<PAGE>   1
                                   FORM 10-QSB

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the quarterly period ended    SEPTEMBER 27,1998

                                       OR

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

For the transition period from ______________ to _____________________

Commission File No. 333-5190-A

                            THRIFT MANAGEMENT, INC.
        -----------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

         FLORIDA                                       65-0309540
-----------------------------                     ------------------------
State or Other Jurisdiction of                     I.R.S. Employer I.D. No.
Incorporation or Organization

  3141 W. Hallandale Beach Boulevard
       Hallandale, Florida 33009
---------------------------------------
(Address of Principal Executive Offices)

Issuer's telephone number, including area code:         954-985-8430

Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(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 practical date: At November 2, 1998, there were
outstanding 2,175,000 shares of Common Stock, $.01 par value.

Transitional Small Business Disclosure Format:   YES  /  NO  X
                                                    ----    ----



<PAGE>   2
                             THRIFT MANAGEMENT, INC.
                                AND SUBSIDIARIES

                             INDEX TO FORM 1O-QSB

PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>                                                                                     <C>
Item 1. Financial Statements

Consolidated Balance Sheet as of September 27, 1998 (unaudited) .....................    3

Consolidated Statements of Operations for the Three Months ended September 27,
1998 and September 30, 1997 and the Nine Months Ended September 27, 1998 and
September 30, 1997 (unaudited) .....................................................     4

Consolidated Statements of Cash Flows for the Nine Months ended September 27, 1998
and September 30, 1997 (unaudited) .................................................     5

Notes to Consolidated Financial Statements (unaudited)..............................    6-7

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations ......................................................   8-11
</TABLE>

PART II - OTHER INFORMATION

<TABLE>
<S>                                                                                     <C>
Item 5. Other Information ..........................................................    11

Item 6. Exhibits and Reports on Form 8-K ...........................................    11

Signatures..........................................................................    12
</TABLE>




                                       2
<PAGE>   3


                    THRIFT MANAGEMENT, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                       September 27, 1998
                                                                       ------------------

<S>                                                                    <C>
ASSETS
CURRENT ASSETS
     Cash and cash equivalents                                         $        1,378,306
     Merchandise inventories                                                      394,295
     Prepaid expenses                                                             267,479
     Advances to stockholder                                                       63,156
                                                                       ------------------

          TOTAL CURRENT ASSETS                                                  2,103,236

EQUIPMENT, FIXTURES AND IMPROVEMENTS, net                                         780,671

ADVANCES TO STOCKHOLDER                                                            15,789

PREPAID CONSULTING SERVICES                                                         6,250

COVENANTS NOT TO COMPETE, net                                                      18,070

DEFERRED TAX ASSETS                                                               153,851

PREPAID INCOME TAXES                                                               56,972

OTHER ASSETS                                                                       90,596
                                                                       ------------------

          TOTAL ASSETS                                                 $        3,225,435
                                                                       ==================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                                             205,700
     Accrued expenses                                                             220,226
                                                                       ------------------

          TOTAL CURRENT LIABILITIES                                               425,926


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
     Preferred stock: $.01 par value, authorized 1,500,000
          shares, issued and outstanding 250,000 shares                             2,500
     Common stock: $.01 par value, authorized 15,000,000
          shares, issued and outstanding 2,175,000 shares                          21,750
     Additional paid-in capital                                                 3,082,341
     Accumulated deficit                                                         (306,926)
     Accumulated translation adjustment                                              (156)
                                                                       ------------------

          TOTAL STOCKHOLDERS' EQUITY                                            2,799,509
                                                                       ------------------

          TOTAL LIABILITIES AND
               STOCKHOLDERS' EQUITY                                    $        3,225,435
                                                                       ==================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       3
<PAGE>   4


                    THRIFT MANAGEMENT, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (UNAUDITED)
<TABLE>
<CAPTION>

                                                Three Months Ended            Nine Months Ended
                                            -------------------------     -------------------------
                                             Sept. 27,      Sept. 30,      Sept. 27,      Sept. 30,
                                               1998           1997           1998           1997
                                            ----------     ----------     ----------     ----------
<S>                                         <C>            <C>            <C>            <C>       
Net sales                                   $2,110,634     $1,954,591     $6,511,839     $5,615,439

Cost of goods sold                           1,476,582        954,006      4,096,879      2,701,855
                                            ----------     ----------     ----------     ----------

GROSS PROFIT                                   634,052      1,000,585      2,414,960      2,913,584

Selling, general and administrative
     expenses                                  979,357        919,185      2,823,005      2,630,310
Officer's bonus incentive                       21,036         19,673         65,057         56,282
                                            ----------     ----------     ----------     ----------
          TOTAL OPERATING EXPENSES           1,000,393        938,858      2,888,062      2,686,592
                                            ----------     ----------     ----------     ----------

   (LOSS) INCOME FROM OPERATIONS              (366,341)        61,727       (473,102)       226,992

Interest expense                                    --           (297)          (308)        (1,098)
Interest income                                  5,958         22,169         64,587         63,690
                                            ----------     ----------     ----------     ----------
   (LOSS) INCOME BEFORE INCOME
               TAX (BENEFIT) EXPENSE          (360,383)        83,599       (408,823)       289,584

Income tax (benefit) expense                  (137,051)        42,527       (153,840)       147,227
                                            ----------     ----------     ----------     ----------

          NET (LOSS) INCOME                 $ (223,332)    $   41,072     $ (254,983)    $  142,357
                                            ==========     ==========     ==========     ==========
   (Loss) Earnings per share:
      Basic:
           Net (loss) income                $    (0.10)    $     0.02     $    (0.12)    $     0.07
                                            ==========     ==========     ==========     ==========

      Diluted:
           Net (loss) income                $    (0.10)    $     0.02     $    (0.11)    $     0.07
                                            ==========     ==========     ==========     ==========

 Weighted average number of shares
      Basic                                  2,175,000      2,125,000      2,160,000      2,125,000
                                            ==========     ==========     ==========     ==========

      Diluted                                2,312,000      2,125,000      2,297,000      2,125,000
                                            ==========     ==========     ==========     ==========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>   5


                 THRIFT MANAGEMENT, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                               (Unaudited)
<TABLE>
<CAPTION>

                                                                              Nine Months Ended
                                                                          -------------------------
                                                                           Sept. 27,      Sept. 30,
                                                                              1998           1997
                                                                          ----------     ----------
<S>                                                                       <C>            <C>       
Cash flows from operating activities:
      Net (loss) Income                                                   $ (254,983)    $  142,357
      Adjustments to reconcile net (loss) income to
           net cash (used in) provided by operating activities:
                Depreciation and amortization                                 77,565         64,317
                Loss (Gain) on sale of equipment                               3,505         (1,708)
                Payment of consulting expense with common stock               30,375         52,500
                Deferred income tax (benefit) expense                       (153,851)        49,500
                (Increase) in merchandise inventories                        (65,861)      (117,932)
                (Increase) in prepaid expenses                              (113,791)       (78,402)
                (Increase) in prepaid income taxes                           (56,972)            --
                Increase (decrease) in accounts payable                       63,810       (258,199)
                Increase in accrued expenses                                  18,633        216,029
                (Decrease) increase in accrued income taxes                  (34,016)        45,727
                                                                          ----------     ----------

                     Total adjustments                                      (230,603)       (28,168)
                                                                          ----------     ----------

NET CASH USED IN OPERATING ACTIVITIES                                       (485,586)       114,189
                                                                          ----------     ----------

Cash flows from investing activities:
      Purchase of property and equipment                                    (376,143)      (288,705)
      Proceeds from disposal of property and equipment                            --         38,038
                                                                          ----------     ----------

NET CASH USED IN INVESTING ACTIVITIES                                       (376,143)      (250,667)
                                                                          ----------     ----------

Cash flows from financing activitities:
      Advances to stockholder, net                                            47,367       (161,175)
      Principal payments on notes payable                                     (9,717)       (36,394)
                                                                          ----------     ----------

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                           37,650       (197,569)
                                                                          ----------     ----------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                         (156)            --

                 NET (DECREASE) IN CASH                                     (824,235)      (334,047)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                            2,202,541      2,570,188
                                                                          ----------     ----------

CASH AND CASH EQUIVALENTS - END OF PERIOD                                 $1,378,306     $2,236,141
                                                                          ==========     ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
      INFORMATION:

           Cash paid during the period for:
                Interest                                                  $      308     $    1,098
                                                                          ==========     ==========

                Income taxes                                              $   80,000     $       --
                                                                          ==========     ==========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>   6


                            THRIFT MANAGEMENT, INC.
                                AND SUBSIDIARIES

                             NOTES TO CONSOLIDATED
                        FINANCIAL STATEMENTS (UNAUDITED)

(1)  BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with the instructions to Form 10-QSB and do not
     include all of the information and footnotes required by generally
     accepted accounting principles for complete financial statements. However,
     such information reflects all adjustments (consisting solely of normal
     recurring adjustments), which are, in the opinion of management, necessary
     for a fair statement of results for the interim periods.

     The results of operations for the nine months ended September 27, 1998 are
     not necessarily indicative of the results to be expected for the full
     year.

     These statements should be read in conjunction with the consolidated
     financial statements and notes thereto included in the Form 10-KSB for the
     year ended December 31, 1997 of Thrift Management, Inc. (the "Company").

(2)  ORGANIZATION

     The consolidated financial statements at September 27, 1998 and September
     30, 1997 include the accounts of the Company and its wholly owned
     subsidiaries: Hallandale Thrift Management, Inc. ("HTMI"), Thrift Shops of
     South Broward, Inc. ("TSSB"), Thrift Shops of West Dade, Inc. ("TSWD"),
     Hallandale Thrift, Inc. ("HTI"), North Broward Consignment, Inc. ("NBCI"),
     Thrift Shops of North Lauderdale, Inc. ("TSNL"), Thrift Retail, Inc.
     ("TRI"), Thrift Management Canada, Inc. ( "TMCI"), Thrift Holdings, Inc.
     ("THI"), and Thrift Export, Inc. ("TEI"). All significant intercompany
     accounts and transactions have been eliminated for financial statement
     presentation purposes.

     On September 28, 1998 the Board of Directors approved a plan of
     reorganization of the Company's subsidiaries. Pursuant to the 
     reorganization, five of the Company's subsidiaries, Hallandale Thrift,
     Inc., North Broward Consignment, Inc., Thrift Shops of North Lauderdale,
     Inc., Thrift Shops of South Broward, Inc., and Thrift Shops of West Dade, 
     Inc., merged into Thrift Retail, Inc., also a subsidiary of the Company.  

(3)  STOCKHOLDERS' EQUITY

     In December 1996, the Company consummated its initial public offering in
     which it sold 615,000 units at a price of $5.75 per unit. Each unit
     consisted of one share of common stock ("Common Stock") and one warrant to
     purchase one share of Common Stock for $5.00 per share. The warrants are
     exercisable for a period of five years commencing December 11, 1996 and
     may be redeemed by the Company on 30 days' notice at any time during such
     period at a price of $.10 per warrant if the closing bid price of the
     Common Stock for 20 consecutive trading days ending on the fifteenth day
     prior to the date that notice of redemption was given by the Company has
     been at least 150% of the exercise price then in effect. The Company
     realized approximately $2,596,950 in proceeds from the offering, net of
     underwriting discounts and expenses and other offering expenses.
     Simultaneously with the offering, the Company charged all offering costs
     incurred to additional paid-in capital, which costs totaled $653,050.


                                       6
<PAGE>   7


     On June 17, 1997, the Company issued 30,000 shares of its restricted
     Common Stock to a business consultant in payment for services rendered to
     the Company. Such restricted Common Stock was initially valued at $52,500,
     which was later revised to $33,500.

     On June 15, 1998, the Company issued an additional 30,000 shares of its
     restricted Common Stock to a business consultant. Such restricted Common
     Stock was valued at $30,375.

(4)  CHANGE IN ACCOUNTING PERIODS

     In January 1998, the Company adopted a 52/53 week retail reporting 
     calendar, whereby all accounting periods end on a Sunday.

(5)  CASH AND CASH EQUIVALENTS

     At September 27, 1998, the Company had investments in various bank money
     market accounts and non-operating accounts with an aggregate value of
     $1,387,725.

(6)  STOCK OPTION PLAN

     In 1998, the Company granted a total of 358,152 stock options to its
     employees and Directors under the Company's 1996 Stock Option Plan at an
     exercise price equal to the fair market value of the Common Stock at the
     date of grant. These options generally vest over the next four years and
     expire not later than 2008.

(7)  COMMITMENTS

     In April 1998, the Company entered into a five-year lease for a sixth
     store location in Pompano Beach in Broward County, Florida. The lease
     provides for minimum monthly rental payments of approximately $4,000 and
     contains two renewal options for five years under substantially the same
     terms and conditions. This store opened on August 14, 1998.

     As part of the program of operating manned donation trailers as a new
     source of donated merchandise, the Company has entered into month to month
     rental agreements to rent space in parking lots of various shopping
     centers. As of September 27, 1998, the Company had entered into eleven
     such agreements with aggregate monthly rental payments totaling
     approximately $1,200.

     The Company's Board of Directors approved the prepayment of up to $130,000
     of the 1998 salary and bonus of the Company's President, subject to the
     agreement of the President to pay interest on the amount prepaid at the
     annual rate of 8.5%. Prepaid expenses as of September 27, 1998 include
     $68,348 in such prepaid salary and bonus payments to the Company's
     President.


                                       7
<PAGE>   8


                            THRIFT MANAGEMENT, INC.
                                AND SUBSIDIARIES

ITEM 2

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

The following is an analysis of the results of operations of Thrift Management,
Inc. and Subsidiaries (collectively, the "Company") and its liquidity and
capital resources. The Company cautions readers that certain important factors
may affect the Company's actual results and could cause such results to differ
materially from any forward-looking statements that may be deemed to have been
made in this Report or that are otherwise made by or on behalf of the Company.
For this purpose, any statements contained in this Report that are not
statements of historical fact may be deemed to be forward-looking statements
which involve risks and uncertainties. Without limiting the generality of the
foregoing, words such as "may," "expect," "believe," "anticipate," "intend,"
"could," "estimate," or "continue" or the negative or other variations thereof
or comparable terminology are intended to identify forward-looking statements.
These risks include: risks of increases in the costs of the Company's
merchandise and the continued availability of suitable merchandise; the
Company's relationship with its suppliers, licensors and contributors; changes
in preferences of customers; competitive and general economic factors in the
markets where the Company sells and collects goods; the impact of and changes
in government regulations such as restrictions or prohibitions relating to the
contribution of charitable goods; and other factors discussed herein or from
time to time in the Company's filings with the Securities and Exchange
Commission.

The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the related notes thereto of the Company
included elsewhere herein.

GENERAL

The Company was organized in July 1991 for the purpose of managing the
operation of retail thrift stores that offer new and used articles of clothing,
furniture, miscellaneous household items and antiques. HTMI is registered with
the State of Florida as a professional solicitor. The Company obtains its
merchandise primarily from two sources: (i) purchase contracts with charitable
organizations in return for an average of 2% - 3% of the Company's gross sales;
and (ii) various independent contract collectors from whom the Company
purchases merchandise in bulk.

Items from the stores that remain unsold are sold in bulk to exporters, which
ship the items to countries throughout the Caribbean, Central and South
America, and Eastern Europe. Through its subsidiaries, the Company currently
operates six retail stores and plans to open its seventh store in January 1999.
HTMI is responsible for the solicitation of donations on behalf of the
charities through direct mailings, newspaper advertising and telemarketing.
HTMI is, in addition, responsible for the pickup of the donated merchandise
throughout the communities surrounding the Company's stores and the attended
donation trailers.

In January 1998, the Company adopted a 52/53 week retail reporting calendar,
whereby all accounting periods end on a Sunday.


                                       8
<PAGE>   9


RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED SEPTEMBER 27, 1998 AND
SEPTEMBER 30, 1997.

Revenues for the third quarter ended September 27, 1998 and September 30, 1997
totaled $2,110,634 and $1,954,591, respectively. Sales increased $156,043 or
8.0% for the 1998 quarter as compared to the 1997 quarter. The sales increase
resulted primarily from the opening of the Company's sixth store in Pompano
Beach, Florida in August 1998 and the Lauderdale Lakes Florida store in July
1997. The same-store sales for the quarter decreased 2.2%. The Company's
adoption of a 52/53 week reporting calendar resulted in the third quarter of
1998 having one day less than the third quarter of 1997. If the sales for that
day were added to the third quarter of 1998, the total sales would have
increased 9.0% and the same-store sales would have decreased 1.3%.

Economic and political conditions in the overseas markets that purchase rags
have further deteriorated, with the result that the Company sold rags in the
third quarter for approximately $0.08 per pound as compared to approximately
$0.13 per pound in the second quarter of 1998 and approximately $0.14 per pound
in the first quarter of 1998 as compared to approximately $0.20 per pound
throughout 1997. This very significant decline in the market price for rags
represented a 12.1% unfavorable variance in total sales and same store sales
compared to the third quarter of the prior year. The Company believes that
economic and political conditions in the overseas markets that purchase rags
will continue to remain depressed for the rest of this year and at least
through the first quarter of 1999.

The Company's gross profit for the third quarter of 1998 decreased $366,533 or
36.6% to $634,052 from $1,000,585 for the third quarter of 1997. This decrease
in gross profit dollars and the gross profit margin from 51.2% in the third
quarter of 1997 to 30.0% in the third quarter of 1998 is attributable to the
significant increase in the cost of goods sold. This increase was due primarily
to the increasing dependence on merchandise purchased from independent contract
collectors, the collapse of the export market for rags plus the significant
payroll start-up expenses of a new telephone solicitation operation and the
rapidly growing attended trailer donation center operation. The decline in
export prices for rags represent approximately 53% of the decline in the
Company's gross profit margin.

Cost of goods sold, as a percentage of sales, increased 21.2% points to 70.0%
for the third quarter of 1998 as compared to 48.8% for the third quarter of
1997. The Company currently has two primary sources for merchandise: direct
donated goods through the charities with which it has entered into purchase
contracts and merchandise purchased in bulk from independent contract
collectors. The amount of donated merchandise received from the Company's
solicitation has not kept pace with the growth in sales and new stores. This has
resulted in the Company purchasing an ever-increasing amount of higher cost
merchandise from various independent contract collectors. In order to support
the 8.0% increase in store sales and to build inventory for the new stores, the
Company increased its purchases of merchandise from independent collectors. The
Company's purchases from independent contract collectors for the third quarter
of 1998 increased 34.3% compared to the prior year, which is more than four
times the 8.0% increase in sales. Additionally, more merchandise being acquired
is being purchased from sources in other states, requiring higher freight costs
than last year. These additional costs resulting from the Company's greater
reliance on purchased goods are a significant factor resulting in a higher cost
of goods sold. The impact of current market price for rags is the primary factor
in the decline of the gross profit margin, which accounted for 53% of the
decline.

The Company is accelerating its efforts to reduce its dependence on purchased
merchandise by continuing to develop its network of attended donation trailers
and by establishing a phone solicitation division to increase the Company's
sources of donated merchandise.

Operating expenses for the third quarter of 1998 increased $61,535 or 6.6% to
$1,000,393 from $938,858 for the third quarter of 1997. This increase is due
primarily to the $72,951 in operating expenses related to the Company's sixth
store in Pompano Beach, Florida, which opened in August 1998, and the up-front
expenses of four management personnel hired to develop and manage a new Central
Florida Region, with the first store in the Region scheduled to open in January
1999. These increases in operating expenses were partially offset by lower
expenses of the other stores.


                                      9
<PAGE>   10


RESULTS OF OPERATIONS - FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1998 AND
SEPTEMBER 30, 1997

Revenues for the nine months ended September 27, 1998 and September 30,1997
totaled $6,511,839 and $5,615,439, respectively. Sales increased $896,400 or
16.0% for the 1998 nine month period compared to the 1997 nine month period.
The sales increase resulted primarily from the opening of the Company's sixth
store in Pompano Beach, Florida in August 1998 and the Lauderdale Lakes Florida
store in July 1997. The same-store sales for the nine months increased by 1.4%.
The Company's adoption of a 52/53 week reporting calendar resulted in the nine
months of 1998 having three days less than the nine months of 1997. If the
sales for those three days were added to the nine months of 1998, the total
sales would have increased 17.2% and the same-store sales would have increased
2.4%.

Economic and political conditions in the overseas markets that purchase rags
have further deteriorated, with the Company selling rags for approximately
$0.14 per pound in the first quarter of 1998, approximately $0.13 per pound in
the second quarter of 1998 and approximately $0.08 per pound in the third
quarter of 1998, as compared to approximately $0.20 per pound throughout 1997.
This very significant decline in the market price for rags represented a 7.3%
unfavorable variance in total sales and a 6.8% unfavorable variance in same
store sales compared to the nine months of the prior year. The Company believes
that economic and political conditions in the overseas markets that purchase
rags will continue to remain depressed for the rest of this year and at least
through the first quarter of 1999.

The Company's gross profit for the nine months of 1998 decreased $498,624 or
17.1% to $2,414,960 from $2,913,584 for the nine months of 1997. This decrease
in the gross profit dollars and the gross profit margin from 51.9% in the nine
months of 1997 as compared to 37.1% in same period of 1998 is attributable to
the significant increase in the cost of goods sold. This was due primarily to
the increasing dependence on merchandise purchased from independent contract
collectors, and the collapse of the export market for rags. The decline in
export prices for rags represented approximately 45% of the decline in the
Company's gross profit margin.

Cost of goods sold, as a percentage of sales, increased 13.9% to 62.9% for the
nine months of 1998 as compared to 48.1% for the nine months of 1997. The
Company currently has two primary sources for merchandise: direct donated goods
through the charities with which it has entered into purchase contracts, and
merchandise purchased in bulk from independent contract collectors. The amount
of donated merchandise received from the Company's solicitation has not kept
pace with the growth in sales and new stores. This has resulted in the Company
purchasing an ever increasing amount of higher cost merchandise from various
independent contract collectors. In order to support the 16.0% increase in store
sales, the Company increased its purchases of merchandise from independent
contract collectors. The Company's purchases from independent contract
collectors for the nine months of 1998 increased 35.6% compared to the prior
year, more than double the 16% sales increase. Additionally, more merchandise
being acquired is being purchased from sources in other states, requiring higher
freight costs than last year. These additional costs resulting from the
Company's greater reliance on purchased goods are one of the primary factors
resulting in a higher cost of goods sold. The impact of the current market price
for rags is the second primary factor in the decline of the gross profit margin,
which accounted for 45% of the decline.

The Company is accelerating its efforts to reduce its dependence on purchased
merchandise by continuing to develop its network of attended donation trailers
and by establishing a phone solicitation division to increase the Company's
sources of donated merchandise.

Operating expenses for the nine months of 1998 increased $201,470 or 7.5% to
$2,888,062 as compared to $2,686,592 for the same period in 1997. This increase
is primarily the result of the $90,622 increase of the operating expenses of
the new Lauderdale Lakes store, which opened in July 1997, and the $72,381
increase in the new Pompano Beach store which opened in August 1998. The
$38,467 balance of the increase represents an increase in corporate overhead
expenses partially offset by lower expenses of the other stores.


                                       10
<PAGE>   11


LIQUIDITY AND CAPITAL RESOURCES

At September 27, 1998, the Company had working capital of $1,677,310, as
compared to working capital of $2,256,248 at September 30, 1997.

Cash and cash equivalents at September 27, 1998 totaled $1,378,306, a decrease
of $824,235, as compared to $2,202,541 at December 31, 1997. Net cash used in
operating activities totaled $485,586 for the nine months ended September 27,
1998, as compared to $114,189 provided by operating activities for the nine
months ending September 27, 1997. The Company believes that its current capital
resources, together with the expected cash flow from its operations, will be
sufficient to meet its anticipated working capital requirements through 1999.
There can be no assurances, however, that such will be the case.

INFLATION AND SEASONALITY

Although the Company cannot accurately determine precisely the effects of
inflation, management does not believe that inflation currently has a material
effect on the Company's sales or results of operations.

The Company's operations are located in South Florida, which has numerous
part-time residents during the winter. The Company's results of operations
reflect the seasonable nature of this market, with donations and sales of
merchandise being higher in the winter months.

YEAR 2000

The Company has completed a review and assessment of its new P.C. based software
system, which was installed in October 1997, including the impact of the year
2000 on its information system. The Company's software will be modified by the
currently available vendor-supplied software upgrades no later than the first
quarter of 1999. All P.C. hardware, which was acquired in 1996 through 1998,
will be reviewed for year 2000 compatibility, and replaced if required,
by no later than the first quarter of 1999. The Company currently anticipates
that its year 2000 project will not have a material effect on the Company's 
results of operations, although there can be no assurances that such will be the
case.

PART II - OTHER INFORMATION

Item 5 - Other Information

On September 28, 1998, the Board of Directors approved a plan of reorganization
of the Company's subsidiaries. Pursuant to the reorganization, five of the 
Company's subsidiaries, Hallandale Thrift Inc., North Broward
Consignment, Inc., Thrift Shops of North Lauderdale Inc., Thrift Shops of South
Broward Inc., and Thrift Shops of West Dade Inc., merged into Thrift Retail,
Inc., also a subsidiary of the Company.

In November 1998, the Company entered into a five-year, two month lease for a
seventh store location in Orlando, Florida. The lease provides
for minimum monthly payments of approximately $8,540. The Company currently 
plans to open this store in early 1999.

In November 1998, the Company announced that has reduced the exercise price of
its outstanding Warrants to $2.24 per share from $5.00 per share. The Board of
Directors made this decision based on various factors, including the current
trading prices of the Company's Common Stock and Company's desire to obtain
additional capital for acquisitions and opening new stores. The Board also
announced that the Company will redeem any Warrants remaining outstanding as of
the close of business on December 14, 1998. The redemption price of the Warrants
is $0.10 per Warrant.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibits:

            EXHIBIT NUMBER       DESCRIPTION
            --------------       -----------
                11.1             Statement re: computation of per share earnings

                27.1             Financial Data Schedule (for SEC use only)

        (b) Reports on Form 8-K

                NONE


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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.


                                THRIFT MANAGEMENT, INC.

                                By: /s/ MARC DOUGLAS
                                    -------------------------------------------
                                    Marc Douglas, President and Chief Executive
                                          Officer (Principal Executive Officer)

Date:  November 11, 1998

                                    /s/ STEPHEN L. WILEY
                                    -------------------------------------------
                                    Stephen L. Wiley, Chief Financial
                                          Officer (Principal Financial Officer)


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