U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

[X]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
       OF  1934  FOR  THE  QUARTERLY  PERIOD  ENDED  JUNE 30, 1999
                                                     --------------------

[ ]   TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
       ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________


                          Commission file number 0-5887
                                                 ------

                                    RTI INC.
       -----------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)

                    NEW YORK                           11-2163152
          ------------------------------            -------------------
         (State or other jurisdiction of            (I.R.S. Employer
          incorporation or organization)            Identification No.)


            P.O.BOX 3048, 301 ANTONE, SUNLAND PARK, NEW MEXICO 88063
            --------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (505) 589-5431
                                 --------------
                (Issuer's telephone number, including area code)


      Check  whether  the issuer (1) filed all  reports  required to be filed by
Section l3 or l5(d) 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.

     JULY 23, 1999  -   1,611,166   shares of common stock
     ----------------     -----------


    Transitional Small Business Disclosure Form    Yes [ ] No [X]




PART I.  FINANCIAL INFORMATION

ITEM I.  FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                                                                       RTI INC. AND SUBSIDIARIES
                                                                                   CONSOLIDATED FINANCIAL STATEMENTS
                                                                                    (UNAUDITED)

                                                                                   BALANCE SHEET

               ASSETS                                                        JUNE 30 ,                      DECEMBER 31,
                                                                               1999                            1998

        CURRENT ASSETS
            Cash and cash equivalents                                        $     -        0%         $   9,361          0%
            Accounts receivable, net of allowance
        of $10,072 in 1999, and $13,214 in 1998                             842,365         15%          191,497          4%

            Inventory                                                     1,647,859         29%        1,317,649         28%

            Prepaid expenses and other
                                                                            248,278         4%            54,228          1%

                       Total current assets                               2,738,502         48%        1,572,735         34%


        PROPERTY, PLANT AND EQUIPMENT, NET                                1,727,005         30%        1,787,312         39%


        DUE FROM RELATED PARTIES                                            102,505          2%          111,206          2%


        INTANGIBLE ASSETS, net of accumulated
        Amortization of $34,250 in 1999, and $21,687 1998                 1,052,877         19%        1,135,057         24%


        OTHER ASSETS                                                         48,428          1%           31,635         1%


                       Total assets                                     $ 5,669,317       100%      $ 4,637,945         100%


        The  Notes  to  Financial  Statements  are an  integral  part  of  these
        consolidated statements.
<PAGE>

                                                                                   BALANCE SHEET

               LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                                JUNE 30                  DECEMBER 31,
                                                                                1999                        1998

   1999 CURRENT LIABILITIES
      1     Notes payable to related parties    *                         $  632,648      7.6%        $  627,811        9.2%  *
      2     Due to related parties BII           *                        $  231,749      2.8%        $  174,469        2.6%  *
      3     Notes payable TCC                    *                       $ 1,910,890     23.0%        $  606,861        8.9%  *
      4     Due to customer                      *                        $  185,000      2.2%        $  404,207        6.0%  *
      5     Accounts payable                     *                       $ 1,367,045     16.4%       $ 1,088,297       16.0%  *
      6     Accrued expenses                     *                        $  353,508      4.3%        $  387,208        5.7%  *
      7     Accrued warranty                     *                        $  377,611      4.5%        $  621,312        9.2%  *
      8     Accrued interest                     *                        $  257,343      3.1%        $  139,578        2.1%  *
      9    Capital lease obligation              *                         $  68,452      0.8%         $  19,987        0.3%  *
     10     Other current liabilities            *                        $  216,341      2.6%        $  180,000        2.7%  *
     11     Bridge loan                          *                        $  564,002      6.8%        $  566,502        8.3%  *
     12 Current portion of long term debt        *                       $  682,364       8.2%       $  667,926         9.8%  *

                       Total current liabilities                         $ 6,846,953     82.4%       $ 5,484,158       80.8%

        LONG-TERM DEBT
     13 SBA  & Norwest net from current portion                           $  454,248      5.5%        $  209,858        3.1%  *

     14 Provision for future Environmental Cost                           $  888,955     10.7%        $  927,140       13.7%  *
     15 Convertible notes                                                  $  76,000      0.9%

     16 Trio deposit ( ACE )                                               $  23,590      0.3%           $     -
     17 Rock away Property Tax net of the current portion                  $  23,558      0.3%       $  167,258         2.5%

                       Total liabilities                                $ 8,313,304     100.0%      $ 6,788,414       100.0%

        STOCKHOLDERS' EQUITY
            Preferred stock, $.05 par value - shares
                authorized 2,000,000; shares issued
                and outstanding 100,000                                    $   5,000                   $   5,000
            Common stock; $.08 par value - shares
                authorized 25,000,000, issued and
                outstanding 1,611,166 at year-end  1998
               and 1,611,166 at March 31, 1999                            $  128,894                  $  128,493
            Additional paid-in capital                                   $18,115,261                 $18,115,261
            Accumulated deficit                                       $ (20,893,142)              $ (20,399,223)

           Total stockholders' equity                                  $ (2,643,987)               $ (2,150,469)

           Total liabilities and stockholders' equity                   $ 5,669,317                 $ 4,637,945



<PAGE>


                                                                                 CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                              SIX MONTHS ENDED JUNE 30,
                                                                          1999                       1998

        Net sales                                                        $ 2,011,897                 $ 2,308,945
        Cost of sales                                                      1,424,108        71%        2,468,338         107%

            Gross profit (loss)                                              587,789        29%         (159,393)         -7%


        Selling and Marketing                                                162,604         8%           264,338         11%

        General and administrative expenses                                  511,964        25%           643,369         28%

        Research and development expenses                                     42,864         2%            97,007          4%

                       Total operating expenses                              717,432        36%         1,004,714         44%


                       Loss from operations                                (129,643)        -6%       (1,164,107)        -50%


        Other income (expense)

            Rental income                                                    19,510           1%          10,625         0%

            Expenses of Rockaway Industrial Park,
                including interest expense of $5,500
                in every year                                              (19,510)          -1%

            Interest income (expense)                                     (385,152)         -19%         (145,965)         -6%

            Other income
                                                                                                              -
                       Total other income (expenses)                       (385,152)         -19%         (135,340)         -6%


                       Loss from continuing operations                     (514,795)         -26%       (1,299,447)        -56%


        EXTRAORDINARY INCOME                                                113,064            6%                            0%


                                                                                   -                           -
                       Net loss before income taxes

        Income taxes
        Net loss                                                       $  (401,731)      -20%     $ (1,299,447)        -56%

        Weighted Average Shares                                          1,611,166                   1,565,599


        Net loss per share                                                 ($0.25)                     ($0.83)

<PAGE>
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                    SIX  MONTHS ENDED JUNE30 ,
                                                                                1999                 1998

        CASH FLOWS FROM OPERATING ACTIVITIES:
               Net Loss                                                 $  (401,731)               $ (1,299,447)

               Adjustments  to  reconcile  net  loss  to  net  cash  applied  to
               operating activities:

                      Depreciation and amortization                         223,266                     158,782
                      Allowance for doubtful accounts                        10,072                      13,727
                      Allowance for warranty expense                             -                       22,757
                      Imputed interest on note payable                           -                           -
                      (Increase) decrease in:
                         Accounts receivable                                 (650,868)                 (170,285)
                          Restricted deposits                                    -                           -
                          Due from affiliate                                     -                       (1,445)
                          Inventories                                        (330,210)                   351,588   (330,210)
                          Other assets                                        (16,793)                                16,793
                          Prepaid expenses and other                         (194,050)                  (167,833)   (194,050)
                       Increase (decrease) in:
                            Due relatives parties                              (8,701)                    69,158
                           Due to customers                                  (219,207)                               219,207
                           Accrued warranty                                 (243,701)                                243,701
                          Accounts payable                                   278,748                      180,707   (278,748)
                          Accrued interest                                    117,765                               (117,765)
                          Accrued expenses                                    65,580                      17,770
                          Other liabilities                                   36,341                     (41,442)      36,341
                             TOTAL ADJUSTMENTS                              (931,758)                    433,484

                             Net cash applied to operating
                             activities                                  (1,333,489)                    (865,917)

         CASH FLOWS FROM INVESTING ACTIVITIES:
                Purchases of fixed assets                                   (86,899)                    (158,330)
                Reduction in notes receivable                                   -                           -
                Purchase of business, net of cash acquired
                Purchases of other assets                                       -                        (23,315)


                              Net cash (applied to) provided by
                              investing activities                          (86,899)                   (181,645)


         CASH FLOWS FROM FINANCING ACTIVITIES:
                Proceeds from sale of common stock                             -                         490,439
                Proceeds from notes payable                               1,403,619
                 Proceeds from related party notes                            4,837                       48,405
                Payments on related party notes                                                          (26,511)
                Changes in short-term borrowing                                                          541,502
                Payments on short-term loans                                     -

                Payments on long term debt
                                                                                   -                    (15,011)

                             Net cash provided by (applied to)            1,408,456                    1,038,824
                             financing activities

         Net increase (decrease) in cash and cash equivalents               (9,361)                     (8,738)
         Cash and cash equivalents, beginning of period                      9,361                      11,712
         Cash and cash equivalents, end of period                         $     -                    $   2,974




</TABLE>
<PAGE>


                            RTI INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information  as of June 30, 1999 and 1998,  for the three months then ended and
for the six-months then ended is unaudited).

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

The following  "Management's  Discussion and Analysis of Financial Condition and
Results of Operations "includes"  forward-looking statements "within the meaning
of the Private  Securities  Litigation  Reform Act of 1995.  This Act provides a
"safe harbor" for  forward-looking  statements to encourage companies to provide
prospective  information  about  themselves  so  long  as  they  identify  these
statements  as  forward-looking  and provide  meaningful  cautionary  statements
identifying important factors that could cause actual results to differ from the
projected  results.  All statements  other than statements of historical fact we
make in this Form 10-Q are forward-looking. In particular, the statements herein
regarding  industry  prospects and our future results of operations or financial
position are forward-looking statements.  Forward-looking statements reflect our
current expectations and are inherently uncertain. Our actual results may differ
significantly from our expectations.  The section entitled  "Additional  Factors
That May Affect Future Results" describes some, but not all, of the factors that
could cause these differences.


OVERVIEW

1.       BASIS OF PRESENTATION

In the opinion of management of RTI Inc. (with its Subsidiaries, the "Company"),
the  accompanying   unaudited  consolidated  financial  statements  include  all
adjustments necessary to present fairly, in all material respects, the company's
financial  position as of June 30, 1999,  its results of operations and its cash
flows for the six months ended June 30, 1999 and 1998. Results of operations for
the six-month  period ended June 30, 1999 are not necessarily  indicative of the
results to be expected for the year ending December 31, 1999.

Information  included in the consolidated  balance sheet as of December 31, 1998
has been derived from the Company's audited consolidated financial statements in
its Annual Report on Form 10-KSB for the year ended  December 31, 1998, to which
reference  is made.  Certain  information  included in the audited  consolidated
financial  statements  and related notes  prepared in accordance  with generally
accepted accounting principles may have been condensed or omitted.


2.       AIR CONDITIONING AND COOLER OPERATIONS

         With its  acquisition  of the  business of Quality Air Inc. in February
1997,  the  Company  engaged  in  the  manufacture,  marketing  and  selling  of
residential coolers and of central air conditioning equipment.  The AC2 utilizes
patented  evaporative  technologies to air condition homes and small  businesses
with reduced  electricity usage when compared to standard air conditioners.  The
AC2 is assembled in the Company's Westway,  Texas factory. In 1997, this factory
was  purchased,  equipped for  producing  the AC2,  and a work force  trained to
manufacture  the AC2.  During the first half of 1999 the  company was focused on
recovering  confidence  in the "AC2"  central  air  conditioner  and pushing the
Aireze product line as hard as possible.
<PAGE>
3. ROCKAWAY INDUSTRIAL PARK (Superfund Site)

For a more detailed  description of the Rockaway "Superfund" site please see the
companies 10K report for the year ended December 1998.

The Company owns a 248 acre parcel of land ("Parcel I") in Rockaway,  New Jersey
(47 acres of which  have  been  leased to  SteriGenics  International),  that is
contiguous  to a 15 acre  operating  parcel  that is the site of an  irradiation
processing  facility leased to SteriGenics  International("Parcel  II" and, with
Parcel I, the  "Rockaway  Industrial  Park").  Since 1985,  the Company has been
seeking a buyer for Parcel I. However, the Company's ability to sell Parcel I is
impaired  until the  completion  of an  environmental  cleanup  and  remediation
program,  and its ability to recover  its  current  book value of $50,000 in 201
acres of Parcel I is impaired by unpaid outstanding  non-recourse property taxes
for the years  1993,1994,1995,1996,1997,1998 and the first half of 1999 totaling
$323,558,  which have been accrued in the financial  statements  under  "current
portion of long term debt $300,000 and Rockaway property tax $23,558.

As a result of  engineering  tests that commenced in 1981, the property has been
named an EPA "Superfund  Site" and there have been ongoing  cleanup  operations.
There is a  remediation  proposal  to complete  the cleanup  over the next eight
years.

Rockaway sales commitment

On April 20, 1999 the Company signed an agreement to sell the property. The sale
will provide no funds to RTI and is  essentially an assumption of liabilities in
exchange  for  the  property,  with  no  cash to  RTI.  The  buyer  will  assume
liabilities,  including the environmental and taxes. As the sale of the Rockaway
industrial park is consumated the  responsibility  of cleaning the contamination
will be at the expense of the buyer.  The buyer is in a due diligence period and
the Company believes the sale will close during the third quarter of 1999.

RTI  did  not  generate  the   contamination  and  has  not  been  charged  with
contributing to the contamination of the property.  RTI has suffered the expense
of this  superfund  site because it purchased  the property from Thiokol and RTI
was the legal owner when the  contamination  was  discovered.  Some of the major
expenses associated with RTI owning the facility have been:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
         Rockaway  Property  (including   improvements  @  current  book  value)
         $485,532 August 1996 payment to the New Jersey Department of
                  Environmental Protection (NJDEP)                                      $575,000
         Non Recourse Property Tax Accrued                                              $323,558
         Note to Thiokol (interest included)                                            $318,004
         Accrued for environmental provision (as of June 30, 1999)                      $888,955
                                     Listed Items                                     $2,016,624
<PAGE>
There have also been other expenses for studies, consultants, and other cleaning
expenses that have been borne by RTI.




Some of the major liabilities RTI may be relieved of by the sale are:

         Cash to be realized by RTI                                                  $0
         Non Recourse Property Tax Accrued                                           $323,558
         Note to Thiokol (interest included)                                         $318,004
         Accrued for environmental provision (as of March 31, 1999)                  $888,954
         Less: Rockaway Book Value net of Depreciation                              ($366,130)
                                    Listed Items                                   $1,164,386
</TABLE>

An oral status  update was  requested  from the buyer on July 27, 1999,  and the
buyer  indicated that to that date the "due diligence" has uncovered no problems
that will block the closing of the sale. The property is a lush forested area of
New Jersey  that the buyer plans to  develop.  There is current  income from the
property tenants and the buyer has met with local officials to obtain permission
for additional  tenants.  A second potential buyer has expressed interest in the
property if the present sales commitment is not closed. The signing of the sales
commitment does not provide  assurance that the transaction will be completed or
that all or all parts of the above  liabilities  will be removed.  No effect has
been given to the pending sale in the company's financial records.


5.       SHORT TERM BORROWINGS

         The Company had a related party note  outstanding at June 30, 1999, for
$588,383 with its former  Chairman and CEO, Theo W. Muller  (Muller  Note),  and
another for $26,511 with Frellum Corporation (Frellum Note), which is owned 51%
by  Mr.  Muller.  These notes, which were due on February 20, 1998, were
renegotiated  effective  February  21,  1998.  The terms of the Muller  Note was
increasing to a 12% annual interest rate up to August 20 of 1998 and an 18% rate
thereafter.  The terms of the Frellum Note are 12% annual interest,  the balance
along with accrued interest are due and payable on February 20, 2000.

The  company  has a  related  party  note  outstanding  at June  30,  1999,  for
$17,754.08 with its President Rick Bacchus(  Rick's note).  The interest rate of
Rick's  Note is 16%,  the  balance  along  with  accrued  interest  are due upon
request.

The Company entered into a factoring  arrangement with Texas Capital Corporation
(TCC) of Austin, Texas in February 1998. The terms are for interest of 2.75% for
the first 30 days,  with an additional  charge of 1% for each additional 15 days
the invoice is  outstanding.  As of June 30,  1999,  the  Company  had  factored
accounts receivable in the approximate amount of $579,517.

The Company also obtained a credit line of up to $1.81  million with TCC,  using
the inventory as collateral, As of June 30, 1999 the Company had used $1,340,749
of the credit line.

On June 16,  1999 the  Company  issued a  convertible  note  offering  for up to
$800,000,  in  $25,000  convertible  notes.  As of June 30 of 1999  the  company
received funds of $76,000.  The company has 3 notes outstanding that will accrue
12% annual interest rate for 18 months and the notes are convertible into shares
during this time or at the end of the period.

<PAGE>
6.       STATEMENT OF CASH FLOWS

  Supplemental disclosures of cash flow information are as follows:

                                Six months ended June 30,
                                     1999          1998
                                 -----------    ----------
         Interest                 $385,152       $64,564
         Income taxes                --             --



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

RTI  is a  developer  and  manufacturer  of  high  efficiency  air  conditioning
equipment.  RTI has patented technology and patents pending. RTI has the highest
efficiency  air  conditioning  equipment  rated  under  ARI  Standard  210  (Air
Conditioning and Refrigeration Institute).  RTI's AC2 technology has achieved an
efficiency  increase  that Pacific Gas & Electric  Company  measured as being an
average  of  102%  better  than  10  SEER  "High   Efficiency"  air  cooled  air
conditioners  (70% plus of US sales).  The AC2  technology is cost  efficient to
manufacture and AC2's initial price is competitive with premium  performance air
conditioners from the existing manufacturers.

RTI defines five market segments: 1) Residential Evaporative {Aireze & Trio}, 2)
Residential  Split  Systems 2 - 8 ton  capacity  {AC2 & S1},  3) E2Pak and E3Pak
Systems  (commercial  Trio), 4) Industrial/  Institutional 50 - 300 ton capacity
{Water  Chiller  Venture}  and, 5)  Commercial  3 - 30 ton  capacity  {primarily
package units}.  Please note that E3Pak, Water Chillers,  and Commercial Package
units are all in various stages of  development  and are not yet being sold. RTI
does not currently  include window air conditioners or motel units in its market
segments. The following table shows the sales by market segment.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

------------ --------- --------- ----------- --------- --------- ----------- --------- -------------- --------------
$ in          Apr-      Apr-       % Change   Jan       Jan-       % Change   Jan       Jan-             % Change
thousands     Jun 99    Jun 98               -Mar 99    Mar 98               -Jun 99   Jun 98
------------ --------- --------- ----------- --------- --------- ----------- --------- -------------- --------------

AC2/EvapCon    462       655       -29.47      136       637       -78.65      598         1,292         -53.72

Aireze         602       621       -3.06       694       323       114.86     1,296         944           37.29

E2Pak           78        52         50         0         36        -100        78          88           -11.36

Trio            12        0          NA         0         0          NA         12           0             NA

Misc.           25        1        2,400        1         20        -95         26          21            23.81
------------ --------- --------- ----------- --------- --------- ----------- --------- -------------- --------------
</TABLE>

In 1997 the AC2 was certified for  performance (by ARI) and safety (by ETL to UL
standard  1995),  just  after the  cooling  season.  For this  reason  there was
essentially no field installation experience on the newly designed AC2 units. In
1998 the AC2 product line had substantial field problems  primarily related to a
freeze protection  control system.  The problems emerged at the beginning of the
1998  cooling  season  after  nearly  3,000 AC2 units  had been  built.  The AC2
controls problems would shut units down erratically and a series of five recalls
were made to attempt to correct the flaws with "immediately available" alternate
controls components. The recalls and the associated  re-manufacturing of the AC2
units to attempt rushed corrections during the 1998 summer cooling season led to
a severe loss in 1998.  The controls  malfunctions  were  primarily  caused by a
water level sensing device and a submerged temperature sensing device.
<PAGE>
Since the summer of 1998,  RTI has redesigned the AC2 unit controls to eliminate
problems  experienced  in 1998,  insure high  reliability  in the controls,  and
simplify  the controls  system.  RTI has taken field  experience  to enhance the
total AC2 reliability and these enhancements were laboratory  verified with good
results. A 1999 AC2 unit Field test program to check operation was briefly field
verified, and then the units in inventory were upgraded. A Field Upgrade Program
is being implemented and units are being upgraded in the field.  During 1998 the
repeated  controls  failures were happening in the field within a few weeks.  At
this point the field  results have been very good with half a season of use, but
the controls  have not yet been field  proven for a full  season,  and the field
upgrades are still in progress.

Feedback from AC2 dealers  (installing  contractors)  indicated  that the energy
efficiency goals had been achieved in the field, but that AC2 reliability had to
substantially improve in order for AC2 sales to grow instead of declining. The 2
- 5 ton size air  conditioning  market in the United States is  approximately  5
billion  dollars per year.  Management  desires to achieve a substantial  market
share (5% plus) over the next five years and Management's  main goal for 1999 is
to  overcome  the  problems  related  to the AC2 units  and  prove the  reliable
operation  of  AC2  units  in the  field.  As a  consequence  of  achieving  the
reliability goal in 1999,  marketing efforts were cut and an overhead  reduction
plan was implemented to keep the operating loss for 1999 below 1 million dollars
verses  a  nearly  4.5  million  loss in  1998.  The AC2  portion  of  marketing
expenditures were dramatically cut while efforts were focused on solving product
problems and proving the solutions with field results.  The Aireze Marketing was
slightly  increased and refocused to increase sales strength in the local market
and begin expanding sales into the Southwest  market area. The net total Selling
and  Marketing  expenditures  were cut by almost 40% for the first six months of
1999  verses the same  period in 1998.  Accordingly  the AC2 sales were down 53%
while Aireze sales were up 37% for the same period.  Aireze sales increases were
primarily  from  strengthening  sales in the New Mexico & El Paso market.  E2Pak
sales were down 11% for the first six months  because the major  customer  had a
sales  slump in its  business  such that there were no E2Pak  sales in the first
quarter and the second quarter E2Pak sales were up 50% verses the same period in
1998.

Management is pleased with the AC2 field results and is working to achieve field
results  that can enable the  Company to raise much  needed  capital  and become
profitable in 2000.

The company  signed an agreement with the EPA to be an EPA "Energy Star Partner"
and RTI is now listed on the EPA Energy  Star Web page under the  manufacturer's
section for "labeled heating & cooling  equipment" for the "Air Source Heat Pump
and Central Air Conditioning Manufacturers". RTI's AC2, EvapCon and new products
which meet the Energy Star  guidelines can now receive  favorable  financing and
other advantages of the "Energy Star" program.

The company's  development  department achieved  laboratory  performance results
indicating an efficiency of  approximately  40 EER at the SEER  efficiency  test
conditions on a new product line trade named "Trio".  This  efficiency  level is
more than double that of the  companies'  AC2 product  line and believed to be a
substantial  advance. The Trio product line has been field tested in the El Paso
area and begun sales in the El Paso market only.

The gross  profit of 29% for the first six months of 1999 verses the negative 7%
for the same  period  in 1998  reflects  a  dramatic  turnaround.  Cost of sales
dropped from  $1,315,255 in the second  quarter of 1998 to $886,927 for the same

<PAGE>
period in 1999.  Better material usage on Aireze and standard  production of the
AC2 helped make that possible.  The primary reason for the  improvement in gross
margin  is the AC2  units  were not  having  new field  problems  that  required
redesigns of components in 1999. The 1999 costs to upgrade prior year units were
applied to Warranty reserve, and the company upgraded approximately 350 units in
the second  quarter with a cost of $173,033  (~$494 each).  During the first six
months the  company  upgraded  approximately  950 units with a cost of  $244,385
(~$257 each) which includes labor, materials, freight and overhead.

The company has  manufacturing  facilities in Sunland Park, New Mexico,  Westway
Texas, and Juarez Mexico. These facilities are operating far under capacity with
the present  sales level and  management  is working on several  programs to cut
costs and increase  gross margins to a target of 30% - 40% (depending on product
line).  The plans being  considered  include  keeping all the facilities to have
available plant space for future growth,  and plans to sell the Westway facility
and consolidate  operations  into Juarez.  The Westway plant has been listed for
sale in accordance with the planning.

The General and  Administrative  expenses  were cut from $643  thousand  for the
first  half of 1998 to $512  thousand  for the same  period  in 1999.  This $131
thousand  reduction  reflects  substantial  improvements  in the  utilization of
accounting  information  to make  overhead cuts and the  combination  of jobs to
reduce costs.

Research and development costs totaled $4,161 in the quarter ending June 30,1999
while they were  $49,140 in the same  quarter of 1998.  The expense  decrease in
Research and  development  compares  favorably  because the company  capitalized
$34,580  for  plugs  and  molds for the new  "Trio"  product,  also the  company
capitalized $15,052 from Selling, general & administration for the same purpose.
Research and development  costs totaled $42,864 in the first six months of 1999,
while they were $97,007 in the same period of 1998.

For the first quarter of 1999 rental income from the Rockaway  Industrial  Park,
was offset by its  expenses  compared  with the net income of $8,147 in 1998 for
the same  period.  For the first half of 1999 rental  income  from the  Rockaway
Industrial  Park,  was offset by its  expenses  compared  with the net income of
10,625 in 1998.

The biggest negative factor is the increase in interest  expense.  For the three
months ending June 30,1999 the Company incurred net interest expense of $230,570
as compared with net interest expenses of $82,960 in the second quarter of 1998.
The interest expense increased from $146 thousand for the first half of 1998 (6%
of sales) to $385 thousand for the same period in 1999 (19% of sales).  Interest
expense has increased due to the Company factoring its receivables and obtaining
inventory  loans to fund  operations,  the buildup of accounts  receivable,  and
inventory.  These additional  financings to fund working capital, in addition to
the  previous  notes  caused the  interest  expense to go up. See  5-Short  term
borrowings

Because  of the costs  described  above,  the  Company  incurred  a loss  before
interest,  other  income  and  extraordinary  income of  $69,926  for the second
quarter compared to a loss of $314,583 for the same period in 1998.

Extraordinary income of $113,064 was posted during May and June of 1999. Bacchus
industries  (a Related  company)  and RTI agreed that Bacchus  Industries  would
assume the Spec Air Lease and pay for the  equipment  that was directly  leased.
The $113,064  charge is for the lease  amounts from  February of 1997 to June of
1999.  Bacchus  Industries  will pay  $4,000  a month  with no  cash-in  for the
company, Bacchus industries will pay this payment with future royalties accrued.
<PAGE>
The net loss of  $187,332  or $0.12 per share for the  second  quarter  of 1999,
compares  with a loss of  $390,148  or $0.25 per share in the second  quarter of
1998.

Because  of the costs  described  above,  the  Company  incurred  a loss  before
interest,  other income and extraordinary  income of $129,643 for the first half
of 1999  compared to a loss of $1,164,107  for the same period of 1998.  The net
loss of $1,299,447, or $0.83 per share for the first half of 1998, compares with
a loss of $401,731 or $0.25 per share in the same period in 1999.

The air cooling and air conditioning business is highly seasonal, and the second
quarter is not an indicator of results for the year.

LIQUIDITY AND CAPITAL RESOURCES

During the first six months of 1999,  the Company  generated  $1,408,456 in cash
from its notes  payable to TCC,  notes from  related  parties,  and  convertible
notes,  and applied that  primarily to  operations  such as building  inventory,
accounts receivables and interest.

The net cash of zero as of June 30,1999 was decreased compared to $11,712 at the
end of the second quarter of 1998.

The Company has  significant  equity capital and working  capital needs in 1999.
The anticipated  sales levels require the infusion of additional equity capital,
as  well as a line of  credit  to meet  the  working  capital  needs  due to the
seasonality of the air cooling and air conditioning business.

On June 26, 1999 the company issued a convertible notes offering for 800,000. As
June 30, 1999 the  company  had  received  $76,000.  The  company  has  received
$230,000  as of July 27,  1999.  The company has  received  notice that  another
$300,000 is committed.  The term of the convertible  notes are as follow: a 12 %
promissory  note in the  principal  amount of $25,000 at the  purchase  price of
$25,000 per  convertible  note. Each note is due and payable upon the earlier of
eighteen  (18) months from the day of the signing or the initial  closing of the
company's contemplated equity financing.  The principal amount of each note may,
at the  option of the  holder,  be rolled  over into the  equity  financing,  or
converted at 5 shares per dollar of the principal. At the time of the conversion
any accrued interest will be forfeited.  The convertible  notes are secured by a
second mortgage on the Westway facility and the Mexican corporation.

The Company is presently seeking financing through capital investment  regarding
a private  placement of common stock in which the company intends to include all
the convertible notes already outstanding and other notes the company expects to
have from the recent offering.

There can be no  assurance  that such  private  placement  will be  consummated.
Should the Company be unable to obtain any  financing,  it may have to limit its
operations and inventories, and therefore its future sales volume.
<PAGE>
PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

During the first half of 1999 several  vendors  started  legal action to collect
their  payments.  The Company has accrued $20,000 since September 1998 for legal
fees. The renegotiations of the debt were largely accomplished with about 65% of
the vendors but the majority of the agreements  have not been funded due to lack
of cash to make payments.

The original  agreement that the Company had with the Internal  Revenue  Service
(for  the  payment  of back  taxes)  had too  high of  payment  requirements  to
accomplish,  therefore  the  company  started a new  negotiation  to make  lower
payments and have a longer  period to pay. As of June 30, 1999 the total debt to
IRS is for  $212,926.  As of June 30, 1999 the company has not been able to make
payments on back taxes since March 1999.

The  company  received a bridge  loan in April of 1998 for  $540,000  payable on
January 22 of 1999 which is in default,  as well as another bridge loan received
in September 1998 for $25,000, payable on June 22, 1999 which is in default. The
bridge loan notes have not been  renegotiated,  the note  holders can take legal
action,  convert  into common  stock,  and exercise the warrants of $4.50 each ,
which will expire on April 22, 2003.

Since the Third quarter of 1998 Officers of the company  including Rick Bacchus,
Ron Bacchus and Rocky  Bacchus  have not  received  their full  salaries.  Total
payroll accrued for them as of June 30, 1999 is $86,983.

Since the third quarter of 1998 the company has made only partial payment to the
New Mexico State Tax  Departments.  As of June 1999 the delinquent taxes accrued
are  $30,054.  The State of New Mexico  has an  amnesty  plan that will start on
August 16 of 1999 and conclude on November 4, 1999. The company hopes to pay all
New Mexico taxes from 1998 without  penalties,  interest or late fees during the
amnesty period.

In May 1999 the  Company  started to review  transactions  related  with the TCC
financing, in order to have the proper interest,  discounts and fees. As of June
30,  1999 the  company  has not  recognized  in its books  fees,  discounts  and
interest  for  $91,000.  The  company  believes  that those  charges  are out of
contract. In addition, the company already recognized in its books about $49,500
which will be in dispute  because the company  believes those charges are out of
contract.  The company believes that the overcharges can be solved without legal
action during the third quarter of 1999.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

In addition to the factors  discussed  in the  "Overview"  and  "Liquidity"  and
"Capital  Resources"  sections of this  "Management  Discussion  and Analysis of
Financial  Condition and Results of Operations" and the Company's  Annual Report
on Form 10-K for the year  ended  December  31,  1998 the  following  additional
factors may affect the company's future results:

In analyzing this 10-Q prospective  investors should consider all of the matters
set forth  below  and in the 1998  10-K,  and the March  1999 10-Q and read such
documents in full.
<PAGE>
         When  used  in  this  report,   the  words  "may,"  "will,"   "expect,"
"anticipate,"   "continue,"   "estimate,"   "project,"   "intend"   and  similar
expressions  are  intended to  identify  forward-looking  statements  within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended regarding events,  conditions
and financial  trends that may affect the Company's  future plans of operations,
business  strategy,  operating  results  and  financial  position.   Prospective
investors are cautioned that any  forward-looking  statements are not guarantees
of future performance and are subject to risks and uncertainties and that actual
results may differ  materially  from those included  within the  forward-looking
statements  as a result of various  factors.  Such factors are  described in the
Company's  1998 10-K,  March 1999 10-Q, and in the risk factors set forth below.
All references to "Items" refer to the 1998 10-K.

#1 Going  Concern  Opinion;  Significant  Losses;  Pressing Need to Complete the
Convertible  Note Offering and a Stock  Offering.  The report  accompanying  the
audited  Financial  Statements  for the year ended  December 31, 1998 contains a
"going  concern"  qualification,  the  results  for such year  reflect a loss of
$4,492,352 or ($2.88) per share and a stockholders  deficit of  $2,150,469.  The
Company  posted a loss of  $2,667,385  in the year ended  12/31/97  or $1.92 per
share.  The Company posted a loss of $214,399 or ($0.13) per share for the first
quarter ended March 31, 1999 verses a loss of $909,299 or $.60 per share for the
first quarter ended March 31, 1998. No assurances  can be given that the Company
will be able to continue its operations if it does not complete its  Convertible
Note Offering and a subsequent Equity Financing.

#2 Likely Competition. Although, to the best of management's knowledge there are
as yet no competitors  offering a water cooled central air conditioning unit, it
must be assumed that if the Company's  efforts are  successful  other  companies
will begin to offer  competing  systems.  These future  competitors  may well be
companies which have substantially greater research, development,  marketing and
financial resources than the Company. See "Risk factor 1."

#3 Potential Environmental  Liability.  The Company is involved in environmental
proceedings  regarding an EPA Superfund Site in the State of New Jersey owned by
the Company.  While the Company  believes  that  sufficient  reserves  have been
provided  for in the  accrued  $888,955  reported  in this June 30, 1999 10Q, no
assurances can be given that the Company's actual liability will not exceed such
estimates. See "Risk factor 1."

#4 EPA Superfund Site Sale Commitment Signed but not Closed.  While a commitment
to sell the land in  Rockaway  (which  contains  the  Superfund  Site)  has been
signed.  A closing on the sale is projected for the third quarter and a possible
recovery of up to 1.1 million in previously  recognized expenses associated with
the Superfund  site is projected to take multiple  years.  No assurances  can be
given that the  Company  will close on the sale or that the buyer will  complete
the clean up. If the buyer  closes on the sales  transaction  and at some  point
defaults on the clean up the Company could still be liable for the clean up.

#5 No  Assurance  of  Acceptance  of Novel  Technology.  The  Company's  primary
product,  the AC2 Water Cooled Central Air Conditioning  unit, uses water rather
than air as a cooling medium.  Such technology requires the installation of both
a water  supply line and a water  waste line with  direct  access to the cooling
unit. No assurances can be given that contractors or the public will accept such
technology  even if they believe that the Company's  product  offers  advantages
over its competitors products. See "Risk factor 1."
<PAGE>
#6  Concentration on a Single Product.  While the Company  produces  evaporative
coolers  and heat  exchangers  as well as the AC2, it intends to  concentrate  a
significant  portion of its marketing and  distribution  efforts on the AC2. The
Company's success will therefore be substantially  dependent upon the success of
the AC2,  which  is only  being  marketed  in  certain  geographical  areas.  No
assurances can be given that the Company's marketing efforts will be successful.
See "Risk factor 1."

#7  Uncertainty  of  Patent  Protection.   The  Company  holds  patents  on  its
evaporative  coolers,  has a patent on the AC2,  and other  patents are pending.
While the Company's  patent counsel has received  notice that an application has
been approved and that another  patent  relating to the AC2 may be issued in the
near future,  no assurances can be given that additional  patents will be issued
regarding the AC2 or that if issued,  such patent,  or the Company's  subsisting
patents, will provide adequate protection from its competitors, which may either
devise  alternate  technological  solutions  to  accomplish  the purpose of such
patents or obtain patents of their own which would require the Company to either
obtain a license  from such  patent  holders or to  redesign  its  products.  In
addition,  no  assurances  can be given that the Company will have the necessary
funds to either  commence an action  against  parties who may be infringing  the
Company's patents or to defend against any patent infringement actions which may
be commenced by others. See "Risk factor 1."

#8 Development Stage of the Company's  Primary Product.  The Company's sales and
marketing  efforts  regarding the AC2 are not sufficiently  established to fully
evaluate or forecast  their  prospects.  The Company is thus  subject to all the
risks  associated  with the launching of a new product and there is no assurance
that such efforts will be successful. See "Risk factor 1."

The  efficiency  and  comfort  achieving  capability  of the AC2  have  received
favorable responses during the 1998 season, however the reliability in the field
has been  unacceptable.  The  high  volume,  large,  and  well  established  air
conditioning  contractors  are not  expected to buy AC2 units until they believe
the reliability issues have been solved, and that is not expected to occur until
after 1999. The smaller more aggressive air  conditioning  contractors  that are
looking for an advantage to increase sales, may sell AC2 units in 1999, but they
want assurances that they will get factory support if they have problems.

The Company is  dependent  on equity  offerings  to  continue  to provide  field
support.  Management  considers  it crucial that AC2 units  operate  reliably in
1999. The Company needs to quickly put together  "field upgrade kits" that solve
past operating problems and reassure customers. Some of the major problems are:

1. AC2 units had  reliability  problems  in 1998 (the first year for  widespread
units to operate with freeze protection controls).
2. The 1999 AC2 unit Upgrades
based on field  evaluations have not been field proven for a full season.

3. RTI has not been able to purchase all the  materials  required to upgrade all
AC2 units in the field.

4. Customers are cautious in making sales  commitments (both in making purchases
from RTI & in offering AC2 units to their  customers)  because of concerns about
a) RTI's financial strength, b) AC2 field corrections not yet being made, and c)
possible future AC2 product problems.

5. RTI has not automated  manufacturing and this creates concern for the quality
of production  (since it is largely hand built) and the cost is high because the
labor  content is high and the material  utilization  efficiency is less than an
automated   process  would  generate.
<PAGE>
 6.  Relations  with  Suppliers  &  Sales
Representatives have been strained by failure to make timely payments.

No assurances can be given that the Company will resolve AC2 product problems or
solve customer and supplier relationship problems.

#9 Dependence on Certain Suppliers.  The Company is dependent upon its suppliers
of plastics,  motors, pumps and compressors.  The Company has failed to pay many
of its  suppliers  in  accordance  with  the  terms  of  sale.  Certain  of such
components may have long lead order times and the Company does not have a strong
relationship with such suppliers. Should the Company lose any of such suppliers,
it would cause  manufacturing  and  assembly  delays which would have a material
adverse effect on its business.  No assurance can be given that the Company will
be able to adequately  replace such  suppliers in the event of a termination  of
their services to the Company. See "Risk factor 1."

#10  Seasonality.  The air  conditioning  business  is highly  seasonal  and the
Company  expects to earn the majority of its revenues in the summer  months when
the demand for cooling  equipment is greatest.  No assurances  can be given that
the Company will be able to maintain sufficient cash flow. See "Risk factor 1."

#11 Need for Highly Qualified  Personnel.  The success of the Company's business
will depend upon its ability to attract and retain  personnel  with a wide range
of technical  capabilities.  Competition  for such personnel is intense,  and is
expected to increase in the future.  No assurance  can be given that the Company
will be able to attract and retain such personnel.

#12 Dependence on Management; No Key Man Insurance. The Company is substantially
dependent upon the services of Messrs. Richard, Ronald and Rockney Bacchus (ages
45, 41, and 43 respectively) for the success of its business. The loss of any of
their  services would have a material  adverse effect on the Company.  While the
Company  proposes  to obtain Key Man  Insurance  in the amount of  approximately
$500,000 on the lives of each of the Bacchus brothers, no such insurance has yet
been obtained.

#13 Significant  Common Stock Holdings by Current Officers and Directors.  As of
the date hereof, the management of the Company  beneficially owns 258,705 shares
of Common Stock, or  approximately  16% of the Company's  issued and outstanding
Common  Stock.  There are no  cumulative  voting  rights and  directors  must be
elected by a plurality of the outstanding  voting  securities  entitled to vote.
Management  will  therefore  be in a position  to  significantly  influence  the
actions of the Company.

#14 Absence of Dividends on Common Stock. The Company has not paid any dividends
on its Common  Stock  since its  incorporation  and  anticipates  that,  for the
foreseeable future,  working capital and earnings,  if any, will be retained for
use in the Company's  business  operations and in the expansion of its business.
The Company has no present intention to pay cash dividends on its Common Stock.

#15 Possible Adverse Effects of Authorization of Preferred Stock;  Anti-Takeover
Effects. The Company's Certificate of Incorporation authorizes the issuance of a
maximum of  2,000,000  shares of  preferred  stock,  $.05 par value  ("Preferred
Stock"), on terms which may be fixed by the Company's Board of Directors without
further  stockholder  action.  The terms of any series of Preferred Stock, which
may include priority claims to assets and dividends,  and special voting rights,

<PAGE>
could adversely  affect the rights of holders of the Common Stock.  The issuance
of  Preferred  Stock  could make the  possible  takeover  of the  Company or the
removal of management of the Company more difficult, discourage hostile bids for
control of the  Company in which  stockholders  may receive  premiums  for their
shares of Common Stock or otherwise dilute the rights of holders of Common Stock
and the market price of the Common Stock. . #16 Shares Eligible for Future Sale.
Sales of the Common Stock in the public market could adversely affect the market
price of the Common Stock. As of June 30, 1999, the Company had 1,611,166 shares
of Common Stock  outstanding.  Of these shares,  1,065,773  are freely  tradable
without  restriction under the Securities Act and 545,393 shares are "Restricted
Securities" within the meaning of Rule 144 promulgated under the Securities Act.

#17 No Assurance  of Public  Market.  The Company was  delisted  from the Nasdaq
Small Cap Market and is now traded on the Nasdaq Bulletin Board.  There may be a
greater  difficulty in selling stock on the Nasdaq  Bulletin Board than when the
stock was listed on the Nasdaq Small Cap Market.

#18 Risk of "Penny Stock"  Regulations  The Commission  has adopted  regulations
which define a "penny  stock" to be any equity  security that has a market price
(as defined) of less than $5.00 per share,  subject to certain  exceptions.  The
Common  Stock was listed for  quotation  on the Nasdaq  SmallCap  Market and was
therefore  not deemed to be a "penny  stock."  Since the  Common  Stock has been
delisted  from the  Nasdaq  Small  Cap  Market  the Stock may be deemed a "penny
stock" as defined by the Exchange Act and the rules and regulations  promulgated
thereunder.  For any  transaction  involving a penny stock,  unless exempt,  the
rules require the delivery,  prior to the transaction,  of a disclosure schedule
prepared by the Commission relating to the penny stock market. The broker-dealer
also must disclose the  commissions  payable to both the  broker-dealer  and the
registered representative, current quotations for the securities, information on
the  limited  market  in penny  stocks  and,  if the  broker-dealer  is the sole
market-maker,  the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. In addition,  the broker-dealer  must obtain a
written  acknowledgment  from the customer that such disclosure  information was
provided  and must retain such  acknowledgment  from the  customer  for at least
three years. Finally, monthly statements must be sent to the customer disclosing
current price information for the "penny stock" held in the account.

While many Nasdaq listed securities would otherwise be covered by the definition
of penny stock,  transactions  in a Nasdaq listed  security would be exempt from
all but the sole market-maker  provision for: (i) issuers who have $2,000,000 in
tangible assets  ($5,000,000 if the issuer has not been in continuous  operation
for three years);  (ii)  transactions in which the customer is an  institutional
accredited  investor;  and (iii)  transactions  that are not  recommended by the
broker-dealer.  In addition,  transactions in a Nasdaq listed security  directly
with a Nasdaq market-maker for such securities would be subject only to the sole
market-maker  disclosure,  and the disclosure  with respect to commissions to be
paid to the broker-dealer and the registered representative.

The above described rules may materially  adversely affect the liquidity for the
market of the Company's Common Stock.  Such rules may also affect the ability of
broker-dealers  to sell the Company's Common Stock and may impede the ability of
holders  (including,  specifically,  purchasers in this  offering) of the Common
Stock to sell their shares in the secondary market.
<PAGE>
#19 Indemnification of Directors and Officers. The Company's By-laws provide for
indemnification  against  losses  that  they  may  incur  in  legal  proceedings
resulting  from  rendering  services  to the Company in such  capacities  to the
fullest extent permitted by law.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933,  as  amended  ("Act")  may be sought  by  directors,  officers  and
controlling  persons of the Company  pursuant to such indemnity (or  otherwise),
the Company has been advised that in the opinion of the  Securities and Exchange
Commission such indemnification is against public policy as expressed in the act
and is, therefore,  unenforceable. In the event that a claim for indemnification
against  such  liabilities  (other  than the  payment by the Company of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any such action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the Common Stock
being  registered,  the Company  will,  unless in the opinion of its counsel the
matter  has  been  settled  by  controlling  precedent,  submit  to a  court  of
appropriate  jurisdiction  the question  whether such  indemnification  by it is
against  public policy as expressed in the Act and will be governed by the final
adjudication of such issue.


ITEM 2.  CHANGES IN SECURITIES

             None.



                                    SIGNATURE


         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                     RTI  INC.




Date: August 4, 1999                     By: /s/ RICK E. BACCHUS
                                      ---------------------------
                                          Rick E. Bacchus
                                          Acting Chief Executive Officer
                                          And Principal Accounting Officer