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 SEPTEMBER 30, 1998
                           --------------------

[ ]  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.

   OCTOBER 31, 1998 -  1,611,166  shares of common stock
   ----------------   -----------

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

PART I. FINANCIAL INFORMATION

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



                                                                               RTI INC. AND SUBSIDIARIES
                                                                               (UNAUDITED)
                                                                             BALANCE SHEET
              ASSETS                                                                       SEPTEMBER 30,            DECEMBER
                                                                                                                         31,
                                                                                      1998                              1997

CURRENT ASSETS

    Cash and cash equivalents                                           $                 -                 $         11,712
    Accounts receivable, net of allowance
        of $ 12,092 in 1998, and $11,482 in 1997                                    59,093                           234,993
    Inventory                                                                    1,216,593                         1,979,893
    Prepaid expenses and other                                                     361,556                           163,357
               Total current assets                                              1,637,242                         2,389,955

PROPERTY, PLANT AND EQUIPMENT, NET                                               1,874,016                         1,902,066

DUE FROM RELATED PARTIES                                                           101,445                           135,605

INTANGIBLE ASSETS, net of amortization
        of $63,721 1998 and $72,353 in 1997                                      1,106,309                         1,204,193

OTHER ASSETS                                                                        59,854                            38,111
               Total assets                                               $      4,778,865                   $     5,669,930
                                                                            =================== ------------- ===================

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


<PAGE>

                                                                               RTI INC. AND SUBSIDIARIES
                                                                               (UNAUDITED)
                                                                             BALANCE SHEET
                                  LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                                      1998                              1997
CURRENT LIABILITIES

    Notes payable to related parties                                     $         200,000                   $       593,000
    Due to related parties                                                         180,385                            94,900
    Accounts payable                                                             1,603,238                           796,521
    Accrued expenses                                                             1,007,999                           133,886
    Accrued interest                                                                50,679                            49,780
    Short Term Loans                                                               564,002                                  -
    Other current liabilities-Future Environmental Cost                            180,000                           180,000
    Current portion of long-term debt                                              133,011                           654,613

               Total current liabilities                                         3,919,314                         2,502,700

LONG-TERM DEBT, net of $22,000
    discount in 1997                                                               873,177                           257,344
Non-current notes to related parties                                               388,383                                  -
Provision for Future Environmental Cost                                            782,600                           782,600
OTHER LIABILITIES                                                                  167,957                           231,485

               Total liabilities                                                 6,131,431                   $     3,774,129

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 1,481,166 at year-end  1997
       and 1,611,166 at March 31, 1998                                             128,893                           118,494
    Additional paid-in capital                                                  18,170,768                        17,679,579
    Accumulated deficit                                                       (19,657,227)                      (15,907,272)

   Total stockholders' equity                                                  (1,352,566)                         1,895,801

   Total liabilities and stockholders' equity                             $      4,778,865                   $     5,669,930
                                                                       =================== ------------- ===================
<PAGE>

                                                                               RTI INC. AND SUBSIDIARIES
                                                                               (UNAUDITED)
                                                                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                       Three Months Ended September 30,
                                                                                      1998                      1997
Net sales                                                               $             (12,354)            $           997,025
Cost of sales                                                                          998,403                      1,012,581
    Gross profit (loss)                                                           (1,010,757)                           (15,556)

Selling, general and administrative expenses                                        1,320,369                          509,497
Product Development                                                                      28,660                           32,491
               Total operating expenses                                             1,349,029                          541,988

               Loss from operations                                               (2,359,786)                         (557,544)

Other income (expense)

    Rental income for Rockaway Industrial Park, net                                         7,926                       (11,371)
        of expenses

        in both years                                                                              -
    Interest income (expense)                                                           (87,498)                        (14,250)
    Other income                                                                                   -                               -
               Total other income (expenses)                                            (79,572)                        (25,621)

               Loss from continuing operations                                    (2,439,358)                         (583,165)

Discontinued operations
    Loss from irradiation operations                                                               -                               -
               Net loss before income taxes                                       (2,439,358)                         (583,165)

Income taxes                                                                                                                       -
Net loss                                                                $        (2,439,358)              $         (583,165)
                                                                         =================== ------------- ===================

Weighted Average Shares                                                             1,577,356                       1,481,166

Net loss per share                                                                 ($1.55)                           ($0.39)


<PAGE>

                                                                               RTI INC. AND SUBSIDIARIES
                                                                                           CONSOLIDATED FINANCIAL STATEMENTS
                                                                               (UNAUDITED)


                                                                                       CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                                   NINE MONTHS ENDED
                                                                                                     SEPTEMBER 30,

                                                                                      1998                      1997
Net sales                                                                 $      2,296,591                   $     2,291,640
Cost of sales                                                                    3,365,741                         2,406,869
    Gross profit (loss)                                                        (1,069,150)                         (115,229)

Selling, general and administrative expenses                                     2,234,108                         1,330,614
Product development                                                                226,667                            79,626
               Total operating expenses                                          2,460,775                         1,410,240

               Loss from operations                                            (3,529,925)                       (1,525,469)

Other income (expense)

    Rental income for Rockaway Industrial Park, net                                 23,830                            22,181
        of expenses
    Interest income (expense)                                                    (233,463)                            13,769
    Other income                                                                         753                          46,071
               Total other income (expenses)                                     (208,880)                            82,021

               Loss from continuing operations                                 (3,738,805)                       (1,443,448)

Discontinued operations
    Loss from irradiation operations                                                       -                            (427)
               Net loss before income taxes                                    (3,738,805)                       (1,443,875)

Income taxes                                                                               -                                -
Net loss                                                                 $     (3,738,805)                  $    (1,443,875)
                                                                       =================== ------------- ===================

Weighted Average Common Shares Outstanding                                       1,577,356                         1,481,166

Net loss per share                                                                 ($2.37)                           ($0.97)


<PAGE>

                                                                               RTI INC. AND SUBSIDIARIES
                                                                               (UNAUDITED)
                                                                                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                   NINE MONTHS ENDED
                                                                                                     SEPTEMBER 30,

                                                                                      1998                      1997


CASH FLOWS FROM OPERATING ACTIVITIES:
            Net Loss                                                     $     (3,738,805)                  $      (860,735)

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

                              Depreciation and amortization                        226,043                            93,142

                     Allowance for doubtful accounts                                12,092                                  -
                      Allowance for warranty expense                               746,175                                  -
                     Imputed interest on note payable                                      -                          11,000
                                    (Increase) decrease in:
                                        Accounts receivable                        163,808                         (483,630)
                                        Restricted deposits                                -                         476,045
                                   Due from related parties                         34,160                                  -
                                                Inventories                        763,300                       (2,001,105)
                                 Prepaid expenses and other                      (198,199)                         (151,532)
                                    Increase (decrease) in:
                                           Accounts payable                        806,717                           501,224
                                  Accrued expenses other than warranty             127,938                           120,180
                                     Due to related parties                         85,485                                  -
                                          Other liabilities                              899                        (24,247)
                                          TOTAL ADJUSTMENTS                      2,768,419                       (1,458,923)

                              Net cash applied to operating activities           (970,386)                       (2,319,658)

 CASH FLOWS FROM INVESTING ACTIVITIES:
                                  Purchases of fixed assets                      (134,218)                       (1,352,611)
                              Reduction in notes receivable                                -                         605,000
                 Purchase of business, net of cash acquired                                -                       (697,731)
                                  Purchases of other assets                         21,743                          (41,910)

                                        Net cash applied to
                                       investing activities                      (112,475)                       (1,487,252)

 CASH FLOWS FROM FINANCING ACTIVITIES:

                      Proceeds from sale of preferred stock                                -                         330,600
                         Proceeds from sale of common stock                        490,439                           420,500
                    Lease Proceeds on Purchase of Equipment                         68,000                                  -
                       Increase in notes to related parties                          (4,617)                                -
                       Payments on notes to related parties                        (26,511)                                 -
                           Changes in short-term borrowings                        579,502                           563,000
                                 Payments on long term debt                        (35,664)                           25,224

                             Net cash provided by financing activities           1,071,149                         1,339,324

 Net increase (decrease) in cash and cash equivalents                              (11,712)                      (2,467,586)
 Cash and cash equivalents, beginning of period                                     11,712                         2,578,180
 Cash and cash equivalents, end of period                               $                 -                  $       110,594
                                                                      =================== ------------- ===================







</TABLE>

<PAGE>

                    RTI INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        (Information as of  September  30, 1998 and 1997,  for the  three-months
               then ended, and for the nine-months then ended is unaudited)


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 September 30, 1998, its 1998 and 1997 results
of  operations  for the three  months  ended  September 30 and nine months ended
September  30, and its 1998 and 1997 cash flows for the same nine month  period.
Results of operations for the nine-month period ended September 30, 1998 are not
necessarily  indicative  of the  results  to be  expected  for the  year  ending
December  31,  1998.  In  preparing  July's  financial  statements,  there was a
incident involving the Company's computer system that required reconstruction of
that  month's  financial  statements  manually.  This  reconstruction  is nearly
complete,  and management  believes that any resulting  adjustments  will not be
material in nature.

   Information  included in the  consolidated  balance  sheet as of December 31,
1997  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,
1997, 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 Company's new "AC2" central air
conditioner utilizes patented  evaporative  technologies to cool homes and small
businesses with air conditioning 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  1997,  and in the  first  two  quarters  of 1998,  the  company
produced and sold each of its air conditioning and cooling products. During this
time  period  there was a  significant  dedication  of  resources  to 1) product
development  for the  Company's  AC2,  including  obtaining  safety  and  energy
efficiency  certifications,  2) development of production  capacity at a factory
purchased and equipped for production of the AC2 in Westway,  Texas,  and 3) the
development of an air conditioner distribution network, currently limited to the
southern  states of the US. In the first quarter,  the  development of the "fill
and drain" addition to the AC2 was completed,  and distributors  were encouraged
to return any remaining  units from the 1997 sales season,  to have the fill and
drain kit added at cost to the Company because of the significant improvement to
the product.  The fill and drain kit enhances the salability of the product,  as
well.

         However,  by the  third  quarter  of 1998,  the  Company  continued  to
experience  reliability  problems  on the fill and  drain  unit,  as well as the
necessity  of  adding  other  items to  resolve  problems  experienced  in field
testing.  Further  engineering  changes  required the addition of an anti-siphon
valve,  a device to prevent a water hammer  effect in a small  percentage of the
units, and an addition of an anode to eliminate corrosion caused by the chemical
make-up of water in some locals.  All of these devices are inexpensive,  and can
be added in the field.  However,  to resolve  these  problems  and  support  the
product,  the Company  intends to upgrade every unit in the field.  As a result,
most units in  distributors'  warehouses  have been returned to RTI in the third
quarter for the upgrade.  Upgrade operations are presently in progress, and when
completed,  the units will be  reshipped to the  distributors.  The Company also
performs  significantly  enhanced  quality  procedures to the returned  units to
insure defect-free  operation.  To reflect the anticipated cost to upgrade units
in inventory and to upgrade units operating in the field,  RTI has established a
reserve for future  warranty in September  1998 for $722,000.  It is anticipated
that the repairs will be completed within a year.
<PAGE>

3.  ROCKAWAY INDUSTRIAL PARK

   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 net  investment 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,  and the first nine  months of 1998
totaling  $232,250,  which have been accrued in the financial  statements  under
"Other liabilities".  It should be noted that RTI is at present negotiating with
a willing buyer for the facility. While the monetary proceeds are expected to be
negligible,  the  buyer,  who states  that he is  experienced  in  environmental
matters,  and will assume full and final  financial  obligation  to complete the
cleanup  and  assume  payment  of all  property  taxes if the  negotiations  are
successful. There is no guarantee that such negotiations will be successful.

4.  ENVIRONMENTAL INVESTIGATION AND REMEDIATION

   As a result of  engineering  tests  that  commenced  in 1981,  the New Jersey
Department of  Environmental  Protection  (the "DEP") issued a directive in 1986
ordering a remedial  investigation  and feasibility study (the "Study") designed
to determine the nature and extent of contamination  on the Rockaway  Industrial
Park property. The Company agreed to pay the costs of the Study and entered into
an  Administrative  Consent Order with the DEP. In 1989, the DEP issued a Second
Directive to pay for an additional  environmental study and DEP oversight costs.
In 1993, the Company entered into an  Administrative  Consent Order ("ACO") with
the DEP. Cost  reimbursement  to the DEP under the ACO includes  applicable  DEP
expenditures  beginning July 1, 1982 and future DEP oversight  costs.  In August
1996,  the Company made a payment of $575,000 to the DEP as full  settlement  of
all  outstanding  claims asserted under the ACO. The Company  subsequently  paid
additional  claims by the DEP for oversight  costs through  October 31, 1996. In
April 1996,  the DEP responded to the Company's  petition to change the Remedial
Action  Work Plan under the Record of  Decision  (ROD),  and advised the Company
that a pilot test of the CleanOx remediation program,  undertaken by the Company
on its Rockaway property, was not considered conclusive.  In September 1996, the
Company  completed a second CleanOx test, which reduced the  contamination,  but
did not result in  remediation  of the  groundwater.  On March 7, 1997,  the DEP
reaffirmed its requirement that the Company comply with the ROD.

In November of 1997, the Company  submitted a Proposed Remedial Action Work Plan
to the NJDEP.  This plan,  which required the  installation of a single recovery
well,  rather than three wells as was previously  required,  was reviewed by the
NJDEP and accepted in February 1998, subject to certain modifications. Under the
modified  plan, the  "Clean-Ox"  technology  was permitted,  and required RTI to
begin  implementing  the plan according to the proposed  schedule.  In 1998, the
installation of the groundwater  recovery system was to occur, with ground water
remediation  to  follow  for a  five-year  time  frame,  subject  to  regulatory
concurrence  based upon favorable  results as groundwater is monitored.  RTI has
accepted the modified plan,  but requested a delay to the original  schedule for
administrative  purposes.  Permits  have been  applied  for and  granted for the
installation of the groundwater  recovery  system.  Draft  applications  for the
Treatment  Work  Approval and air permit to  construct  and operate the recovery
system have been  prepared,  and ready to be finalized.  The Company has accrued
$962,600 for long term environmental expenses under "Other liabilities".

  Considering the ongoing remediation and DEP involvement in this matter,  there
can be no assurances that the cleanup,  remediation,  and DEP oversight accruals
will represent the Company's ultimate liability.

5. SHORT TERM BORROWINGS

  As of September 30, 1998, RTI has several notes outstanding.  Two of the notes
are related party notes with its former Chairman and CEO, Theo W. Muller (Muller
Note),  and  another  with  Frellum  Corporation  (Frellum  Note).  Frellum is a
corporation owned 51% by Mr. Muller. These notes, which were due on February 20,
1998, were subsequently  renegotiated effective February 21, 1998, for principal
and accrued  interest in the amounts of $588,383  and $53,022 for the Muller and
Frellum  Notes,  respectively.  The  terms of the  Muller  Note  are 12%  annual
interest  payable  quarterly  and  installments  of  $100,000  each  six  months
beginning  August 20, 1998,  until  principal is fully paid.  The Muller note is
secured by the patents  owned by the Company.  The terms of the Frellum Note are
12% annual  interest.  The Company has already paid the first payment of $26,511
plus interest in April.  The balance of $26,511  along with accrued  interest is
payable  on October  20,  1998.  The  Company  is  delinquent  in payment of the
required  payments  at  August 20 for the  Muller  note and  October  20 for the
Frellum  note.  Mr.  Muller  has  not  demanded   payment  for  either  note  in
anticipation of equity funding being pursued by RTI.


<PAGE>

         The Company in April 1998 entered into a bridge financing in the form
of nine-month Promissory Notes (Notes) bearing 10% interest.  The Notes are 
secured by a security interest in the Company's assets.  The Notes will 
automatically rollover into a private placement proposal (Proposal) upon 
shareholder approval.  Should the Proposal not be approved, the Notes will 
remain debt instruments and become due at maturity.

         The Company entered into a $68,000 computer lease-purchase agreement
 in July 1998 with a financing institution.  Only two payments have been made
 to date, and the Company is two months behind in its monthly payments of 
$2,700.

         The Company entered into a factoring arrangement with Texas Capital 
Corporation 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 September 30, 1998, the Company had factored 
accounts receivable and inventory loans in the approximate amount of $132,000.


6.   STATEMENT OF CASH FLOWS

   Supplemental disclosures of cash flow information are as follows:

        Nine months ended September 30,

                     1998   1997
                ----------- ----------
   Interest paid   $157,717  $ 362
   Income taxes paid   --    --

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

COMPARISON OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1998 AND
1997.

         Net sales for the three months ended September 30, 1998, were ($12,354
 compared to $997,025 in 1997.  Sales of the AC2 unit in third quarter of 1998 
were ($272,180), which resulted from the return of the units to RTI to be 
retrofitted with upgraded components.

         Cost of sales  decreased  slightly from $1,012,581 in the third quarter
of 1997 compared to $998,403 for the same period in 1998.

Selling,  general and administrative  costs were $1,320,369 in the third quarter
of 1998 compared to $509,497 in the same period of 1997. The increased  costs in
1998  resulted from sizing the Company to match  significant  levels of sales in
1998,  which  did  not  materialize  due to the  product  upgrades  required.  A
significant portion of the increase was due to the warranty reserve of $722,000.
Without the warrant reserve,  selling, general and administrative costs would be
$598,369,  compared to $509,497 for the same period of 1997. Product development
costs totaled $28,660 for the third quarter of 1998,  while they were $32,491 in
the same period of 1997.  Management has recently reduced  selling,  general and
administrative costs significantly from those costs experienced in June and July
of 1998.
         1998 rental income net of expenses $7,926 from the Rockaway  Industrial
Park increased in 1998 compared with net expenses of ($11,371) for the same 1997
period.

         Because of the costs described  above, the Company incurred a loss from
operations  before  interest and other income of $2,439,358 for the three months
ended  September  30, 1998.  This  compares with a loss of $583,165 for the same
period last year.


<PAGE>

For the three months ended September 30, 1998 the Company  incurred net interest
expense of $87,498,  as compared  with net interest  expense of $14,250 in 1997.
Interest  expense has increased due to the Company  factoring its receivables to
fund  operations  and the buildup of inventory for in  anticipation  of seasonal
sales in the  third and  third  quarters  of 1998,  reflecting  working  capital
demands of a growing  business.  In 1997, the Company earned  interest income on
the funds received from the sale of the contract irradiation line of business.

  The net loss of $2,429,358,  or $1.55 per share for the third quarter of 1998,
compares with a loss of $583,165, or $0.39 per share in the same period of 1997.

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


COMPARISON OF OPERATIONS FOR THE NINE-MONTH  PERIOD ENDED SEPTEMBER 30, 1998 AND
1997.

         Net sales for the nine months ended September 30, 1998, were
 $2,296,591, and compared to $2,291,640 in 1997.  Sales of the AC2 unit in 
through September 30 of 1998 were $1,011,297.  During the same period of 1997
 AC2 sales were approximately $937,000.

         Cost of sales  increased  from  $1,330,614  in the first nine months of
1997  compared to  $3,354,741  for the same period in 1998.  Air cooling and air
conditioning  production represents a full nine months in 1998, while 1997 first
quarter  operations  began on February 24, 1997, the date of the  acquisition of
Quality Air, Inc. The Company has encountered lower than expected AC2 production
this year due to improper  operation of the new "fill and drain" kit. There were
also a series of  technical  and supply  setbacks for the fill and drain kits in
the first nine months. The Company is redesigning the "fill and drain" kit prior
to shipping  such units in 1999,  and will replace all  components  necessary to
insure that all units remain operational. Additionally, the 1998 costs include a
warranty  reserve of $722,000  for expected  costs to upgrade  prior year units,
including  costs to be paid to  contractors  to  complete  the  upgrade on units
previously  installed in the field.  Most of the upgrades are  anticipated to be
completed in 1998 and early 1999.

         Selling, general & administrative (SG&A) costs were $2,234,108 in the
first nine months of 1998 compared to $1,330,614 in the same period of 1997.  
Note that SG&A costs, without the warrant reserve of $722,000 would be 
$1,512,108 compared to $1,330,614 in the same period of 1997.  Product
development costs totaled $226,667 through September 30, 1998, while they were
$79,626 in the same period of 1997.

         1998 rental income from the Rockaway  Industrial  Park, net of expenses
was approximately the same through September in 1997 and 1998.

         Because of the costs described above, the Company incurred a loss from
operations before interest and other income of $3,738,805 through September
 1998.  This compares with a loss of $1,443,875 for the same period last year.

         For the nine months ended September 30, 1998 the Company incurred net 
interest expense of $233,463, as compared with net interest income of $13,769
 in 1997.  Interest expense has increased due to the Company factoring its 
receivables to fund operations.  Additionally, the Company is paying interest
 on the Norwest and SBA loans for the Westway property, and the Bridge Loan 
received in April of 1998.  In contrast, in 1997 the Company earned interest
 income on the funds received from the sale of the
contract irradiation line of business.

         The net loss of  $3,738,805,  or $2.37 per  share  for the  first  nine
months of 1998,  compares with a net loss of $1,443,875,  or $0.97 per share for
the same period in 1997.
<PAGE>

YEAR 2000 ISSUE

         The Year 2000 issue is the result of computer programs using a
 two-digit format, as opposed to four digits, to indicate the year.  Such
computer systems will be unable to interpret dates beyond the year 1999, which
 could cause a system failure or other computer errors, leading to disruption
 in operations.

         RTI has completed its internal  assessment of the Year 2000 issue,  and
believes that it is in a state of readiness  internally with a single exception.
The exception is that the uses an older Unix based  operating  system to operate
its  accounting  software that will not address the full four digits of the year
field,  and thus, will operate only until December 31, 1999. The remedy is being
assessed in conjunction with other accounting system  decisions.  Before July of
1999, the Company  intends to complete  installation of either an upgrade to its
Unix operating  system to a more current version that has resolved the Year 2000
problem, or to replace its current accounting system with a system that operates
in the Windows NT environment.  It is anticipated  that  replacement of the Unix
operating system will be at a cost of approximately  $1,000,  and replacement of
the accounting system will be in a range of $50,000 to $100,000.

         The Windows NT environment was purchased in 1998 and installed to 
operate internal office communications, and is Year 2000 compliant.  The 
Company is currently assessing new accounting software that may replace the 
existing Unix based software and operate in the Windows NT environment.  The
 accounting software decision process is not driven by Year 2000 issues, but
 Year 2000 is relevant to the decision.

         In 1998, RTI purchased and installed upgraded computers and software
 in order to meet business requirements.  The computer purchase and software
 installations were also made with the Year 2000 issue in mind.  The costs to 
complete this upgrade were approximately $70,000.

         RTI's  manufacturing area utilizes a single  computerized test machine,
which operates in a Windows 95 environment, and is Year 2000 compliant.

         Because of 1) the  probability  of  resolving  all known issues by July
1999,  and 2) the  proactive  position  of the  Company  in 1998  in  installing
upgraded computer equipment and software that is Year 2000 compliant (other than
the Unix operating system mentioned above), it is the Company's  assessment that
there is little risk associated with the Year 2000 problem internally.

         RTI's has multiple supply sources for most purchases required for its
 products.  Only a few suppliers of production materials are sole suppliers. 
 In 1998 and early 1999, RTI will communicate with each of the sole suppliers 
and determine the level of compliance for each sole supplier, and provide for
 alternate supply source if, in it's assessment, RTI believes there is a risk
 of supply chain interruption.  The Company has yet to determine the costs that 
will be incurred in connection with the
third party area.
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         During the first nine months of 1998,  funds were internally  generated
from  inventories  of  $763,000,  increased  accounts  payable of $806,000 and a
decrease in receivables of $163,000.

         The Company has received cash from financing activities just over
 $1,070,000 in 1998.  This includes net proceeds of approximately $490,000 
from the private placement that closed in April 1998 of 130,000 shares of 
common stock sold in units of 5,000 shares at a purchase price of $20,000 per 
unit. A bridge loan of approximately $540,000 was received in late April
 pursuant to a third private placement. It addition, a bridge loan was
 received in September in the amount of $38,000.

         The Company invested cash in assets of approximately $130,000 in the
first nine months of 1998, compared to $1,353,000 in 1997.  The net beginning
 cash of $11,712 was decreased to $0 by the end of the third quarter of 1998.
  In 1997 cash decreased from $2,578,180 to $110,594 by the end of the third
quarter.

         The Company has significant capital and working capital needs at
 present. The Company continues to seek an agreement with an investment-banking 
firm to act as Placement Agent for an offering of common stock to capitalize 
the Company adequately.  This private placement offering will be subject to 
shareholder approval.  There can be no assurance that the shareholders will 
approve the private placement, or if approved that it will be consummated.  
Should the Company be unable to obtain any such
financing, it may have to limit its operations and inventories, and therefore
 its future sales volume.

         RTI has a significant need to make payments to its vendors who have
had outstanding balances for many months.  In negotiation with its 
investment-banking firm, RTI is attempting to schedule payments for most
 vendors over an extended period of time.  This will be required since the 
company is not sufficiently capitalized to both continue production and make 
payments to its vendors, except at a minimal level over the next 12 months. 
 RTI is also behind in payment of taxes.  Unpaid federal and state
taxes at the end of September totaled approximately $120,000.

         In September, RTI was delisted from the NASDAQ Small Cap Market
pursuant to a requirement to maintain tangible net assets in excess of
 $4.0 million.  This action by the NASDAQ will result in greater difficulty
 in obtaining equity funding for the Company.

The Company is presently  relying upon inventory,  production of Aireze coolers,
and E2Pak heat  exchangers,  and  financing  from a finance  company to continue
operations.  Production  of new AC2 air  conditioners  in 1998 is presently at a
minimal level  because of the lack of financing and the need to modify  existing
units in stock at  distributors'  warehouses.  Production  is  continuing on the
Company's Aireze  evaporative  cooler and E2Pak heat exchangers and is the major
present  source of  operating  capital in  addition  to  funding  from a finance
company.

RTI has  signed a letter  of intent  for $1.8  million  line of credit  with the
finance  company.  This line is the first step in obtaining  adequate funding to
smooth  operations at RTI and allow the Company to pursue its plan of validating
performance  of the AC2 air  conditioner  in 1999 and moving toward  substantial
earnings in the year 2000.

<PAGE>

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

There were no new legal proceedings during the quarter.  RTI was sued for breach
of an advertising  contract in 1997. The Company,  at that time, felt that there
was no basis for recording the full outstanding obligation under the contract of
approximately  $110,000,  and that the $23,000  accrual in accounts  payable was
sufficient  reserve.  In September 1998, RTI accrued an additional  $75,000 as a
contingency  since it has been unable to retain counsel to represent its case in
the Tennessee venue. Upon retaining counsel, RTI believes that it may prevail by
either  negotiating  with the  complainant or litigating  the issue.  Either may
result in a payment lower than the total reserve of $98,000.

ITEM 2.  CHANGES IN SECURITIES

    None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Because of the  Company's  need for  capital  injection,  it has fallen
behind in payments of its debt instruments.

Refrigeration Technology Inc., RTI's wholly owned subsidiary has long-term notes
with the Westway property as collateral.  Norwest note is for $350,000,  and the
Small Business  Administration  (SBA) note,  subordinated to the Norwest note is
for $250,000. The Company is presently 3 payments in arrears on the Norwest note
for a total of $14,794.  Norwest has presented a demand letter  requesting  this
amount by November 20, 1998. RTI is providing for funds to meet this demand. RTI
is also  required  under the Norwest note to maintain  certain  financial  ratio
minimums,  which the  Company  is not in  compliance  at  present.  Norwest  has
requested  that the  financial  covenants  be  remedied by  November  30,  1998.
Refrigeration Technology Inc. is presently 3 payments in arrears on the SBA note
for a total of $9,738. RTI is requesting a 6-month deferral of payments from the
SBA.

Refrigeration  Technology Inc. has not made the August 20, 1998 $100,000 payment
on the $588,383 Muller note, nor the interest  payments  accrued at that date in
the amount of $35,303.  Interest is due quarterly on May 20, August 20, November
20, and February 20. Mr. Muller has not demanded  payment in anticipation of the
Company issuing equity securities.

RTI Inc.  has an  obligation  under  certain  litigation  for a mortgage  on its
Rockaway New Jersey property.  The mortgage is for $287,000, and requires annual
payments of $41,000 plus  interest at 10.61% each year  beginning  in 1998.  The
Company has not made its scheduled note or interest payments in 1998.

ITEM 4.  MATTERS BEFORE SHAREHOLDERS

Annual Meeting Dates - RTI held an annual meeting of its  stockholders  in 1998.
Shareholders  of record on July 27, 1998 were notified of the Annual  Meeting to
be held on August  27,  1998.  The  meeting on August 27 was called to order and
postponed until September 1 to allow sufficient shareholder votes to be recorded
by the transfer agent.  By September 1,  sufficient  votes were received and the
annual meeting was held accepting the votes of those present,  and accepting the
votes by proxy for those not  present.  Each matter voted upon will be described
below.  Because of a material  change in proposal  3, the meeting was  continued
until September 10, so that  shareholders  could be notified of the change,  and
either be present for the continued Annual Shareholders Meeting or file votes by
proxy on that matter separately.
<PAGE>

The Company has 1,611,166 shares  outstanding,  plus 100,000 shares of preferred
stock with equal voting  rights,  for a total of 1,711,166  votes.  Total shares
voted  were  1,488,303,  which  exceeded  the 50%  required  for a  quorum.  All
proposals passed, except proposal 3, which is discussed below in greater detail.
There were no other  business  matters  brought before the  shareholders  at the
annual meeting.
   Matters voted on:

To elect five directors for a one-year term expiring in 1999.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                                  Broker
              Director                                  For            Against          Abstain           Non-vote

         Rick E. Bacchus                             1,441,495         46,808
         Rockney D. Bacchus                          1,451,449         36,854
         Ronald A. Bacchus                           1,441,449         46,854
         Dr. Lanny Snodgrass                         1,451,399         36,904
         Joel S. Kanter                              1,451,495         36,808
</TABLE>

         Mr. Kanter is elected as a new director, and the remaining nominees
are elected as continuing directors.

To ratify the purchase of certain  assets from  Bacchus,  Industries,  Inc., an
affiliated  company,  in exchange  for 450,000  shares of the  Company's  Common
Stock.

     This issue passed with a 55% vote.

                                                               Broker
            For            Against          Abstain           Non-vote
         736,547           40,672           151,078           560,006

To approve a private  placement of Units (each Unit to consist of two (2) shares
of Common  Stock and one (1) five (5) year  Common  Stock  Purchase  Warrant  to
purchase  one (1) share of Common  Stock at an  exercise  price of $3.00) on the
revised terms set forth in the Revised Proxy Statement.

     This issue failed for insufficient votes (see discussion below).

                                                               Broker
            For            Against          Abstain           Non-vote
         546,873           11,583             1,399           928,448

To approve the granting of  performance  options for up to  1,564,000  shares of
Common Stock to certain  members of  management  of the Company on the terms set
forth in the Proxy Statement.

     This issue passed with a 55% vote.

                                                               Broker
            For            Against          Abstain           Non-vote
         819,465           98,706            10,126           560,006

To approve  an  amendment  to the  Company's  Certificate  of  Incorporation  to
increase  the  authorized  number of shares of Common Stock from  15,000,000  to
25,000,000.

     This issue passed with a 96% vote.

                                                               Broker
            For            Against          Abstain           Non-vote
         1,420,480         58,488             9,355

Proposal  No. 3 was to approve a private  placement  of Common Stock to generate
minimum gross  proceeds of $2,000,000  and maximum gross proceeds of $5,000,000.
The investment  banking firm revised the terms of the private placement prior to
the August 27  shareholders'  meeting,  requiring a revised proposal No. 3 to be
voted on separately.  A revised notice of Annual Meeting of  Stockholders  to be
held on September 10, 1998 was  distributed  to  shareholders,  with a proxy for
shareholders to return to the stock transfer agent. Unfortunately,  insufficient
votes on this  separate  issue  were  returned  to the stock  transfer  agent by
September 15th, the last day of voting.

RTI  believes  that there is a need for an  additional  capital  injection,  and
although  Proposal No. 3 did not pass because of logistics,  the vote tally from
those shareholders that were able to vote indicates strong  shareholder  support
for such a capital injection. RTI intends to resubmit a revised proposal similar
to  Proposal  No.  3 when it  successfully  obtains  a firm  commitment  from an
investment-banking firm. RTI is presently negotiating such an agreement, but has
not finalized the terms.  There is no guarantee that such terms will be reached,
that the proposal will be passed by the  shareholders,  or that the  marketplace
will subscribe to the private placement.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   (a) Exhibits: None

   (b) Reports on Form 8-K

The Company filed a Report on Form 8-K dated February 2, 1998 regarding Item 6,
Resignation of Registrant's Directors (File No. 0-5887)
<PAGE>

                                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.

Date: November 19, 1998

    RTI INC.

     By: /s/ RICK E. BACCHUS
         ---------------------------
           Rick E. Bacchus
           Acting Chief Executive Officer
           and Principal Accounting Officer