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                   Commission File Number: 0-10707
December 31, 1998


                              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 Identification No.)
Incorporation or Organization)

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 Dec. 31, 1998
   Common stock $.01 Par Value                            13,065,276 Shares


<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES

                                      INDEX

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

PART I         FINANCIAL INFORMATION

    Item 1.    Financial Statements

               Consolidated Balance Sheet
                  December 31, 1998 and March 31, 1998........................3

               Consolidated Statements of Income and Comprehensive
                  Income Three Months Ended December 31,
                  1998 and 1997...............................................4

               Consolidated Statements of Income and Comprehensive
                  Income Nine Months Ended December 31,
                   1998 and 1997..............................................5

               Consolidated Statements of Cash Flows
                  Nine Months Ended December 31,
                  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


                                       -i-
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                                    December 31,          March 31,
                                                                       1998                 1998
                                                                    (Unaudited)           (Audited)
<S>                                                                 <C>                 <C>        
CURRENT ASSETS
  Cash                                                              $     2,726         $     2,023
  Accounts Receivable, Net                                              985,184           1,039,078
  Inventories                                                         1,873,666           1,448,420
  Prepaid Expenses and Other Current Assets                             287,229             240,563
  Deferred Income Taxes                                                 100,000             100,000
                                                                    -----------         -----------
    Total Current Assets                                              3,248,805           2,830,084
                                                                    -----------         -----------

PROPERTY , PLANT AND EQUIPMENT
  Property, Plant and Equipment - At Cost                             9,222,016           8,963,252
  Less: Accumulated Depreciation                                      4,689,760           4,450,814
                                                                    -----------         -----------
   Property, Plant, and Equipment - Net                               4,532,256           4,512,438
                                                                    -----------         -----------

OTHER ASSETS
  Undeveloped Land Held for Investment                                  118,109             116,593
  Intangible Assets - Net of Amortization                               118,668             127,623
  Officers' Life Insurance                                            1,129,121           1,022,440
  Deposits and other                                                      5,976              12,726
  Investment in Unconsolidated Company                                   68,777                 -0-
  Marketable Equity Securities, at Market                               138,000             392,000
                                                                    -----------         -----------
    Total Other Assets                                                1,578,651           1,671,382
                                                                    -----------         -----------

TOTAL ASSETS                                                        $ 9,359,712         $ 9,013,904
                                                                    ===========         ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts Payable                                                  $   823,023         $   912,435
  Accrued Taxes and Expenses                                            132,195             120,831
  Current Portion of Long Term Debt                                     312,799             291,566
  Notes Payable - Bank                                                1,555,669           1,061,747
                                                                    -----------         -----------

    Total Current Liabilities                                         2,823,686           2,386,579
                                                                    -----------         -----------

LONG TERM DEBT                                                        2,145,406           2,366,345
                                                                    -----------         -----------

STOCKHOLDERS' EQUITY
  Common Stock, Par Value $.01/Share,
  Authorized 25,000,000 shares, issued 13,065,276 shares
      At 12/31/98 and 12,569,591 shares at 3/31/98                      130,653             125,696
    Additional Paid-in Capital                                        5,434,051           5,411,524
  Less:  Treasury Stock, at Cost                                        320,521             320,521
  Less:  Valuation Reserve for Marketable Equity Securities             276,000             196,000
  Retained Earnings (Deficit)                                          (577,563)           (759,719)
                                                                    -----------         -----------
    Total Stockholders' Equity                                        4,390,620           4,260,980
                                                                    -----------         -----------

TOTAL LIABILITIES AND                                               $ 9,359,712         $ 9,013,904
  STOCKHOLDERS' EQUITY                                              ===========         ===========
</TABLE>

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


                                      -2-
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
                     FOR THE THREE MONTHS ENDED DECEMBER 31,
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                                  1998            1997
                                                              ------------    ------------

<S>                                                           <C>             <C>         
Net Sales                                                     $  2,465,222    $  2,031,411

Cost of Goods Sold                                               1,844,943       1,502,137
                                                              ------------    ------------

Gross Profit                                                       620,279         529,274

Selling, General & Administrative Expenses                         469,458         388,701
                                                              ------------    ------------

Income From Operations                                             150,821         140,573
                                                              ------------    ------------

Other Income (Expense)
     Interest Expense, Net                                         (96,202)        (90,245)
     Equity in (Loss) of Unconsolidated Company                    (36,319)            -0-
     Other - Net                                                    (4,785)         (6,624)
                                                              ------------    ------------

     Total Other Income (Expense)                                 (137,306)        (96,869)
                                                              ------------    ------------

Income Before Income Taxes                                          13,515          43,704

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

Net Income                                                          13,515          43,704

Other Comprehensive Income (Loss),net of tax
      Unrealized gains (losses) during the period                      -0-         (52,087)
                                                              ------------    ------------
                                                                       -0-         (52,087)
                                                              ------------    ------------

Comprehensive Income                                          $     13,515    $     (8,383)
                                                              ============    ============

Earnings per Share-Basic                                               NIL             NIL
                                                              ============    ============

Earnings per Share-Diluted                                             NIL             NIL
                                                              ============    ============

Weighted Average Shares Outstanding- Basic                      12,700,091      12,569,646
                                                              ============    ============
Weighted Average Shares Outstanding- Diluted                    15,137,699      15,737,388
                                                              ============    ============
</TABLE>

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


                                      -3-
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
                     FOR THE NINE MONTHS ENDED DECEMBER 31,
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                   1998                   1997
                                                               ------------          ------------
<S>                                                            <C>                   <C>         
Net Sales                                                      $  7,763,052          $  6,446,283

Cost of Goods Sold                                                5,654,260             4,671,598
                                                               ------------          ------------

Gross Profit                                                      2,108,792             1,774,685

Selling, General & Administrative Expenses                        1,446,651             1,303,840
                                                               ------------          ------------

Income From Operations                                              662,141               470,845
                                                               ------------          ------------

Other Income (Expense)
     Interest Expense, Net                                         (292,731)             (274,176)
     Equity in (Loss) of Unconsolidated Company                     (36,319)                  -0-
     Realized (Loss) on Sale of Securities                         (126,580)                  -0-
     Other - Net                                                    (24,355)              (19,872)
                                                               ------------          ------------

     Total Other Income (Expense)                                  (479,985)             (294,048)
                                                               ------------          ------------

Income Before Income Taxes                                          182,156               176,797

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

Net Income                                                          182,156               176,797

Other Comprehensive Income (Loss), net of tax
      Unrealized gains (losses) during the period                   (80,000)               24,500
                                                               ------------          ------------
                                                                    (80,000)               24,500
                                                               ------------          ------------

Comprehensive Income                                           $    102,156          $    201,297
                                                               ============          ============

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

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

Weighted Average Shares Outstanding- Basic                       12,665,721            12,560,778
                                                               ============          ============
Weighted Average Shares Outstanding- Diluted                     15,558,455            15,639,931
                                                               ============          ============

     The accompanying notes are an integral part of these financial statements.
</TABLE>


                                      -4-
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     FOR THE NINE MONTHS ENDED DECEMBER 31,

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                1998              1997
                                                              ---------        ---------
<S>                                                           <C>              <C>      
OPERATING ACTIVITIES:
  Net income                                                  $ 182,156        $ 176,797
         Adjustments to reconcile net income to net
         cash provided by operating activities:
  Depreciation and amortization                                 247,901          256,975
  Realized loss on sale of securities                           126,580              -0-
   Equity in loss of unconsolidated company                      36,319              -0-
  Changes in operating assets and liabilities:
    Increase (decrease) in accounts payable                     (89,412)        (112,759)
    Decrease (increase) in prepaid expenses and                 (39,920)         (31,710)
 other assets
    Decrease (increase) in accounts receivable                   53,894          224,853
    Decrease (increase) in inventories                         (425,246)        (289,956)
    Increase (decrease) in accrued expenses                      16,848          (14,092)
                                                              ---------        ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
                                                                109,120          210,108
                                                              ---------        ---------

INVESTING ACTIVITIES;
  Purchases of property, plant and equipment                   (258,764)        (183,830)
  Increase in undeveloped land held for investment               (1,516)          (1,482)
  Investment in unconsolidated company                         (105,092)           - 0 -
  Increase in life insurance premiums receivable               (106,681)        (188,908)
  Sale of marketable securities                                  47,420              -0-
                                                              ---------        ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
                                                               (424,633)        (374,220)
                                                              ---------        ---------

FINANCING ACTIVITIES
  Sale of common stock                                           22,000              -0-
  Principal payments on debt obligations                       (220,939)        (449,008)
  Net proceeds from revolving and term debt                     515,155          613,174
                                                              ---------        ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES                       316,216          164,166
                                                              ---------        ---------

INCREASE (DECREASE) IN CASH                                         703               54

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

CASH AT END OF PERIOD                                         $   2,726        $   2,604
                                                              =========        =========
</TABLE>

     The accompanying notes are an integral part of these financial statements


                                      -5-
<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 nine months ended December 31, 1998
and  December  31,  1997 are not  necessarily  indicative  of the  results to be
expected for the full year.

     NOTE 2: INVENTORIES

     Inventories consist of the following at December 31:

                                     1998                 1997
                                  ----------           ----------
     Raw materials                $1,336,239           $  956,375
     Work-in-process                 299,895              208,625
     Finished goods                  237,532              355,522
                                  ----------           ----------
                                  $1,816,504           $1,520,522
                                  ==========           ==========

     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 nine months
ended  December  31, 1998 and 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               Nine Months Ended
                                         Dec. 31 1998    Dec 31, 1997    Dec. 31, 1998    Dec 31, 1997
                                         ------------    ------------    -------------    ------------
<S>                                       <C>             <C>             <C>              <C>       
Weighted Average Shares Outstanding
                   (Basic)                12,700,091      12,569,646      12,665,721       12,560,778
Assumed Conversion of Stock                2,437,609       3,167,742       2,902,734        3,079,153
                                          ----------      ----------      ----------       ----------
Weighted Average Shares Outstanding
                  (Diluted)               15,137,699       5,737,388      15,558,455       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:


                                      -6-
<PAGE>


Assets:
     Uniform capitalization adjustment                          $  (1,864)
     Net operating loss carryforward                              450,452
     Other                                                         13,636
                                                                ---------
                                                                  462,224
Liabilities:
     Accelerated depreciation                                      (7,603)
                                                                ---------
                                                                   (7,603)
                                                                ---------
     Net deferred tax asset before valuation allowance            469,826
         Less: Valuation allowance                               (369,826)
                                                                ---------
         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 tax planning strategies and future income projections.

     At December 31, 1998, the Company had net operating loss  carryforwards  of
$1,324,000  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".


                                                         9 Months Ended
                                                     12/31/98      12/31/97
                                                     --------      --------
Cash payments for interest                          $ 292,731     $ 274,176
Issuance of common stock to 401(k) plan             $   5,483     $   8,423
Valuation reserve to reflect long-term equity
     securities at market                           $ (80,000)    $ (24,500)


     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
closely-held Belgian company engaged in the processing of pharmaceutical related
products.  It is anticipated  that this advance will  subsequently  be converted
into a  long-term  equity  investment.  Accordingly,  during the  quarter  ended
December  31, 1998 the  Company  reduced  the  carrying  value of the advance by
$36,319, representing its allocated share of Conforma's loss for the most recent
quarterly period.


                                      -7-
<PAGE>


     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  resulting  in margin  calls made on the Company.  In order to meet
these obligations,  in September 1998 the Company made cash payments aggregating
$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. In December 1998, additional margin calls resulted in
a cash  payment of $11,000 to reduce the margin  debt.  As of December 31, 1998,
the margin obligation was reduced to approximately $21,000, which is expected to
be fully paid during the quarter ending March 1999.


                                      -8-
<PAGE>


                      THERMODYNETICS, INC. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

     RESULTS OF OPERATIONS

Net sales of  $2,495,222  for the three months ended  December 31, 1998 declined
slightly from the prior  quarter's  record level of $2,665,374.  Compared to the
same  quarter  of the prior  year,  sales  increased  by  $433,811  or 21%.  The
company's third fiscal quarter has  historically  exhibited lower sales than the
previous  quarterly  periods  due to  seasonal  construction  industry  building
patterns which create demands for heating and air  conditioning  equipment.  For
the nine-month period, sales of $7,763,052 represented an increase of $1,316,769
or 20% over the first three quarters of the prior year.

The large  increase  in sales  over the prior  year  continues  the trend  begun
towards the end of the prior fiscal year.  Several  factors are  responsible for
this growth including a return to more seasonal  temperature patterns across the
United  States,  increased  demand from existing  customers  and the  successful
introduction of new product applications for the Company's tubing product line.

The Company's core business of  manufacturing  water source coaxial coils to OEM
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. Other established markets have shown
strong growth during the entire year, including swimming pool heat pumps, marine
applications and biomedical products.

Cost of sales aggregated 75% of net sales for the current quarter as compared to
74% of sales for the same  period  last  year.  For the nine  months of both the
current and prior year,  cost of sales was 73% of sales. As a result of slightly
lower production levels during the third quarter,  indirect  manufacturing costs
per unit  increased,  as fewer  units  were  produced  to  absorb  manufacturing
overhead  expenses.  The costs of direct  materials,  represented  primarily  by
copper and copper alloy tubing,  and direct labor have remained  stable for both
the current and past year,  which has helped to maintain  gross  margins.  Minor
cost increases have been offset by increased efficiencies, further demonstrating
the benefits of introducing cellular  manufacturing and just-in-time  production
techniques to the shop floor.

Selling,  general and administrative expenses increased by $80,757 (20%) for the
three months and $142,811  (11%) for the  nine-month  period and compared to the
prior year results.  Additions to staffing in engineering,  customer service and
other  support  services  accounted  for a  portion  of the  increase  in costs.
Compensation  adjustments  and higher costs for employee  fringe  benefits  also
contributed to the increase over the prior year periods.

Operating  income increased by $10,248 and $191,296 for the three and nine-month
periods of 1999,  compared to the same periods of the prior year.  Higher levels
of sales for all periods generated  significant increases in gross profit, which
offset the large increase in operating expenses.

Interest  expense  increased in absolute terms, but decreased as a percentage of
net sales for the  current  year  periods as  compared  to fiscal  1998.  Higher
average  levels of revolving debt were  outstanding in 1999,  resulting from the
need to fund higher inventory levels necessary to support  increased  production
activities.  However,  a reduction in the prime rate  created a lower  effective
borrowing rate,  which served to reduce debt service payments during the current
year periods.

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  subsequently  be converted into a long-term
equity  investment.  During the  quarter  ended  December  31,  1998 the Company
reduced the carrying value of the advance by $36,315, representing its allocated
share of


                                      -9-
<PAGE>


Conforma's loss for the most recent quarterly  period.  This amount is reflected
as other expense during the current quarter.

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 that current
quarter,  representing the difference  between the proceeds of the sales and the
cost basis of the securities.  No such transactions  occurred during the current
period.

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.

     LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 1998 was $425,119  compared to $443,505 at March
31, 1998 and  $687,947  at  December  31,  1997.  During the current  nine month
period,  current  assets  increased  by  $418,721,  largely due to  increases in
inventories required to support higher production levels. Concurrently,  current
liabilities  increased by $437,107 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.

Net cash  provided by  operating  activities  totaled  $109,120  for the current
nine-month   period  compared  to  net  cash  generated  of  $210,108  in  1997.
Inventories and other current assets increased by a total of $465,162 during the
period,  reflecting the  substantial  increase in shipments over the prior year.
Accounts  receivable  decreased  by $53,894  over the same  period,  believed to
reflect a timing  difference  as the  average  balance of  receivables  has also
increased as a function of significantly higher sales in fiscal 1999. Net income
from operating activities for the current nine months was $345,051, or 4% of net
sales, after adding back  non-operating  charges for losses of $162,895 relating
to long-term investments.  For the same period last year, income from operations
totaled $176,797, or 3% of net sales. Cash generated from operations was used to
fund a portion of the increase in operating  assets,  with the balance  financed
through the revolving debt facility.

Cash used in  investing  activities  increased  from  $374,220 in fiscal 1997 to
$424,633 for the nine months  ended  December  1998.  In August 1998 the Company
completed a long-term  investment  in a foreign  company which was financed with
funds generated by use of a margin account with a financial services company. To
meet the margin calls made on the Company in September  and December  1998,  the
Company  made  cash  payments  aggregating  $33,000  and sold a  portion  of its
holdings in another  long-term  equity  investment.  The net proceeds from these
sales were $47,420.

Capital expenditures increased by $74,934 over the prior year period. Additional
machinery and equipment was added during the year to meet  increased  production
requirements.   Also,  certain   enhancements  and  upgrades  to  the  Company's
information  processing  systems were completed in fiscal1999.  As a result, the
Company's  internal  systems  are  now  believed  to  be  year  2000  compliant.
Communications  with major suppliers and customers  indicate that their programs
in this area are  progressing  and the Company does not  anticipate any problems
associated  with  year  2000  issues  at this  time.  Anticipated  purchases  of
production  equipment  for the  balance  of the year and  fiscal  year  2000 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  $316,216 for the current nine
months  compared to $164,166 in the prior year.  The revolving debt facility was
used to finance  additions to inventories,  capital projects and other equipment
purchases  during the period.  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.


                                      -10-
<PAGE>


Inflation  and  other  cost  increases  continue  to  play a  minor  role in the
Company's day to day  operations.  Improvements in  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 and
just-in time manufacturing  techniques,  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.


                                      -11-
<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.

     At the annual  meeting of  shareholders  of the Company held on December 4,
1998,  Robert A Lerman,  John F Ferraro  and Anthony C  Mirabella  were  elected
directors  of the  Company,  to serve  until  their  successors  are elected and
qualified.

Item 5. Other Information.

     None

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

     (a)  No Exhibits have been submitted with this report, except Exhibit 27.

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


                                      -12-
<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: February 12, 1999          By:  /s/ Robert A. Lerman
                                      ------------------------------------------
                                          Robert A. Lerman
                                          President


Date: February 12, 1999          By:  /s/ Robert I. Lieberman
                                      ------------------------------------------
                                          Robert I. Lieberman
                                          Treasurer and Chief Financial Officer


                                      -13-