SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB


                     QUARTERLY REPORT UNDER SECTION 13 OR 15
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1998
                                                 Commission File Number: 0-10707

                              THERMODYNETICS, INC.
        (Exact name of small business issuer as specified in its charter)

           Delaware                                               06-1042505
(State or other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

    651 Day Hill Road, Windsor, CT            06095              860-683-2005
(Address of Principal Executive Offices)    (Zip Code)        (Telephone Number)


              (Former name, former address and former fiscal year,
                         if changed since last report.)

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

     Yes _X_      No ___

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


           Class                                   Outstanding at Sept. 30, 1998
Common stock $.01 Par Value                              12,665,276 Shares


<PAGE>

                      THERMODYNETICS, INC. AND SUBSIDIARIES


                                      INDEX


                                                                     Page Number
                                                                     -----------

PART I      FINANCIAL INFORMATION

   Item 1.  Financial Statements

            Consolidated Balance Sheet
               September 30, 1998 and March 31, 1998.......................    3

            Consolidated Statements of Income and Comprehensive
               Income Three Months Ended September 30,
               1998 and 1997...............................................    4

            Consolidated Statements of Income and Comprehensive
               Income Six Months Ended September 30,
                1998 and 1997...        ....................................   5

            Consolidated Statements of Cash Flows
               Six Months Ended September 30,
               1998 and 1997...............................................    6

            Notes to Consolidated Financial Statements.....................  7-8

   Item 2.  Management's Discussion and Analysis .......................... 9-10


PART II     OTHER INFORMATION

   Item 1.  Legal Proceedings..............................................   11

   Item 2.  Changes in Securities..........................................   11

   Item 3.  Defaults Upon Senior Securities................................   11

   Item 4.  Submission of Matters to a Vote of Security Holders............   11

   Item 5.  Other Information..............................................   11

   Item 6.  Exhibits and Reports on Form 8-K...............................   11


SIGNATURE PAGE ............................................................   12


                                     Page 2
<PAGE>



                      THERMODYNETICS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                September 30,              March 31,
                                                                                    1998                     1998
                                                                                 (Unaudited)               (Audited)
                                                                                 -----------              -----------
<S>                                                                              <C>                      <C>
                                     ASSETS

CURRENT ASSETS
  Cash                                                                           $     2,702              $     2,023
  Accounts Receivable, Net                                                         1,243,449                1,039,078
  Inventories                                                                      1,816,504                1,448,420
  Prepaid Expenses and Other Current Assets                                          279,009                  240,563
  Deferred Income Taxes                                                              100,000                  100,000
                                                                                 -----------              -----------
    Total Current Assets                                                           3,441,664                2,830,084
                                                                                 -----------              -----------

PROPERTY , PLANT AND EQUIPMENT
  Property, Plant and Equipment - At Cost                                          9,101,787                8,963,252
  Less: Accumulated Depreciation                                                   4,610,111                4,450,814
                                                                                 -----------              -----------
   Property, Plant, and Equipment - Net                                            4,491,675                4,512,438
                                                                                 -----------              -----------

OTHER ASSETS
  Undeveloped Land Held for Investment                                               118,109                  116,593
  Intangible Assets - Net of Amortization                                            121,653                  127,623
  Officers' Life Insurance                                                         1,076,894                1,022,440
  Deposits and other                                                                   5,750                   12,726
  Investment in Foreign Company                                                      100,742                      -0-
  Marketable Equity Securities, at Market                                            138,000                  392,000
                                                                                 -----------              -----------
    Total Other Assets                                                             1,561,148                1,671,382
                                                                                 -----------              -----------

TOTAL ASSETS                                                                     $ 9,494,488              $ 9,013,904
                                                                                 ===========              ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts Payable                                                               $   808,605              $   912,435
  Accrued Taxes and Expenses                                                         120,690                  120,831
  Current Portion of Long Term Debt                                                  322,890                  291,566
  Notes Payable - Bank                                                             1,668,242                1,061,747
                                                                                 -----------              -----------

    Total Current Liabilities                                                      2,920,387                2,386,579
                                                                                 -----------              -----------

LONG TERM DEBT                                                                     2,218,997                2,366,345
                                                                                 -----------              -----------

STOCKHOLDERS' EQUITY
  Common Stock, Par Value $.01/Share,
  Authorized 25,000,000 shares, issued 12,665,276 shares
      At 9/30/98 and 12,569,591 shares at 3/31/98                                    126,653                  125,696
    Additional Paid-in Capital                                                     5,416,051                5,411,524
  Less:  Treasury Stock, at Cost                                                     320,521                  320,521
  Less:  Valuation Reserve for Long-Term Investments                                 276,000                  196,000
  Retained Earnings (Deficit)                                                       (591,079)                (759,719)
                                                                                 -----------              -----------
    Total Stockholders' Equity                                                     4,355,104                4,260,980
                                                                                 -----------              -----------

TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                                                           $ 9,494,488              $ 9,013,904
                                                                                 ===========              ===========
</TABLE>


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



                                     Page 3
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
                    FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     1998               1997
                                                                 ------------       ------------
<S>                                                              <C>                <C>
Net Sales                                                        $  2,665,374       $  2,200,210

Cost of Goods Sold                                                  1,931,735          1,590,301
                                                                 ------------       ------------

Gross Profit                                                          733,639            609,909

Selling, General & Administrative Expenses                            480,157            438,709
                                                                 ------------       ------------

Income From Operations                                                253,482            171,200
                                                                 ------------       ------------

Other Income (Expense)
     Interest Expense, Net                                            (99,702)           (93,832)
     Realized Loss on Sale of Securities                             (126,580)               -0-
     Other - Net                                                       (4,785)            (6,624)
                                                                 ------------       ------------
     Total Other Income (Expense)                                    (231,067)          (100,456)
                                                                 ------------       ------------

Income Before Income Taxes                                             22,415             70,744

Provision for Income Taxes                                                -0-                -0-
                                                                 ------------       ------------

Net Income                                                             22,415             70,744

Other Comprehensive Income (Loss),Net of tax
      Unrealized holding gains during the period                       (5,750)           125,587
                                                                 ------------       ------------
                                                                       (5,750)           125,587
                                                                 ------------       ------------

Comprehensive Income                                             $     16,665       $    196,331
                                                                 ============       ============

Earnings per Share-Basic                                                  NIL       $        .01
                                                                 ============       ============

Earnings per Share-Diluted                                                NIL                NIL
                                                                 ============       ============
Weighted Average Shares Outstanding- Basic                         12,665,276         12,569,646
                                                                 ============       ============
Weighted Average Shares Outstanding- Diluted                       15,227,015         15,737,388
                                                                 ============       ============
</TABLE>


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


                                     Page 4
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
                     FOR THE SIX MONTHS ENDED SEPTEMBER 30,
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                         1998                       1997
                                                                     ------------               ------------
<S>                                                                  <C>                        <C>
Net Sales                                                            $  5,297,829               $  4,414,873

Cost of Goods Sold                                                      3,809,317                  3,169,461
                                                                     ------------               ------------

Gross Profit                                                            1,488,512                  1,245,412

Selling, General & Administrative Expenses                                977,194                    915,139
                                                                     ------------               ------------

Income From Operations                                                    511,318                    330,273
                                                                     ------------               ------------

Other Income (Expense)
     Interest Expense, Net                                               (196,530)                  (183,930)
     Realized Loss on Sale of Securities                                 (126,580)                       -0-
     Other - Net                                                          (19,568)                   (13,250)
                                                                     ------------               ------------
     Total Other Income (Expense)                                        (342,678)                  (197,180)
                                                                     ------------               ------------

Income Before Income Taxes                                                168,640                    133,093

Provision for Income Taxes                                                    -0-                        -0-
                                                                     ------------               ------------

Net Income                                                                168,640                    133,093

Other Comprehensive Income (Loss), net of tax
      Unrealized holding gains during the period                          (80,000)                    76,587
                                                                     ------------               ------------
                                                                          (80,000)                    76,587
                                                                     ------------               ------------

Comprehensive Income                                                 $     88,640               $    209,680
                                                                     ============               ============

Earnings per Share-Basic                                             $        .01               $        .01
                                                                     ============               ============

Earnings per Share-Diluted                                           $        .01               $        .01
                                                                     ============               ============

Weighted Average Shares Outstanding- Basic                             12,633,381                 12,557,778
                                                                     ============               ============
Weighted Average Shares Outstanding- Diluted                           15,562,090                 15,639,931
                                                                     ============               ============
</TABLE>


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


                                     Page 5


<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     FOR THE SIX MONTHS ENDED SEPTEMBER 30,

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                   1998                  1997
                                                                                 ---------            ---------
<S>                                                                              <C>                  <C>
OPERATING ACTIVITIES:
  Net income                                                                     $ 168,640            $ 133,093
         Adjustments to reconcile net income to net cash provided by
         operating activities:
  Depreciation and amortization                                                    165,267              176,288
  Realized loss on sale of securities                                              126,580                  -0-
  Changes in operating assets and liabilities:
    Increase (decrease) in accounts payable                                       (103,830)            (170,297)
    Decrease (increase) in prepaid expenses                                        (31,470)             (50,890)
       and other assets
    Decrease (increase) in accounts receivable                                    (204,371)              97,597
    Decrease (increase) in inventories                                            (368,084)            (102,483)
    Increase (decrease) in accrued expenses                                          5,303              (11,425)
                                                                                 ---------            ---------

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
                                                                                  (241,965)              71,883
                                                                                 ---------            ---------
INVESTING ACTIVITIES;
  Purchases of property, plant and equipment                                      (138,535)             (86,447)
  Increase in long-term investments                                                 (1,516)              (1,482)
  Investment in foreign company                                                   (100,742)                 -0-
  Increase in life insurance premiums receivable                                   (54,454)             (81,681)
  Sale of marketable securities                                                     47,420                  -0-
                                                                                 ---------            ---------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
                                                                                  (247,827)            (169,610)
                                                                                 ---------            ---------

FINANCING ACTIVITIES
  Principal payments on debt obligations                                          (147,348)            (168,402)
  Net proceeds from revolving and term debt                                        637,819              266,116
                                                                                 ---------            ---------

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
                                                                                   490,471               97,714
                                                                                 ---------            ---------

INCREASE (DECREASE) IN CASH                                                            679                  (13)

CASH AT BEGINNING OF PERIOD                                                          2,023                2,550
                                                                                 ---------            ---------

CASH AT END OF PERIOD                                                            $   2,702            $   2,537
                                                                                 =========            =========
</TABLE>


    The accompanying notes are an integral part of these financial statements



                                     Page 6
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (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 generally  accepted  accounting  principles have been condensed or omitted.
The results of operations for the three and six months ended  September 30, 1998
and  September  30,  1997 are not  necessarily  indicative  of the results to be
expected for the full year.

NOTE 2: INVENTORIES

     Inventories consist of the following at September 30:

                                                    1998                 1997
                                                 ----------           ----------
         Raw materials                           $1,279,077           $  768,902
         Work-in-process                            299,895              208,625
         Finished goods                             237,532              355,522
                                                 ----------           ----------
                                                 $1,816,504           $1,333,049
                                                 ==========           ==========

NOTE 3: 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, 1998 and September 30, 1997 have been computed in accordance
with this  pronouncement,  based on the weighted  average of outstanding  shares
during the periods.  The weighted  average number of shares  outstanding used in
the calculations are as follows:

<TABLE>
<CAPTION>
                                                                 Three Months Ended                     Six Months Ended
                                                           Sept. 30 1998     Sept  30, 1997     Sept. 30, 1998      Sept 30, 1997
                                                           -------------     ----  --------     --------------      -------------
<S>                                                         <C>                <C>                <C>                <C>
Weighted Average Shares Outstanding
   (Basic)                                                  12,665,276         12,569,646         12,633,381         12,560,778
Assumed Conversion of Stock                                  2,561,739          3,167,742          2,928,709          3,079,153
                                                            ----------         ----------         ----------         ----------
Weighted Average Shares Outstanding-
   (Diluted)                                                15,277,015         15,737,388         15,562,090         15,639,931
                                                            ----------         ----------         ----------         ----------
</TABLE>

NOTE 4: INCOME TAXES

     The Company adopted "Statement of Accounting  Standards No. 109, Accounting
For Income Taxes" (SFAS 109)  effective  April 1, 1994.  The statement  requires
that deferred  income taxes reflect the future tax  consequences  of differences
between the tax bases of assets and  liabilities  and their bases for  financial
reporting purposes. In addition, SFAS 109 requires the recognition of future tax
benefits,  such  as  net  operating  loss  carryforwards,  to  the  extent  that
realization of such benefits are more likely than not.

     The primary components of the Company's deferred tax assets and liabilities
and the related valuation allowance are as follows:


                                     Page 7
<PAGE>


     Assets:
       Uniform capitalization adjustment                              $  (1,243)
       Net operating loss carryforward                                  419,265
       Other                                                              9,091
                                                                      ---------
                                                                        427,113
                                                                      ---------
     Liabilities:
       Accelerated depreciation                                          (5,069)
                                                                      ---------
                                                                         (5,069)
                                                                      ---------
     Net deferred tax asset before valuation allowance                  432,182

     Less: Valuation allowance                                         (332,182)
                                                                      ---------
     Net deferred tax asset                                           $ 100,000
                                                                      =========


     The Company continually reviews the adequacy of the valuation allowance and
recognizes a benefit from income taxes only when reassessment  indicates that it
is more likely than not that the benefits  will be realized.  In fiscal 1998 the
Company reduced the valuation  allowance  applied against the net operating loss
carryforwards,  based upon  reasonable  and prudent tax planning  strategies and
future income projections.

     At September 30, 1998, the Company had net operating loss  carryforwards of
$1,391,000  expiring  from 2001 to 2007.  In  addition,  unused  tax  credits of
$144,000 expire from 1999 to 2001 and are also being carried forward.

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".

                                                             6 Months Ended
                                                         9/30/98        9/30/97
                                                         -------        -------
Cash payments for interest                              $ 196,530      $ 183,930
Issuance of common stock to 401(k) plan                 $   5,483      $   8,423
Valuation reserve to reflect long-term equity
   securities at market)                                $ (80,000)     $  76,587

NOTE 6: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

     The  Company  has  adopted  "Statement  of  Accounting  Standards  No. 130,
"Reporting  Comprehensive  Income" (SFAS 130), which  establishes  standards for
reporting and display of comprehensive income and its components (i.e. revenues,
expenses, gains and losses) in a complete set of financial statements. All prior
periods have been restated to conform to the provisions of this statement.

NOTE 7: INVESTMENT IN FOREIGN COMPANY

     In August 1998 the Company advanced  $100,000 to Conforma,  n.v., a Belgian
company  engaged in the processing of  pharmaceutical  related  products.  It is
anticipated  that this advance will be  subsequently  converted into a long-term
equity  investment.  The advance was financed  with funds  generated by use of a
margin account with a financial services company

     The margined  securities  suffered declines in market value in concert with
the  general  stock  market  resulting  in margin  calls made on the  Company in
September  1998.  In order to meet these  obligations,  the Company  made a cash
payment of $22,000  and sold some of its  holdings.  The net  proceeds  from the
liquidations  of the  securities  were $47,420,  resulting in a realized loss of
$126,580,  which is included in other  expense.  As of September  30, 1998,  the
margin obligation has been reduced to approximately $31,000.


                                     Page 8
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

     RESULTS OF OPERATIONS

Net sales for the three months ended September 30, 1998,  $2,665,374,  set a new
record for the Company,  eclipsing the record mark  established  in the previous
quarter.  Consequently,  year to date sales of  $5,297,829  is the highest level
recorded in any  six-month  period in the  Company's  history.  For  comparative
purposes, as recently as the fiscal year ended March 1995, sales for that entire
twelve-month period totaled $5.7 million. With regard to the prior year, current
quarter sales represent an increase of $465,164, or 21%, over the second quarter
of fiscal 1998.  For the six-month  period,  sales  increased by $882,956 or 20%
over the first two quarters of the prior year.

The large  increase in sales  continues  the trend begun  towards the end of the
last fiscal year. Several factors are prominently  intertwined resulting in this
growth  including  a  return  to  more  seasonal  temperature  patterns  and the
successful  introduction  of new  product  applications.  The  Company  has  now
completed  the design  and  qualification  phases  for a line of  coaxial  coils
serving the ice machine and commercial  refrigerator  market. These products are
generating  significant sales in fiscal 1999, compared to only a small amount of
start-up  shipments in the prior year. The Company has also increased  shipments
of coils for chiller-related  marine  applications in fiscal 1999,  representing
the  continuing  development  of a specialty  line begun in 1998.  Further,  the
Company is expanding  its  offerings in flexible  heat  transfer  tubing and has
experienced growth in this product line both in the U.S. and abroad.

The core  business of  supplying  coaxial  coils to OEM  water-source  heat pump
manufacturers  has  continued  to grow as a  result  of both  strong  levels  of
domestic  commercial and  residential  construction  and increased  market share
garnered by the Company's larger customers.  This market historically slows down
in  the  third  calendar  quarter  with  rebounding  volumes  occurring  in  the
January-March  period  anticipating  the  spring  building  season.  Indications
currently  suggest that through the third quarter (period ending 12/31/98) total
shipments should approach $7.5 million.

Cost of sales  aggregated  72% of net sales for both the quarter  and  six-month
periods of the current year as well as in fiscal 1998. As a large portion of the
cost of manufactured  product is concentrated in copper and copper alloy tubing,
the stability of the cost of these raw materials  helped  maintain gross margins
at this level. Cost increases for conversion costs,  including direct labor were
offset  by  increased  efficiencies  resulting  from  refinements  in the use of
cellular manufacturing processes on the production floor.

Selling,  general and administrative  expenses increased by $41,448 (9%) for the
three months and $62,055 (6%) for the six-month period and compared to the prior
year results.  Cost increases for personnel and related  benefits,  coupled with
additions to staffing of support services accounted for the higher levels in the
current year periods.  The Company is planning to further supplement these areas
during  the  balance  of the year,  to  support  product  line  additions  under
development and other applied engineering research activities.

Operating  income  increased by $82,282 and $181,045 for the three and six month
periods of 1999,  compared to the same periods of the prior year.  Higher levels
of sales for all  periods  generated  increases  in gross  margin  dollars  that
absorbed the additional investments in engineering and administrative areas.

Interest expense was slightly higher for the current year periods as a result of
carrying  increased  levels of operating assets compared to fiscal 1998. For all
periods  presented,  interest  costs ranged  between  3-4% of net sales.  Higher
average  levels of  outstanding  debt in 1999 were  offset by a lower  effective
borrowing rate, resulting from a reduction in the prime interest rate during the
year.

In September 1998 the Company  liquidated  certain  marketable equity securities
that were  subject to a margin  agreement  with a  financial  services  company.
Consequently,  a loss of $126,580 was charged to  operations  during the current
quarter,  representing the difference  between the proceeds of the sales and the
cost basis of the securities.

Other  comprehensive  income  (loss)  adjustments  for  the  periods  represents
unrealized holding gains (losses) for marketable equity securities that are held
by the Company as long-term investments.



                                     Page 9
<PAGE>


     LIQUIDITY AND CAPITAL RESOURCES

Working capital at September 30, 1998 was $521,277 compared to $443,505 at March
31,  1998 and  $266,093  at  September  30,  1997.  During the current six month
period,  current  assets  increased  by  $611,580,  largely due to  increases in
accounts  receivable and inventories needed to support higher production levels.
Concurrently,  current liabilities increased by $533,808 consisting primarily of
additional  borrowings  under the revolving line of credit.  These advances were
used to finance  the  additional  investments  in  operating  assets and capital
expenditures during the quarter.

As a result of the  increases  in  current  assets,  net cash used in  operating
activities  totaled  $241,965  for  the  current  period  compared  to net  cash
generated of $71,883 in 1997.  Inventories and accounts receivable  increased by
$368,084 and $204,371,  respectively, for the current six months, reflecting the
substantial increase in shipments over the prior year. Net income from operating
activities  totaled  $295,220  in 1999,  an increase of more than 120% above the
September 1997 level of $133,093.  Cash  generated  from  operations was used to
fund a portion of the  increase in current  assets,  with the  balance  financed
through the revolving debt facility.

Cash used in  investing  activities  increased  from  $169,610 in fiscal 1997 to
$247,827 for the six months  ended  September  1998.  In August 1998 the Company
advanced $100,000 to Conforma, n.v., a Belgian company engaged in the processing
of  pharmaceutical  related  products.  The  advance  was  financed  with  funds
generated by use of a margin  account  with a financial  services  company.  The
margined  securities  suffered  declines  in market  value in  concert  with the
general  stock market  decline  resulting in margin calls made on the Company in
September  1998. To meet these  obligations,  the Company made a cash payment of
$22,000  and  sold  a  portion  of its  holdings.  The  net  proceeds  from  the
liquidations  of the security  were  $47,420,  resulting  in a realized  loss of
$126,580,  which was recorded as a period expense. As of September 30, 1998, the
margin obligation has been reduced to approximately $31,000.

Capital  expenditures  increased  by $52,088  compared to the prior year period.
Anticipated  purchases  of  production  equipment  are  expected to run slightly
higher than the prior year due to the need to add production capacity to support
higher sales and shipping levels.

Cash  provided by  financing  activities  totaled  $490,471  for the current six
months  compared to $97,714 in the prior year.  The revolving  debt facility was
used to finance additions to inventories,  accounts receivable, capital projects
and other equipment  purchases during the quarter. In October 1998 the Company's
bank  increased the maximum  borrowings  available  under the revolving  line of
credit and also authorized a new facility to finance capital  expenditures.  The
revised debt structure is expected to provide  sufficient  resources to fund the
Company's requirements for the foreseeable future.

Inflation  and  other  cost  increases  continue  to  play a  minor  role in the
Company's day to day  operations.  Improvements to  manufacturing  processes and
procedures,  coupled with small  increases in purchased  goods and services have
enabled the Company to maintain  its current  cost  structure.  Stability in the
precious metals markets has also enabled the Company to continue to purchase raw
materials  at  competitive  prices  for  conversion  into  products  shipped  to
customers.  As the Company  continues its conversion to cellular  manufacturing,
further cost  reductions are  anticipated  which should offset future effects of
inflation for the balance of the fiscal year.

     FORWARD LOOKING STATEMENTS

This quarterly 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  products
especially in applications  serving the  commercial,  industrial and residential
construction industries.

When used words such as  "believes,"  "anticipates,"  "expects,"  "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.


                                    Page 10
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings.

     There are no material  legal  proceedings  known or threatened  against the
Company.

Item 2.  Change in Securities.

     No class of  registered  securities  of the  Company  have been  materially
modified,  and no class of registered securities have been materially limited or
qualified by the issuance or  modification  of any other class of  securities of
the Company.

Item 3.  Defaults Upon Senior Securities.

     There have been no defaults of any terms of the Company's securities.

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.

Item 5.  Other Information.

     None

Item 6.  Exhibits and Reports on Form 8-K.

     (a)  No Exhibits have been submitted with this report

     (b)  No reports on Form 8-K were filed  during the  quarter  for which this
          report is filed.


                                    Page 11
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES


                                    SIGNATURE


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


                                       THERMODYNETICS, INC.



Date: November 11, 1998                By: /s/  Robert A. Lerman
                                           -------------------------------------
                                           Robert A. Lerman
                                           President


Date: November 11, 1998                By: /s/  Robert I. Lieberman
                                           -------------------------------------
                                           Robert I. Lieberman
                                           Treasurer and Chief Financial Officer



                                    Page 12