SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

--------------------------------------------------------------------------------


                                   FORM 10-QSB
      (MARK ONE)
         [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934
                           For the quarterly period ended June 30, 1997


         [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________


                                     0-20436
                               Commission file number


                               RT Industries, Inc.
        (Exact Name of Small Business Issuer as Specified in its Charter)

                Delaware                               65-0309477 
     (State of other jurisdiction of        (IRS Employer Identification No.)
      incorporation ororganization)         


    1875 E. Lake Mary Boulevard, Sanford, FL              32773
    (Address of principal executive offices)            (Zip Code)

Issuer's telephone number, including area code: (407) 322-8000

                                      None
              (Former name, former address and former fiscal year,
                         if changed since last report)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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
stock, as of the latest practicable date.

                Class                               Outstanding at June 30, 1997
Common Stock, par value $.001 per share                        9,751,269


<PAGE>




                               RT INDUSTRIES, INC.

                                      INDEX
                                                                            Page
                                                                            ----

PART I. FINANCIAL INFORMATION                                                 3

        Item 1.  Consolidated Financial Statements                            3

        Consolidated Balance Sheet (unaudited) at June 30, 1997
                                                                              4

        Consolidated Statement of Operations (unaudited) for the
                 six months ended June 30, 1997 and June 30, 1996             6

        Consolidated Statement of Operations (unaudited) for the
                 three months ended June 30, 1997 and June 30, 1996           7

        Consolidated Statement of Stockholders' Equity (unaudited)
                 for the six months ended June 30, 1997                       8

        Consolidated Statement of Cash Flows (unaudited) for
                 the six months ended June 30, 1997 and June 30, 1996         9

        Notes to Consolidated Financial Statements                           12

        Item 2.  Management's Discussion and Analysis or Plan of Operation   18




PART II. OTHER INFORMATION                                                   20

        Item 4.  Other Information                                           20

        Item 5.  Exhibits and Reports on Form 8-K                            20

        SIGNATURES                                                           21


                                       -2-





<PAGE>


                          PART I. FINANCIAL INFORMATION



ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS

          The accompanying consolidated financial statements and information are
          submitted  as  required by Form  10-QSB.  The  consolidated  financial
          information  does not include  all  disclosures  that are  required by
          generally accepted accounting principles.

          In the opinion of management,  all  adjustments  that are necessary to
          present  fairly,  the  financial  position  of  RT  Industries,   Inc.
          (the"Company") for the periods included, have been made.

          It is suggested that these Consolidated  Financial  Statements be read
          in conjunction  with the Consolidated  Financial  Statements and notes
          thereto included in the Registrant's  Annual Report on Form 10-KSB and
          10-KSB/A for the year ended December 31, 1996.



                                       -3-


<PAGE>


                               RT INDUSTRIES, INC.

                           Consolidated Balance Sheet
                                  June 30, 1997
                                   (Unaudited)

Current Assets

         Cash                                                           $301,003

         Cash reserved for merger                                      3,000,000

         Accounts Receivable (net of allowance for
          doubtful accounts of $254,723)                                 884,593

         Inventory - Note 2                                            3,315,851

         Prepaid expense                                                  35,148
                                                                     -----------

Total Current Assets                                                  $7,536,595

         Fixed Assets (net of accumulated
          depreciation of $3,548,843)                                  2,988,502

         Other Assets                                                    296,725
                                                                     -----------

TOTAL ASSETS                                                         $10,821,822
                                                                     ===========


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

                                       -4-


<PAGE>


                               RT INDUSTRIES, INC.

                           Consolidated Balance Sheet
                                  June 30, 1997
                                   (Unaudited)


Current Liabilities:

         Notes payable                                               $3,605,010

         Accounts payable - trade                                       349,419

         Accrued liabilities                                            513,722
                                                                   ------------
                  Total Current Liabilities                          $4,468,151



Long-Term Liabilities:

         Notes Payable, less current maturities                         196,945
                                                                   ------------
                  Total Liabilities                                  $4,665,096



Stockholders' Equity:

         Common Stock, $.001 par value per share                          9,751

         Additional paid-in capital                                  21,757,593

         Accumulated deficit                                        (15,610,618)
                                                                   ------------

         Total stockholder's equity                                   6,156,726
                                                                   ------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                            $10,821,822
                                                                   ============


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

                                       -5-


<PAGE>


                               RT INDUSTRIES, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)


                                                     Six Months Ended June 30,

                                                     1997               1996
                                                  -----------       -----------

Net Sales                                          $1,495,303        $2,372,833

Cost of Goods Sold                                  1,388,634         2,801,037
                                                  -----------       -----------

Gross Profit (Loss)                                   106,669          (428,204)
                                                  -----------       -----------

Operating Expenses:

         Selling and delivery                         231,609           313,564

         General and administrative                 2,287,742           762,499

         Interest                                   2,013,220           149,418

         Bad debt expense                               3,336             1,720
                                                  -----------       -----------
Total Operating Expense                            $4,535,907         1,227,201
                                                  -----------       -----------
Loss before extraordinary item                     (4,429,238)       (1,655,405)

Extraordinary item                                          0            26,863
                                                                    -----------

Net Loss                                          ($4,429,238)      ($1,628,542)
                                                  ===========       ===========

Net Loss per share of Common Stock
 before extraordinary item                              -0.49             -0.27

Net Loss per share of common stock                      -0.49             -0.27


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


                                      -6-
<PAGE>


                               RT INDUSTRIES, INC.

                      Consolidated Statements of Operations
                                   (Unaudited)


                                                    Three Months Ended June 30, 

                                                      1997              1996
                                                  -----------       -----------

Net Sales                                            $834,457        $1,072,121

Cost of Goods Sold                                    685,873         1,391,520
                                                  -----------       -----------

Gross Profit                                          148,584          (319,399)
                                                  -----------       -----------

Operating Expenses:

         Selling and delivery                         115,204           159,337

         General and administrative                 1,717,082           345,902

         Interest                                   1,110,463            64,665
                                                  -----------       -----------
Total Operating Expense                             2,942,749           569,904
                                                  -----------       -----------
Net Loss                                           (2,794,165)         (889,303)
                                                  ===========       ===========

Net Loss per share of common stock                      -0.31             -0.14


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


                                      -7-
<PAGE>
 

                               RT INDUSTRIES, INC.

                 Consolidated Statements of Stockholders' Equity
                     For the Six Months Ended June 30, 1997
                                   (Unaudited)


COMMON STOCK

         Balance - January 1, 1997                                       $8,323

         Note conversion                                                    300

         Debenture conversion                                             1,128

Balance June 30, 1997                                                     9,751
                                                                         ======

ADDITIONAL PAID-IN CAPITAL

         Balance-January 1, 1997                                    $15,592,938

         Converted Alliance note to stock                               300,000

         Converted debentures                                         4,031,322

         Conversion discount expense for 1997 debentures              1,833,333
                                                                   ------------

Balance June 30, 1997                                               $21,757,593
                                                                   ============
ACCUMULATED DEFICIT

         Balance-January 1, 1997                                   ($11,181,380)

         Net Loss                                                  (4,429,238)

         Balance June 30, 1997                                     ($15,610,618)
                                                                   ============



TOTAL STOCKHOLDERS' EQUITY                                          $6,156,726
                                                                   ============


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


                                      -8-
<PAGE>
 

                               RT INDUSTRIES, INC.

                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 Six Months Ended June 30,
                                                                  1997              1996
                                                                -----------    -----------
<S>                                                             <C>            <C>         
CASH FLOW FROM OPERATING ACTIVITIES

Net Loss                                                        ($4,429,238)   ($1,628,542)

Adjustments to reconcile net loss
         to net cash provided (used) by operating activities:

         Depreciation                                              $320,836       $298,194

         Amortization                                                     0        $66,000

         Provision for doubtful accounts                                  0         $1,720

         Issuance of Common Stock as payment for prof. svce.              0        $62,500

         Extraordinary item-cancellation of debt                          0       ($26,863)

(Increase) Decrease In:

         Accounts Receivable                                       ($97,038)      $119,454

         Inventory                                                  $55,796       $242,081

         Prepaid Expenses                                          $333,472         $7,173

         Other Assets                                              ($24,835)             0

Increase (Decrease) In:

         Accounts Payable                                          ($34,898)       $76,511

         Accrued Liabilities                                       $287,262              0
                                                                -----------    -----------

Total Adjustments                                                  $840,597       $846,770

Net cash flows used in operating activities                     ($3,588,641)     ($781,772)
                                                                -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES

         Purchase of fixed assets                                 ($148,047)     ($105,673)
</TABLE>




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


                                      -9-
<PAGE>


                               RT INDUSTRIES, INC.

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                  - continued -


                                                       Six Months Ended June 30,

                                                         1997           1996
                                                      -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES

       Net reduction of revolving credit
         demand note                                  ($758,486)   ($1,084,164)

       Net proceeds from issuance of common stock    $5,800,000     $2,236,083

       Notes payable-net                             $1,039,629       ($51,223)
                                                    -----------    -----------

Net cash flow from financing activities              $6,081,143     $1,100,696

NET INCREASE IN CASH                                 $2,344,455       $213,251

Cash-beginning of period                               $956,548       $121,417
                                                    -----------    -----------

Cash-end of period                                   $3,301,003       $334,668
                                                    ===========    ===========


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


                                      -10-
<PAGE>


                               RT INDUSTRIES, INC.

                      Consolidated Statements of Cash Flows
                                   (Unaudited)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

                                                       Six Months Ended June 30,

                                                           1997          1996
                                                        ----------    ----------

Cash paid for interest                                  $2,013,220      $149,418
                                                        ----------    ----------

Non-Cash Financing Activities

         Note payable exchanged for common stock          $300,000             0


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


                                      -11-
<PAGE>

   


                   Notes to Consolidated Financial Statements
                                 March 31, 1997
                                   (Unaudited)

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.       Business Operations and Organization

         The Company, which was formed on January 16, 1992, operates through its
         wholly-owned   subsidiary,   Ultra  Brake   Corporation.   Three  other
         subsidiaries,  Ultratech of South Florida,  Inc., Roinco Manufacturing,
         Inc., and RT Friction,  Inc. no longer conduct any business  operations
         and exist solely as name holding entities.

b.       Unaudited Interim Statements

         The  financial  statements  as of June 30,  1997 for the  three and six
         month periods ended June 30, 1997 and 1996 are unaudited.  However,  in
         the opinion of management, all adjustments (consisting solely of normal
         recurring  adjustments) necessary to reflect a fair presentation of the
         financial  statements  for these  interim  periods have been made.  The
         results  for the interim  periods  ended June 30, 1997 and 1996 are not
         necessarily  indicative of the results to be obtained for a full fiscal
         year.


NOTE 2:  INVENTORY

Major inventory components as of June 30, 1997 were as follows:

         Raw Materials                                                 $519,917

         Packaging Materials                                            $41,684

         Work in Process                                               $187,204

         Finished Goods                                              $2,710,604

         Reserve for obsolescence                                     ($143,558)
                                                                     ---------- 

Total                                                                $3,315,851
                                                                     ==========






                                      -12-

<PAGE>

                               RT INDUSTRIES, INC.

                   Notes to Consolidated Financial Statements
                                  June 30, 1997
                                   (Unaudited)
                                  - continued -

NOTE 3: LOSS PER SHARE

         For the six months ended June 30, 1997 and June 30, 1996, the number of
         shares used in  computing  the earnings  per share were  9,042,020  and
         6,137,743, respectively.

NOTE 4:  NOTES PAYABLE

Line of Credit

In June 1997,  the Company paid off the line of credit which was  collateralized
by  substantially  all of the  Company's  business  assets.  As a result of this
action, collateralization of these assets has been released by the lender.

Convertible Debentures

At January 1, 1997, two 10% convertible  debentures  issued pursuant to offshore
securities subscription agreements,  dated each of December 5, 1996 and December
17,  1996,  in the  aggregate  amount  of  $1,500,000,  were  outstanding.  Such
Debentures were issued in reliance upon exemption from registration  afforded by
Regulation S ("Reg S") as promulgated by the Securities and Exchange  Commission
under the Securities Act of 1933, as amended (the "Act").  Principal and accrued
interest  were  converted  into an aggregate of 383,100  shares of the Company's
common stock in February 1997.

In March,  1997, the Company  entered into an offshore  securities  subscription
agreement  (the  "Agreement")  pursuant  to  which  the  Company  sold  four 10%
cumulative  convertible  debentures dated each of March 7, 1997, March 12, 1997,
March 12,1997 and March 20, 1997, respectively (the "March Debentures"),  in the
aggregate amount of $5,500,000, in reliance upon the Reg S exemption.

Interest  expense  of  $848,148  has been  recorded  for the first  quarter  and
interest  expense  of  $985,185  has  been  recorded  for  the  second  quarter,
representing the difference between the aggregate  conversion price of the March
Debentures  and the  aggregate  market  value of the  Company's  common stock at
issuance on the date of conversion.

                                      -13-





<PAGE>




                               RT INDUSTRIES, INC.

                   Notes to Consolidated Financial Statements
                                  June 30, 1997
                                   (Unaudited)
                                  - continued -

Convertible Debentures (continued)

The debentures  mature on each of March 7, 1998, March 12, 1998, March 12, 1998,
and March 20, 1998,  respectively  (each a "Maturity Date") but may be converted
into shares of the Common Stock,  par value $.001 per share, of the Company (the
"Shares") any time commencing  sixty (60) days after the date of issuance of the
March Debentures as more particularly set forth in the following paragraph. Each
of the March Debentures  entitles the holder to interest  (payable in cash or in
kind as shares) on the unpaid  principal  amount at the date of conversion  (the
"Conversion  Date") at the rate of 10% per year,  payable on a pro-rata basis at
the earlier of (i) the date the March  Debentures  are  converted or redeemed or
(ii) the Maturity  Date.  The March  Debentures  cannot be converted  before the
expiration of the aforesaid 60 day period.

Under the terms of the Agreement, the Company may, at its sole option upon three
business day's notice, redeem the March Debentures (or a portion thereof) at any
time prior to conversion, at a redemption price which shall be equal to (i) 110%
of the  principal  amount of the March  Debentures to be redeemed if the Company
exercises  its  redemption  rights on or before the  Thirtieth day following the
date of sale of the March  Debentures or (ii) 125% of the principal amount to be
redeemed,  any time after the  Thirtieth  day  following the date of sale of the
March Debentures.

Subject to a two-year mandatory conversion period for any Shares issued pursuant
to the default  provisions of the Agreement  (i.e.,  at the conversion  date the
Company does not have sufficient authorized shares of Common Stock available for
issuance at the date of conversion),  the holder of each of the March Debentures
is prohibited  from  converting  that principal  amount of the March  Debentures
which would result in the issuance to such holder of Shares in excess of 4.9% of
the shares of Common  Stock of the  Company  outstanding  as at the date of such
conversion.

The Agreement,  the purchase  representation letters and forms of notice annexed
thereto and  executed  with  respect to each of the March  Debentures  set forth
various  investment  representations  by  the  subscribers,  including,  without
limitation that each subscriber (a) is not a "US Person" as such term is defined
in Reg S, (b) is outside of the United States (i) at the time the purchase order
for the  debenture  originated,  (ii) at the time the  Agreement  was signed and
delivered by the subscriber and (iii) at the time such  subscriber  executed the
Notices;  (c) is not  purchasing or converting  the debenture on behalf of a "US
Person" and (d) the transactions contemplated by the Agreement are not part of a
plan or scheme by such  subscriber to evade the  registration  provisions of the
Act;  and (e) the  class to whom  the  securities  were  sold  were  "accredited
investors" as such term is defined in regulation D promulgated under the Act.

                                      -14-





<PAGE>




                               RT INDUSTRIES, INC.

                   Notes to Consolidated Financial Statements
                                  June 30, 1997
                                   (Unaudited)
                                  - continued -

Convertible Debentures (continued)

Each holder of the March Debentures has the right, at their sole option any time
commencing sixty days after the date of issuance but not later than the maturity
date, to convert the March  Debentures  held by them, in whole or in part,  into
shares at a conversion price equal to the lesser of seventy-five percent of: (i)
the average  closing  bid price of the shares of Common  Stock of the Company as
quoted on  NASDAQ  for the five (5)  trading  days  preceding  the date on which
notice of  conversion  is  effective,  or (ii) one  hundred  ten  percent of the
average closing bid price of the shares of Common Stock of the Company as quoted
on  NASDAQ  for the five  trading  days  preceding  the date on which  the funds
necessary to purchase such March Debentures were received by the Company.

As of June 30, 1997,  principal  and accrued  interest for the March  Debentures
were  converted  into an aggregate  of 926,664  shares of the  Company's  common
stock.

Subsequent  to June 30,  1997,  principal  and  accrued  interest  for the March
Debentures were converted into an aggregate of 1,085,600 shares of the Company's
common stock. With these conversions, all of the March Debentures were converted
into shares of the Company's common stock.

Equipment Loans

As of June 30,  1997,  the Company had three  outstanding  equipment  loans,  as
follows:

(i) An equipment loan with the City of Brownsville,  TN, which was refinanced in
1995, with an outstanding  principal balance of $163,641 plus interest per annum
equal to prime minus 5%, with a floor of 2.5% and a cap of 6.5%. Current monthly
installments on the note are $2,616 each with the final installment  payment due
in March, 2003.

(ii) An equipment loan with Concord  Financial  with an  outstanding  balance of
$127,275,  currently  payable in monthly  installments of $11,107 each, with the
final installment due June 1998.

(iii) The  reinstated  equipment  loan with the First  State Bank & Trust Co. of
Caruthersville,  MO and the US Small Business  Administration in connection with
the  Company's  former  facility in the State of Missouri,  with an  outstanding
principal balance of $193,789,  payable in monthly  installments of $5,678 each,
with the final installment due July 2002.


                                      -15-





<PAGE>



                               RT INDUSTRIES, INC.

                   Notes to Consolidated Financial Statements
                                  June 30, 1997
                                   (Unaudited)
                                  - continued -



Convertible Notes Payable

Two  unsecured  convertible  notes  payable with  interest at 8% due monthly and
principal due at the demand of the holder were  converted into 300,000 shares of
Company common stock in February 1997.

Note Payable

In June  1997,  the  Company  reached  an  agreement  (the  "Amended  Settlement
Agreement") with Ron Tygar, the former President, CEO, and Chairman of the Board
of Directors of the Company,  and related parties  (collectively  referred to as
the "Settlement  Parties") to amend the previously executed Settlement agreement
dated  January  30,  1997  (the  "Agreement").   Under  the  Amended  Settlement
Agreement, the Company made a payment to the Settlement Parties of the aggregate
sum  of  Three  Hundred  Fifty  Thousand  Dollars  ($350,000)  (the  "Settlement
Payment")  in full  satisfaction  of the  obligations  of the parties  under the
Agreement except as otherwise provided in the Amended Settlement Agreement.

The $350,000 applied in the settlement  described in the preceding paragraph was
borrowed by the Company from Elmgrove  Associates II, L.P. ("Elmgrove II"). Such
loan bears  interest  at the rate of 8% per annum and is to mature on August 31,
1997. As additional  consideration  for such loan, the Company granted  Elmgrove
warrants for the purchase of 10,000 shares of the Company's  Common Stock at the
market price at May 31, 1997, the date of the loan. Such warrant has an exercise
period of five years from the date of grant.  If the  $350,000  is not repaid at
maturity,  then a second  warrant  will be granted to Elmgrove  bearing  similar
terms but with an  exercise  price as of the  August  31,  1997  maturity  date.
Elmgrove Associates II, L.P. is a principal  stockholder of the Company.  Mandel
Sherman,  a director of the Company is President and a principal  stockholder of
Miss  Sloan  Ltd.,  an  investment  company  and  general  partner  of  Elmgrove
Associates II, L.P.

NOTE 5: MERGER

In June 1997,  the Company  announced  that it had entered  into an agreement to
merge with Quality Automotive Company,  Inc.  (Quality).  Quality is a privately
held manufacturer of friction materials, and brake pads, and a remanufacturer of
automotive brake shoes.  Quality is based in Tappahannock,  Virginia and employs
over 160 employees.  The merger will become  effective  following  completion of
certain due diligence items and the fulfillment of other conditions set forth in
the  merger  agreement.  The merger is  expected  to be  completed  in the third
quarter of 1997. The Company has placed $3,000,000 in escrow to be held and paid
to the shareholders of Quality upon the merger.


                                      -16-





<PAGE>



                               RT INDUSTRIES, INC.

                   Notes to Consolidated Financial Statements
                                  June 30, 1997
                                   (Unaudited)
                                  - continued -



NOTE 6: THE COMPOSITION

In connection  with  restructuring  of the Company's  then  outstanding  debt, a
committee of the Company's  unsecured trade creditors (the "Trade Creditors") on
March 7, 1995  declared as effective an agreement  (the"Composition  Agreement")
providing for  repayment by the Company of the unsecured  trade debt (the "Trade
Debt")  of  the  Company's  Trade  Creditors  electing  to  participate  in  the
Composition Agreement,  representing  approximately $2,732,000 of the $3,032,000
Trade Debt.  (See Exhibit 10.35  previously  submitted on Form S-18, as amended,
initially  filed  with  the SEC on  April 8,  1992;  Note 5 to the  Consolidated
Financial  Statements in Form 10-QSB for the 1st Quarter,  1996 for a discussion
of  the  proposals,  ratification  process  and  funding  of  the  same).  Trade
Creditors,  representing  approximately  $2,500,000 of the Trade Debt, elected a
lump sum  payment of $0.35 for every $1.00 of the Trade Debt and have been paid.
Trade Creditors,  representing  $232,000 of the Trade Debt, who elected periodic
payments have received fifteen percent (15%) of the periodic payments.  The next
distribution under the Composition  Agreement,  payable in Sept. 1997, is for an
aggregate payment of approximately  $25,000.  Subsequent payments become payable
in the first  quarters of 1998, as well as the third quarter of each of 1998 and
1999.

The Company  successfully  negotiated  settlements with respect to almost all of
the Trade Debt held by the seven percent (7%) of the unsecured  trade  creditors
not  electing  to  participate  in  the  Composition   Agreement,   representing
approximately  $300,000  of the  Trade  Debt.  The  Company  has  satisfied  its
obligation  to  such  non-electing  trade  creditors  in  accordance  with  such
settlement arrangements.

NOTE 7:  OTHER EVENTS

In May  1992  the  Company  entered  into a lease  agreement  with  the  City Of
Caruthersville,  Caruthersville, MO (the "City"), for a lease of a 25,000 square
foot building for use by the Company for manufacturing and distribution. As part
of the  Company's  restructuring  plan  the  Company  ceased  operations  at the
Caruthersville  location and moved all material and equipment to its Sanford, FL
facility.  The City of  Caruthersville  has  attempted  to find a tenant for the
facility,  and has sub-let the building on a short term basis. The City has been
unsuccessful  in finding a long term tenant for the facility,  and, in the first
quarter of 1997,  informed the Company that it had sub-let the building for only
fourteen months of the past thirty seven months. As a result of this disclosure,
the  Company is liable for twenty  three  months  past due lease  payments  at a
monthly rate of $2,270 per month.  The Company  recorded  this charge in the 2nd
quarter less $20,000 already accrued.

In June 1997, the Company  determined that it will have no future use or receive
any future benefit from the Missouri facility and expensed $442,118 representing
the remaining amount of the liability under the Missouri facility lease.

                                      -17-





<PAGE>




RT INDUSTRIES, INC.

ITEM: 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
        OPERATION

Statements  other  than  historical  information  contained  in this  report are
considered  forward  looking  and  involve a number of risks and  uncertainties.
Factors that could cause such statements not to be accurate include, but are not
limited to, increased  competition for the Company's  products,  improvements in
alternative  technologies,   a  lack  of  market  acceptance  for  new  products
introduced by the Company, and the failure of the Company to successfully market
its products.

Liquidity and Capital Resources

In June 1997,  the Company paid off the line of credit which was  collateralized
by most of the Company's  business  assets.  As a result,  collateralization  of
these assets has been released by the lender.

In  March  1997,  the  Company  issued  a total  of  $5,500,000  of  convertible
debentures  pursuant to Reg S. (See Note 4: Notes  Payable).  The funds received
from the issuance of the debentures will be used for: a) possible  acquisitions;
b) general  operating  expenses;  and c) the  purchase  of new plant  equipment.
Interest  expense  of  $1,833,333  has  been  recorded  through  1997,  for  the
difference  between the conversion  prices of the March  Debentures and the fair
market value of the Company's common stock at the date of issuance.

Material Changes in Financial Condition

Net sales for the six month period ended June 30, 1997 and 1996 were  $1,495,303
and $2,372,833,  respectively.  The decrease in net sales is attributable to the
loss of certain  customers,  reduced sales to certain existing customers and the
Company's impaired ability to attract new customers as a result of the Company's
past financial difficulties. Management believes that improvements in 1) product
quality 2) order fill  levels,  3) order  processing  turnaround  time,  and the
Company's improving image in the market will attract new customers in the coming
periods.  In addition,  the Company has begun to market a complementary  product
line which will substantially help in attracting new customers.

Gross  profit for the period  ending June 30, 1997 was $106,669 as compared to a
loss of $428,204 for the same period in 1996. Improvements in production and the
consolidation of facilities contributed to lower cost of goods sold.

Total operating Expenses for the six month period ending June 30, 1997 and 1996,
were $4,535,907 and $1,227,201, respectively. Selling and delivery expenses were
$81,955 lower in 1997 verses 1996. This reduction was the result of lower sales.
General and  Administrative  expenses for the period were $2,287,742 in 1997 and
$762,499, in 1996. The increase of $1,525,243 was the result of 1) an expense of
$403,275 for services relating to the placement of the March  Debentures;  2) an
expense of $477,057  relating to the accrual of the remaining  lease payments on
the Missouri facility; and 3) an increase in professional fees of $233,814.


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<PAGE>




ITEM: 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
        OPERATION (continued)

Material Changes in Financial Condition (continued)

Interest  expense for the six month period  ending June 30, 1997 and 1996,  were
$2,013,220 and $149,418 respectively.  The increase of $1,863,802 was the result
of an  expense  of  $1,833,333  relating  to  the  conversion  discount  on  the
$5,500,000 of convertible debentures.

The net loss for the period  ending  June 30, 1997 and 1996 was  $4,429,238  and
$1,628,542,  respectively.  The  increase  of  $2,800,696  was the result of the
increased  expense in 1) interest expense  associated with the March Debentures,
($1,833,333);  2) March  Debentures  placement cost  ($403,275);  Missouri lease
expense ($477,057); professional fees ($233,814). The total increase in expenses
in these four items was $2,947,479.



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<PAGE>





PART II: OTHER INFORMATION

ITEM 4: Other Information

Agreement To Merge

In June 1997,  the Company  announced  that it had entered  into an agreement to
merge with Quality Automotive Company,  Inc.  (Quality).  Quality is a privately
held manufacturer of friction materials, and brake pads, and a remanufacturer of
automotive brake shoes.  Quality is based in Tappahannock,  Virginia and employs
over 160 employees.  The merger will become  effective  following  completion of
certain due diligence items and the fulfillment of other conditions set forth in
the merger agreement.  Both companies believe the merger will provide a platform
for the future  growth of the  combined  business.  The merger is expected to be
completed in the third  quarter of 1997.  The Company has placed  $3,000,000  in
escrow to be held and paid to the shareholders of Quality upon the merger.

ITEM 5: Exhibits and Reports on Form 8-K

         (a) Exhibits

         Exhibit 27 Financial Data Schedule

         (b) Form 8-K

The Company filed a Report on Form 8-K dated March 24, 1997, as  supplemented by
an  amendment  on Form  8-K/A  dated  April 2,  1997.  (See Note 4:  Convertible
Debentures)



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<PAGE>



RT INDUSTRIES, INC.

Signatures

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


Dated: August 8, 1997


RT Industries, Inc.



By:  /S/ Alfred H. Paul
     -----------------------
Alfred H. Paul
Chief Financial Officer and Chief Accounting Officer


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