporting company)                |  |                              |  | 
|                                                                                                                                                                                                                                              |            
|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                                                             
|                                                                                                                                                                                                                                              | Yes þ 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                 











---







THERMODYNETICS, INC. AND SUBSIDIARIES



INDEX





|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I FINANCIAL INFORMATION
Item 1.Financial Statements
3
Consolidated Balance Sheets December 31, 2008 and March 31, 2008
3
Consolidated Statements of Income Three Months Ended December 31, 2008 and 2007
4
Consolidated Statements of Income Nine Months Ended December 31, 2008 and 2007
5
Consolidated Statements of Cash Flows Nine Months Ended December 31, 2008 and 2007
6
Notes to Consolidated Financial Statements
7
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.
10
Item 3.Quantitative and Qualitative Disclosures About Market Risks.
11
Item 4T.Controls and Procedures.
12
PART II OTHER INFORMATION
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.
14
Item 4.       Submission of Matters to a Vote of Security Holders.
14
Item 5.       Other Information.
14
Item 6.       Exhibits.
14
SIGNATURES
15



---





PART I: FINANCIAL INFORMATION



Item 1.

Financial Statements

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (in 000s)

|                                                         |  |                   |        |   |                |   |        |   |  | 
|-------------------------------------------------------- |  | ----------------- | ------ | - | -------------- | - | ------ | - |  | 
|                                                         |  | December 31,
2008 |        |   | March 31, 2008 |  
|                                                         |  | (Unaudited)       |        |   | (Audited)      |  
|ASSETS                                                   |  |                   |        |   |                |  
|CURRENT ASSETS                                           |  |                   |        |   |                |  
|Cash                                                     |  | $                 | 2,000  |   |                | $ | 1,062  |  
|Accounts Receivable, Net                                 |  |                   | 2,014  |   |                |   | 2,909  |  
|Inventories                                              |  |                   | 3,944  |   |                |   | 3,136  |  
|Prepaid Expenses and Other Current Assets                |  |                   | 283    |   |                |   | 196    |  
|Marketable Securities                                    |  |                   | 52     |   |                |   | 259    |  
|Total Current Assets                                     |  |                   | 8,293  |   |                |   | 7,562  |  
|                                                         |  |                   |        |   |                |   |        |  
|PROPERTY, PLANT AND EQUIPMENT                            |  |                   |        |   |                |   |        |  
|Property, Plant and Equipment - At Cost                  |  |                   | 16,327 |   |                |   | 15,671 |  
|Less: Accumulated Depreciation                           |  |                   | 8,208  |   |                |   | 7,846  |  
|Property, Plant, and Equipment  Net                     |  |                   | 8,119  |   |                |   | 7,825  |  
|                                                         |  |                   |        |   |                |   |        |  
|OTHER ASSETS                                             |  |                   |        |   |                |   |        |  
|Intangible Assets - Net of Amortization                  |  |                   | 94     |   |                |   | 94     |  
|Investments in Unaffiliated Companies                    |  |                   | 146    |   |                |   | 110    |  
|Deferred Income Taxes                                    |  |                   | 980    |   |                |   | 980    |  
|Deposits and Other                                       |  |                   | 58     |   |                |   | 63     |  
|Total Other Assets                                       |  |                   | 1,278  |   |                |   | 1,247  |  
|                                                         |  |                   |        |   |                |   |        |  
|TOTAL ASSETS                                             |  | $                 | 17,690 |   |                | $ | 16,634 |  
|                                                         |  |                   |        |   |                |   |        |  
|LIABILITIES AND STOCKHOLDERS EQUITY                     |  |                   |        |   |                |   |        |  
|CURRENT LIABILITIES                                      |  |                   |        |   |                |  
|Accounts Payable                                         |  | $                 | 1,738  |   |                | $ | 2,046  |  
|Accrued Taxes and Expenses                               |  |                   | 1,041  |   |                |   | 818    |  
|Current Portion of Long-Term Debt                        |  |                   | 302    |   |                |   | 290    |  
|Notes Payable  Bank                                     |  |                   | 1,021  |   |                |   | 100    |  
|Total Current Liabilities                                |  |                   | 4,102  |   |                |   | 3,254  |  
|DEFERRED INCOME TAXES                                    |  |                   | 140    |   |                |   | 296    |  
|LONG-TERM DEBT                                           |  |                   | 1,791  |   |                |   | 1,991  |  
|LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS         |  |                   | 2,782  |   |                |   | 2,782  |  
|MINORITY INTEREST IN SUBSIDIARY                          |  |                   | 3,632  |   |                |   | 3,152  |  
|TOCKHOLDERS EQUITY                                      |  |                   |        |   |                |   |        |  
|Common Stock, Par Value $.01/Share,                      |  |                   |        |   |                |   |        |  
|Authorized 25,000,000 shares, issued 4,080,306 shares at |  |                   |        |   |                |   |        |  
|12/31/08 and at 3/31/08                                  |  |                   | 41     |   |                |   | 41     |  
|Additional Paid-in Capital                               |  |                   | 7,138  |   |                |   | 7,138  |  
|Retained Earnings (Deficit)                              |  |                   | (1,960 | ) |                |   | (2,057 | )
|Accumulated Other Comprehensive Income                   |  |                   | 24     |   |                |   | 37     |  
|Total Stockholders Equity                               |  |                   | 5,243  |   |                |   | 5,159  |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY               |  | $                 | 17,690 |   |                | $ | 16,634 |  



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



3



---





THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED DECEMBER 31,

(UNAUDITED)

IN (000s) EXCEPT PER SHARE DATA



|                                                       |  |      |           |   |      |   |           |  
|------------------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                                                       |  | 2007 |           |   | 2008 |  
|                                                       |  |      |           |   |      |  
|Net Sales                                              |  | $    | 6,415     |   |      | $ | 7,322     |  
|Cost of Goods Sold                                     |  |      | 4,640     |   |      |   | 5,166     |  
|Gross Profit                                           |  |      | 1,775     |   |      |   | 2,156     |  
|Selling, General & Administrative Expenses             |  |      | 1,265     |   |      |   | 1,861     |  
|Income From Operations                                 |  |      | 510       |   |      |   | 295       |  
|                                                       |  |      |           |   |      |   |           |  
|Other Income (Expense)                                 |  |      |           |   |      |   |           |  
|Interest Expense, Net                                  |  |      | ( 42      | ) |      |   | ( 44      | )
|Other  Net                                            |  |      | 3         |   |      |   | 51        |  
|Total Other Income (Expense)                           |  |      | ( 39      | ) |      |   | 7         |  
|Income Before Income Taxes and Minority Interest       |  |      | 471       |   |      |   | 302       |  
|Provision for Income Taxes                             |  |      | 187       |   |      |   | 255       |  
|Minority Interest in Subsidiary                        |  |      | 171       |   |      |   | 150       |  
|Net Income                                             |  | $    | 113       |   |      | $ | ( 103     | )
|Earnings (Loss) per Share  Basic                      |  | $    | .03       |   |      | $ | ( .03     | )
|Earnings (Loss) per Share  Diluted                    |  | $    | .03       |   |      | $ | ( .03     | )
|Weighted Average Shares Outstanding- Basic and Diluted |  |      | 4,062,297 |   |      |   | 4,080,306 |  



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



4



---





THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED DECEMBER 31,

(UNAUDITED)

IN (000s) EXCEPT PER SHARE DATA





|                                                       |  |      |           |   |      |   |           |  
|------------------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                                                       |  | 2007 |           |   | 2008 |  
|Net Sales                                              |  | $    | 20,874    |   |      | $ | 22,251    |  
|Cost of Goods Sold                                     |  |      | 15,431    |   |      |   | 15,582    |  
|Gross Profit                                           |  |      | 5,443     |   |      |   | 6,669     |  
|Selling, General & Administrative Expenses             |  |      | 3,833     |   |      |   | 5,276     |  
|Income From Operations                                 |  |      | 1,610     |   |      |   | 1,393     |  
|                                                       |  |      |           |   |      |   |           |  
|Other Income (Expense)                                 |  |      |           |   |      |   |           |  
|Interest Expense, Net                                  |  |      | ( 122     | ) |      |   | ( 126     | )
|Other  Net                                            |  |      | ( 2       | ) |      |   | 40        |  
|Total Other Income (Expense)                           |  |      | ( 124     | ) |      |   | ( 86      | )
|Income before Income Taxes and Minority Interest       |  |      | 1,486     |   |      |   | 1,307     |  
|Provision for Income Taxes                             |  |      | 423       |   |      |   | 753       |  
|Minority Interest in Subsidiary                        |  |      | 504       |   |      |   | 456       |  
|Net Income                                             |  | $    | 559       |   |      | $ | 98        |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |      |           |   |      |   |           |  
|Earnings (Loss) per Share  Basic                      |  | $    | .14       |   |      | $ | .02       |  
|Earnings (Loss) per Share  Diluted                    |  | $    | .14       |   |      | $ | .02       |  
|                                                       |  |      |           |   |      |   |           |  
|Weighted Average Shares Outstanding- Basic and Diluted |  |      | 4,051,906 |   |      |   | 4,080,306 |  



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



5



---





THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31,

(UNAUDITED)

IN (000S)



|                                                                                  |  |      |       |   |      |   |       |  
|--------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|                                                                                  |  | 2007 |       |   | 2008 |  
|                                                                                  |  |      |       |   |      |  
|Net income                                                                        |  | $    | 559   |   |      | $ | 98    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |       |   |      |   |       |  
|Depreciation and amortization                                                     |  |      | 332   |   |      |   | 362   |  
|Minority interest in earnings of subsidiary                                       |  |      | 50    |   |      |   | 480   |  
|Deferred tax provision                                                            |  |      | 31    |   |      |   | ( 156 | )
|Changes in operating assets and liabilities:                                      |  |      |       |   |      |   |       |  
|Increase (decrease) in accounts payable                                           |  |      | ( 924 | ) |      |   | ( 308 | )
|Decrease (increase) in prepaid expenses and other assets                          |  |      | ( 117 | ) |      |   | ( 87  | )
|Decrease (increase) in accounts receivable                                        |  |      | 588   |   |      |   | 896   |  
|Decrease (increase) in inventories                                                |  |      | 104   |   |      |   | ( 808 | )
|Increase (decrease) in accrued taxes and expenses                                 |  |      | ( 321 | ) |      |   | 223   |  
|                                                                                  |  |      |       |   |      |   |       |  
|NET CASH PROVIDED BY  OPERATING ACTIVITIES                                        |  |      | 302   |   |      |   | 700   |  
|INVESTING ACTIVITIES:                                                             |  |      |       |   |      |   |       |  
|Purchases of property, plant and equipment, net                                   |  |      | ( 369 | ) |      |   | ( 666 | )
|Change in investments in unaffiliated companies                                   |  |      |     |   |      |   | ( 36  | )
|Sales of marketable securities                                                    |  |      |     |   |      |   | 207   |  
|NET CASH USED IN INVESTING ACTIVITIES                                             |  |      | (369  | ) |      |   | ( 495 | )
|                                                                                  |  |      |       |   |      |   |       |  
|FINANCING ACTIVITIES:                                                             |  |      |       |   |      |   |       |  
|Proceeds from short term borrowings and notes payable                             |  |      | 357   |   |      |   | 921   |  
|Principal payments on long-term debt                                              |  |      | ( 196 | ) |      |   | ( 188 | )
|Compensation expense from stock options                                           |  |      | 28    |   |      |   |     |  
|Issuance of stock to retirement plan                                              |  |      | 18    |   |      |   |     |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                         |  |      | 207   |   |      |   | 733   |  
|                                                                                  |  |      |       |   |      |   |       |  
|INCREASE IN CASH                                                                  |  |      | 140   |   |      |   | 938   |  
|CASH AT BEGINNING OF PERIOD                                                       |  |      | 659   |   |      |   | 1,062 |  
|CASH AT END OF PERIOD                                                             |  | $    | 799   |   |      | $ | 2,000 |  



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



6



---







THERMODYNETICS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2007 AND 2008

(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 nine months ended December 31, 2008 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 43.68% minority interest of its subsidiary, Turbotec Products Plc, (the Plc), through an offering on the AIM Market of the London Stock Exchange.



The Company and the Plc entered into a Relationship Agreement (RA) which 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., a wholly-owned subsidiary of the Plc (Turbotec Products), 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 (in 000s) consist of the following at:



| |                 |  |                   |       |                |   |      
| | --------------- |  | ----------------- | ----- | -------------- | - | -----
| |                 |  | December 31,
2008 |       | March 31,
2008
| | Raw materials   |  | $                 | 2,143 |                | $ | 2,044
| | Finished goods  |  |                   | 1,621 |                |   | 1,061
| | Work in process |  |                   | 239   |                |   | 155  
| | Less: Reserves  |  |                   | 59    |                |   | 124  
| |                 |  | $                 | 3,944 |                | $ | 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.





7



---





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 nine months ended December 31, 2008 and 2007 have been computed in accordance with this pronouncement, based on the weighted average of outstanding shares during the periods.



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



|                                             |  |  |                                |  |      |           | 
|-------------------------------------------- |  |  | ------------------------------ |  | ---- | --------- | 
|                                             |  |  | Three Months Ended December 31
|                                             |  |  | 2007                           |  | 2008
|Weighted Average Shares Outstanding- Basic   |  |  | 4,062,937                      |  |      | 4,080,306
|Assumed Conversion of Stock Options          |  |  |                              |  |      |        
|Weighted Average Shares Outstanding- Diluted |  |  | 4,062,937                      |  |      | 4,080,306



|                                             |  |  |                               |  |      |           | 
|-------------------------------------------- |  |  | ----------------------------- |  | ---- | --------- | 
|                                             |  |  | Nine Months Ended December 31
|                                             |  |  | 2007                          |  | 2008
|Weighted Average Shares Outstanding- Basic   |  |  | 4,051,906                     |  |      | 4,080,306
|Assumed Conversion of Stock Options          |  |  |                             |  |      |        
|Weighted Average Shares Outstanding- Diluted |  |  | 4,051,906                     |  |      | 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.



|                                      |  |   |                               |  |      |     | 
|------------------------------------- |  | - | ----------------------------- |  | ---- | --- | 
|                                      |  |   | Nine Months Ended December 31
|                                      |  |   | 2007                          |  | 2008
|Cash payments for interest (in 000s) |  | $ | 122                           |  | $    | 126



During the nine months ended December 31, 2008, long  term debt of approximately $35,000 was incurred to acquire a vehicle.



NOTE 6: INVESTMENT / LOAN



In September 2006, the Company advanced $300,000 to an unaffiliated company and received a note due March 7, 2007 in the amount of $342,858. In March 2007 the Company reduced the carrying value of the note to $30,000 and the company is currently in Chapter 7 Bankruptcy proceedings.



NOTE 7: 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 8: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



8



---





one and is likely to prevail at trial, 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 vigorously defending the case which is still in its preliminary stages, and has filed counterclaims against Turbotec Products for sums due under the two leases.  On January 29, 2009, Turbotec Products was granted permission by the court to file an amended complaint adding counts for fraudulent inducement, fraudulent misrepresentation, and violation of the Connecticut Unfair Trade Practices Act (Conn. Gen. Stat. Sect. 42-110b, et seq.) claiming that it was induced to enter into the two commercial leases based on vague allegations of false statements by an unidentified officer, agent, employee and/or servant of Thermodynetics. Thermodynamics expects to seeks a more detailed and definite statement of Turbotec Products new claims very soon and to conduct discovery to determine the alleged grounds for the new claims.  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.  This suit was settled in October 2008 with no significant financial impact on Turbotec.  The confidential settlement resolved all claims for any alleged future losses as well as those alleged in the complaint.



(d)

There are a number of threatened and pending actions against the Company's discontinued subsidiary, Vulcan Industries, Inc., and a number of material judgments obtained against Vulcan.  Thermodynetics and its other subsidiaries are not and have not been a party to any such Vulcan actions







9



---





Item 2.

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

RESULTS OF OPERATIONS



Our Turbotec subsidiary continues to maintain its sales levels despite the slow down in the general economy.  For the 9 months ended December 31, 2008, revenues were in excess of $22 million as compared with the prior years almost $21 million.  While the major impetus in maintaining sales levels is the geothermal heat pump market, the swimming pool heat pump market, largely Florida oriented, remains weak.  Contributing to the steady sales levels were rebate programs and tax credits in the US and Canada.  The expectation of a slow down in shipments is anticipated in the January to March quarter, a typically slow period for the company, as customers are beginning to extend delivery dates for new orders and also reflect the current economic conditions in our markets.

Another factor in the expectation of reduced revenues going forward involves the commodity prices that have declined significantly over the recent past.  The revenues reported include this factor as price increases are passed along to customers.  Gross profit margins are reduced when prices increase because not all costs are able to be passed along to customers; as prices of raw materials decline, the company can recapture certain costs and thereby improving manufacturing margins result.



Turbotec has proceeded with their plan to open a facility in North Carolina and began limited production in January.  Their reason is to allow for greater capacity and to relieve the pressure they are experiencing at their Connecticut facilities.  They expect, subject to economic conditions, to bring the facility to full production levels this summer.



The demand for high efficiency heat pumps as part of a green initiative continues to give Turbotecs products broad appeal in retrofit and high end system applications.



Gross margin percentage was 30% for the first nine months of fiscal 2009 compared to 26% for the same period last year.  In the latest three month period the margin was 29% vs. 28% in the like period of 2007.  For the full fiscal year ended 31 March 2008 gross margin percentage was 28%.



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 $3.9 million at December 31, 2008.



Selling, general and administrative expenses increased in both the three and nine month periods primarily because of increased costs incurred for corporate governance, engineering and administrative expenses and the cost of litigation.  Interest expenses were relatively constant in these periods.



The minority interest impact of the Companys holding in Turbotec on the income statement was somewhat less in the current fiscal year than in the prior year.



Significant risk factors and economic considerations pertaining to Turbotec include the cost of energy and incentives provided by producers, sellers and municipalities to encourage the use of more efficient equipment; interest rates that can stimulate or depress purchasing demand; the cost and availability of materials used in production; and regulatory directives and incentives relating to energy consumption, conservation and environmental issues.  The Company may be affected by the economic downturn that the world is currently experiencing as poor business conditions, stock market volatility and other financial perturbations create disruptions or opportunities.



LIQUIDITY AND CAPITAL RESOURCES



At December 31, 2008 consolidated working capital was $4,191,000 compared to $4,308,000 at March 31, 2008.



Operating cash flow that was provided in 2008 was the result of collections of receivables, along with significant increases in non cash items including depreciation and minority interest. Cash flow provided by operations during 2007 was the result of collections of receivables, a build up inventory together with non cash items including depreciation, deferred taxes and minority interest.





10



---





The cash used in investing activities during 2008 was the results 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 by financing activities during 2008 and 2007 were obtained from revolving debt facilities.



Aggregate long-term debt on a consolidated basis at December 31, 2008 was $1.8 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 Companys access to credit is believed to be adequate.  Conversations with the Companys bankers have been positive in the current financial environment and it is anticipated that the Companys working capital line will be extended.



The Company previously 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 with an anticipated closing scheduled for the end of February and is assisting two US based companies seeking financing.



The UK lawsuit between the Company and its Plc subsidiary is scheduled to go to trial the week of March 16; we are confident the outcome will be favorable for Thermodynetics.



As we go forward, it is expected that certain industries will fair better than others under the new Obama administration in today's economic climate.  While there are likely to be proposals for a major influx of spending for the countrys infrastructure (and others), until the capital becomes readily available and the programs are identified, the outlook for resuscitating the economy will likely be murky.



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 Turbotec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.



Item 3.

Quantitative and Qualitative Disclosures About Market Risks.

Not applicable.





11



---





Item 4T.

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 Rule 13a-15(e) of the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the reported period, are effective to provide the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms.



Changes in internal controls -



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.





12



---





PART II - OTHER INFORMATION



Item 1.

Legal Proceedings.

The Company is not a party to and its property is not the subject of any pending legal proceeding 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 has filed counterclaims against Turbotec Products for sums due under the two leases.  On January 29, 2009, Turbotec Products was granted permission by the court to file an amended complaint adding counts for fraudulent inducement, fraudulent misrepresentation, and violation of the Connecticut Unfair Trade Practices Act (Conn. Gen. Stat. Sect. 42-110b, et seq.) claiming that it was induced to enter into the two commercial leases based on vague allegations of false statements by an unidentified officer, agent, employee and/or servant of Thermodynetics. Thermodynamics expects to seeks a more detailed and definite statement of Turbotec Products new claims very soon and to conduct discovery to determine the alleged grounds for the new claims.  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 alleged 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.  This suit was settled in October 2008 with no significant financial impact on Turbotec.  The confidential settlement resolved all claims for any alleged future losses as well as those alleged in the complaint.



(d)

There are a number of threatened and pending actions against the Company's dissolved subsidiary, Vulcan Industries, Inc., 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 three-month period covered by this Form 10-Q report.





13



---





Item 3.

Defaults Upon Senior Securities.

There were no material defaults of any terms of the securities or indebtedness of the Company or any of its significant subsidiaries during the three-month period covered by this Form 10-Q report.



Item 4.

Submission of Matters to a Vote of Security Holders.

At the annual meeting of stockholders of the Company held on October 21, 2009, Robert A. Lerman, John F. Ferraro, John J. Hughes and Fred H. Samuelson were elected directors of the Company, to serve for a one year term and until their successors are elected and qualified.



|                  |  |           |  |         |  |         |  |          
|----------------- |  | --------- |  | ------- |  | ------- |  | ---------
|Nominee or Matter |  | For       |  | Against |  | Abstain |  | Not Voted
|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 |  |       |  |        



Also at the meeting, shareholders approved the reincorporation of the Company in the State of Nevada by the following vote:



|          |  |         |  |         |  |          
|--------- |  | ------- |  | ------- |  | ---------
|For       |  | Against |  | Abstain |  | Not Voted
|2,468,092 |  | 319,386 |  | 9,940   |  | 623,590  



Item 5.

Other Information.

None



Item 6.

Exhibits.

(a)

Exhibits:



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



·

Exhibit 31(a)

Certification of Chief Executive Officer.

·

Exhibit 31(b)

Certification of Chief Financial Officer.



Section 1350 Certifications:



·

Exhibit 32(a)

Certification of Chief Executive Officer.

·

Exhibit 32(b)

Certification of Chief Financial Officer.













14



---











SIGNATURES

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



|                        |     |                                       | 
|----------------------- | --- | ------------------------------------- | 
|                        |     | THERMODYNETICS, INC.                  | 
|                        |     |                                       | 
|Date: February 13, 2009 | By: | /s/  ROBERT A. LERMAN                 | 
|                        |     | Robert A. Lerman                      | 
|                        |     | President and Chief Executive Officer | 
|                        |     |                                       | 
|Date: February 13, 2009 | By: | /s/  JOHN F. FERRARO                  | 
|                        |     | John F. Ferraro                       | 
|                        |     | Treasurer and Chief Financial Officer | 





15