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, 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 [ ] No
[X]

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

     JULY 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>

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                                     RTI INC. AND SUBSIDIARIES
                                                 CONSOLIDATED FINANCIAL STATEMENTS
                                                         (UNAUDITED)
                                  BALANCE SHEET

              ASSETS                                                             JUNE 30,               DECEMBER 31,
                                                                                   1998                   1997
CURRENT ASSETS
    Cash and cash equivalents                                          $            2,974       $         11,712
    Accounts receivable, net of allowance
        of $ 13,727 in 1998, and $16,005 in 1997                                  407,556                234,993
    Inventory                                                                   1,628,305              1,979,893
    Prepaid expenses and other                                                    362,052                163,357
                                                                                --------- ----------------------

               Total current assets                                             2,400,887              2,389,955

PROPERTY, PLANT AND EQUIPMENT, NET                                              1,946,329              1,902,066

DUE FROM RELATED PARTIES                                                          137,050                135,605

INTANGIBLE ASSETS, net of accumulated
        amortization of $40,955 1998 and $72,353 in 1997                        1,126,859              1,204,193

OTHER ASSETS                                                                       14,796                 38,111
                                                                                ---------- ----------------------
               Total assets                                              $      5,625,922        $     5,669,930
                                                                                 =================== ==============

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


<PAGE>

                                                        BALANCE SHEET
                                 LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                                 JUNE 30,               DECEMBER
                                                                                     1998                   1997


CURRENT LIABILITIES
    Current notes payable to related parties                            $         200,000        $       593,000
    Due to related parties                                                        164,058                 94,900
    Accounts payable                                                              977,228                796,521
    Accrued expenses                                                              151,656                133,886
    Accrued interest                                                                 8,384                49,780
    Other current liabilities                                                     180,000                180,000
    Short term loan                                                                541,502                       -
    Current portion of long-term debt                                             113,315                654,613
                                                                                ----------- ----------------------

               Total current liabilities                                        2,336,143              2,502,700

LONG-TERM DEBT, net of $22,000
    discount in 1997                                                              825,615                257,344
Noncurrent notes to related parties                                               388,383                       -
Provision for future Environmental Cost                                           782,600                782,600
OTHER LIABILITIES                                                                 206,387                231,485
                                                                                ------------------- ----------------------

               Total liabilities                                                4,539,128        $     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 15,000,000, 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                                                        (17,217,868)           (15,907,272)
                                                                              ------------ ----------------------

   Total stockholders' equity                                                   1,086,793              1,895,801

   Total liabilities and stockholders' equity                            $      5,625,921        $     5,669,930
                                                                            =================== ---===================
<PAGE>

                                                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                     THREE MONTHS ENDED JUNE 30,
                                                                       $            1,998                   1997
Net sales                                                                $      1,334,539                1097635
Cost of sales                                                            $      1,103,535                 850208
    Gross profit (loss)                                                 $         231,004                 247427

Selling, general and administrative expenses                            $         503,752                 817974
Product Development                                                     $          47,867                  34379
               Total operating expenses                                 $         551,619                 852353

              Loss from operations                                    $        (320,615)                -604926

Other income (expense)

    Rental income for Rockaway Industrial Park, net                    $            7,926                  10160
        of expenses

        in both years                                                  $                 -
    Interest income (expense)                                          $         (77,460)                  -5974
    Other income                                                       $                 -                  7327
               Total other income (expenses)                           $         (69,534)                  11513

               Loss from continuing operations                         $        (390,149)                -593413

Discontinued operations
    Loss from irradiation operations                                   $                 -
               Net loss before income taxes                                                              -593413

Income taxes                                                                                                   0
Net loss                                                               $        (390,149)                -593413

Weighted Average Shares                                                  $      1,560,172                1481166

Net loss per share                                                     $                 (0)        -0.400639091

<PAGE>

                                                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                       SIX MONTHS ENDED JUNE 30,
                                                                                     1998           1997

Net sales                                                                $      2,308,945        $     1,315,172
Cost of sales                                                                   2,367,338              1,175,091
                                                                                ----------            -----------
    Gross profit (loss)                                                           (58,393)               140,081

Selling, general and administrative expenses                                      913,739              1,050,333
Product development                                                               198,007                 47,135
                                                                                ------------          -----------
               Total operating expenses                                         1,111,746              1,097,468

               Loss from operations                                           (1,170,139)              (957,387)

Other income (expense)

    Rental income for Rockaway Industrial Park, net                                15,904                 22,994
        of expenses
    Interest income (expense)                                                   (145,965)                 28,014
    Other income                                                                     753                  46,071
                                                                                -------------           ------------
               Total other income (expenses)                                    (129,308)                 97,079

               Loss from continuing operations                                (1,299,447)              (860,308)

Discontinued operations
    Loss from irradiation operations                                                      -                 (427)
               Net loss before income taxes                                                            (860,735)

Income taxes                                                                                                    -
Net loss                                                                $     (1,299,447)       $      (860,735)
                                                                            =================== ---===================

Weighted Average Common Shares Outstanding                                      1,560,172              1,481,166
Net loss per share                                                                ($0.83)                ($0.58)

<PAGE>

                                                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                       SIX MONTHS ENDED JUNE 30,
                                                                                     1998           1997

CASH FLOWS FROM OPERATING ACTIVITIES:
            Net Loss                                                    $     (1,299,447)       $      (860,735)
            Adjustments to reconcile net loss to
            net cash applied to operating activities:
                                        Depreciation and amortization             158,782                 93,142
                          Allowance for doubtful accounts                          13,727                       -
                           Allowance for warranty expense                          22,757                       -
                          Imputed interest on note payable                                -               11,000
                        (Increase) decrease in:
                            Accounts receivable                                 (170,285)              (483,630)
                            Restricted deposits                                           -              476,045
                             Due from affiliate                                     (1,445)                     -
                                    Inventories                                   351,588            (2,001,105)
                                           Prepaid expenses and other           (167,833)              (151,532)
                        Increase (decrease) in:
                               Accounts payable                                   180,707                501,224
                               Accrued expenses                                    17,770                120,180
                         Due to related parties                                    69,158                       -
                              Other liabilities                                   (41,396)              (24,247)
                                                                                -----------          -----------

                                          TOTAL                                   433,530            (1,458,923)
                                    ADJUSTMENTS

                             Net cash applied to operating activities           (865,917)            (2,319,658)

 CASH FLOWS FROM INVESTING ACTIVITIES:
                      Purchases of fixed assets                                 (158,330)            (1,352,611)
                  Reduction in notes receivable                                           -              605,000
                           Purchase of business, net of cash acquired                     -            (697,731)
                      Purchases of other assets                                  (23,315)               (41,910)
                                                                                ------------             ---------
                                    Net cash (applied to) provided by
                           investing activities                                 (181,645)            (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
                                 Increase in notes to related parties              48,405                       -
                                 Payments on notes to related parties             (26,511)                      -
                                     Changes in short-term borrowings             541,502                563,000
                     Payments on long term debt                                   (15,011)                25,224
                                                                                -----------            -----------
                                    Net cash provided by (applied to)           1,038,824              1,339,324
                                     financing activities                      ----------             -----------

 Net increase (decrease) in cash and cash equivalents                               (8,738)          (2,467,586)
 Cash and cash equivalents, beginning of period                                    11,712              2,578,180
                                                                                -----------          -----------
 Cash and cash equivalents, end of period                              $            2,974        $       110,594
                                                                      ====================       ================

</TABLE>

<PAGE>

                                       RTI INC. AND SUBSIDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               (Information  as of June 30, 1998 and 1997, for the  three-months
                             then ended,  and for the  six-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 June 30, 1998, its 1998 and 1997 results of
operations  for the three months ended June 30 and six months ended June 30, and
the its 1998 and 1997  cash  flows  for the same six month  period.  Results  of
operations  for the  six-month  period  ended June 30, 1998 are not  necessarily
indicative of the results to be expected for the year ending December 31, 1998.

     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
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,  in the second  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 included the addition of an anti-siphon valve, and a device
to prevent a water hammer  effect in a small  percentage  of the units.  Both of
these


<PAGE>



devices  are  inexpensive,  and can be added in the field.  However,  to resolve
these problems and support the product, the Company continues support upgrade of
the units in the field, and to encourage its distributors to return all in-stock
units for retrofit with these devices.  The Company also performs  significantly
enhanced  quality  procedures  to  the  returned  units  to  insure  defect-free
operation.

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  six-months  of 1998
totaling  $240,485,  which have been accrued in the financial  statements  under
"Other liabilities".

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 ground water 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 90-day  delay to the  original
schedule for


<PAGE>



administrative purposes. 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

      The Company had two related party notes  outstanding at December 31, 1997,
one for $543,000 with its former Chairman and CEO, Theo W. Muller (Muller Note),
and another for $50,000 with Frellum  Corporation  (Frellum Note).  Frellum is a
corporation,  which is 51% owned 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 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  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  June  30,  1998,  the  Company  had  factored  accounts
receivable in the approximate amount of $245,000.


6.    STATEMENT OF CASH FLOWS

     Supplemental disclosures of cash flow information are as follows:

                Six months ended June 30,

                                         1998      1997
                                -----------  ----------
     Interest paid      $130,637   $  362
     Income taxes paid      --       --

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




<PAGE>



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

     Net  sales for the three  months  ended  June 30,  1998,  were  $1,334,539,
compared to $1,097,635 in 1997.  Sales of the AC2 unit in second quarter of 1998
were  $630,093.  There were nominal AC2 sales in the second quarter of 1997. The
Company is applying its major resources to the AC2.

     Cost of  sales  increased  from  $850,208  in the  second  quarter  of 1997
compared to  $1,103,535  for the same period in 1998.  The increase is partially
due to costs to  upgrade  prior  year  units in  1998.  There  were a series  of
technical  and supply  setbacks  for the fill and drain kits in the first  three
months of 1998, which now appear to be fully resolved.

     Selling, general & administrative costs were $503,752 in the second quarter
of 1998  compared to $817,974  in the same period of 1997.  Product  development
costs totaled $47,867 for the second quarter of 1998, while they were $34,379 in
the same period of 1997.

     1998 rental income from the Rockaway  Industrial  Park, net of expenses was
down by approximately $2,000 compared to the same period in 1997.

     Because of the costs  described  above,  the  Company  incurred a loss from
operations  before  interest  and other  income of $312,689 for the three months
ended June 30, 1998.
This compares with $594,766 for the same period last year.

     For the three months ended June 30, 1998 the Company  incurred net interest
expense of $77,460,  as compared  with net  interest  expense of $5,974 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 second  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  $390,149,  or $0.25 per share for the  second  quarter  of
1998, compares with a loss of $593,416, or $0.40 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.  The majority
of Company sales take place in the second and third quarters of the year.



COMPARISON OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1998 AND 1997.

     Net sales for the six months ended June 30, 1998, were $2,308,945, Compared
to  $1,315,172  in 1997.  Sales of the AC2 unit in through  June 30 of 1998 were
$1,283,477. There were nominal AC2 sales in the first six months of 1997.

     Cost of sales  increased  from  $1,175,091  in the first six months of 1997
compared  to  $2,367,338  for the same  period  in  1998.  Air  cooling  and air
conditioning  production  represents  a full 6 months in 1998,  while 1997 first
quarter operations began on February


<PAGE>



24,  1997,  the date of the  acquisition  of Quality  Air,  Inc.  The Company is
applying its major resources to the AC2. The Company has encountered  lower than
expected  AC2  production  this year due to a  supplier's  inability  to provide
certain  components 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 six
months,  which now  appear to be fully  resolved.  Additionally,  the 1998 costs
include  costs to upgrade prior year units,  and resolve  supplier and technical
issues that have occurred in 1998.

     Selling,  general &  administrative  costs were  $913,739  in the first six
months of 1998  compared  to  $1,050,333  in the same  period  of 1997.  Product
development  costs  totaled  $198,007  through  June 30,  1997,  while they were
$47,135 in the same period of 1997. The cost increases fall within the Company's
business plan, as it staffs for the anticipated growth in 1998 and 1999.

    1998 rental income from the Rockaway  Industrial  Park,  net of expenses was
down by approximately $7,000 compared to the same period in 1997.

     Because of the costs  described  above,  the  Company  incurred a loss from
operations  before  interest and other income of  $1,154,235  through June 1998.
This compares with $934,393 for the same period last year.

     For the six months  ended June 30, 1998 the Company  incurred  net interest
expense of $145,965,  as compared  with net interest  income of $28,014 in 1997.
Interest  expense has increased due to the Company  factoring its receivables to
fund  operations  and the buildup of accounts  receivable  and  inventory for in
anticipation  of  seasonal  sales in the  second  and  third  quarters  of 1998,
reflecting  working capital  demands of a growing  business.  Additionally,  the
Company is paying  interest  on  long-term  debt and the note with Theo  Muller,
while it did not have these debts in 1997. 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 $1,299,447,  or $0.83 per share for the first six months of
1998,  compares with a loss of $860,735,  or $0.58 per share for the same period
in 1997.


LIQUIDITY AND CAPITAL RESOURCES

     During the first six months of 1998,  funds were internally  generated from
inventories of $352,000 and increased  accounts payable of $180,000 offset by an
increase in receivables of $170,000.

     The  Company  has  received  cash  from  financing   activities  just  over
$1,038,000 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. It
addition,  a bridge loan of  approximately  $540,000  was received in late April
pursuant to a second private placement.

     The company invested cash in assets of approximately  $180,000 in the first
six months of 1998,  compared to $1,487,000 in 1997.  The net beginning  cash of
$11,712 was  decreased  to $2,974 by the end of the second  quarter of 1998.  In
1997 cash  decreased  from  $2,578,180  to  $1,101,594  by the end of the second
quarter.



<PAGE>



The Company will continue to have significant  capital and working capital needs
in 1998.  The Company has also  entered in to an  agreement  with an  investment
banking firm to act as Placement Agent for an offering of a minimum of 1,000,000
units and a maximum  of  2,500,000  units at a  contemplated  price of $2.00 per
unit.  Each unit shall  consist of two shares of Common Stock and one  four-year
Common  Stock  Purchase  Warrant  to  purchase  one share of Common  Stock at an
exercise  price  of  $3.00.  This  private  placement  offering  is  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.

The  Company  continues  to rely upon its  inventory  as a source of  internally
generated funds to continue  operations.  Production of new AC2 air conditioners
in 1998 has been at a minimal  level,  because of the lack of financing  and the
need to modify existing units in stock at distributors. Production is continuing
on the Company's Aireze  evaporative cooler and E2Pak heat exchangers and is the
major present source of operating capital.



<PAGE>



PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
     There were no new legal proceedings during the quarter.

ITEM 2. CHANGES IN SECURITIES

       None.

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)


                  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: August 13, 1998

        RTI INC.

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



                 By: /s/ JAMES M. CAYLOR
                   ----------------------------
                     James M. Caylor
                     Controller and Principal
                     Accounting Officer