SECURITIES AND EXCHANGE COMMISSION

                             Washington, D C 20549


                                   FORM 10-Q


                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

                    OF THE SECURITIES EXCHANGE ACT OF 1934


                      For the quarter ended  June 30, 1998

                       Commission File Number  33-19584


                             POWERCOLD CORPORATION
            (Exact name of registrant as specified in its charter)



 Nevada                                                              23-258270
(State of Incorporation)                      (IRS Employer Identification No.)


 103 GUADALUPE DRIVE
 CIBOLO, TEXAS 78108                                              210-659-8450
(Address of principal executive offices)        (Registrant's telephone number)


      Securities registered pursuant to Sections 12(b) of the Act:  NONE

      Securities registered pursuant to Sections 12(g) of the Act:  NONE


Common Stock,  $0.001 Par Value                          OTC Bulletin Board


Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.  Yes   X     NO      .
                                        -----      -----


As of June 30, 1998, 6,345,796 Common Shares were outstanding, and the
aggregate market value of such shares held by non-affiliates was approximately
$3,966,122








                  Sequential Page  1 of 14<PAGE>



                             POWERCOLD CORPORATION

                               AND SUBSIDIARIES


                                     INDEX




PART I.   FINANCIAL INFORMATION                                  Page


     Item 1:   Financial Statements (Unaudited)

        Consolidated Balance Sheets as of
        June 30, 1998 and December 31, 1997.                          3

        Consolidated Statement of Operations for Three and Six
        Months Ended June 30, 1998 and June 30, 1997.                 4

        Consolidated Statement of Changes in Stockholders' Equity
        for Three Months Ended June 30, 1998 and June 30, 1997.       5

        Consolidated Statement of Cash Flows for Three and Six
        Months Ended June 30, 1998 and June 30, 1997.                 6

        Notes to Consolidated Financial Statements at June 30, 1998.  7


     Item 2:   Management's Discussion and Analysis of                8
               Financial Condition and Results of Operations.



PART II.   OTHER INFORMATION                                          13


     Item 1.   Legal Proceedings.

     Item 2.   Changes in Securities.

     Item 3.   Defaults Upon Senior Securities.

     Item 4.   Submission of Matters to a Vote of Security Holders.

     Item 5.   Other Information.

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








                  Sequential Page  2 of 14<PAGE>

<TABLE>
<CAPTION>
 POWERCOLD CORPORATION                                   CONSOLIDATED STATEMENT OF FINANCIAL
 AND SUBSIDIARIES                                        POSITION AT June 30, 1998
 (UNAUDITED)                                             AND DECEMBER 31, 1997
---------------------------------------------------------------------------------------------
<S>                                                         <C>                  <C>
                                                              June 30,           DECEMBER 31,
                   ASSETS                                      1998                  1997
                                                            -----------          -------------
 CURRENT ASSETS: 
    Cash and cash equivalents                                   $4,042                 $2,274
    Restricted cash                                            600,000                600,000
    Accounts receivable, net of allowance for doubtful
      accounts of $7,718 and $7,718 respectively.              127,449                117,680
    Interest receivable from affiliate                                                 58,082
    Interest receivable                                          9,918
    Other receivable                                             4,583
    Inventories                                                 40,923                 69,082
    Prepaid expenses and other current assets                    9,036                 13,162
    Refundable income tax                                      124,156                124,156
                                                            -----------          -------------

      Total Current Assets                                     920,107                984,436

 OTHER ASSETS:
    Investment in securities                                                              206
    Investment in securities through affiliate                 675,014                597,300
    Property and equipment, net                                 54,294                 65,574
    Patent rights and related technology, net                  474,616                508,153
    Goodwill, net                                               68,424                 73,688
                                                            -----------          -------------

      Total Other Assets                                     1,272,348              1,244,921

 TOTAL ASSETS                                               $2,192,455             $2,229,357
                                                            ===========          =============

   LIABILITIES  AND  STOCKHOLDERS'  EQUITY

 CURRENT LIABILITIES: 
    Short-term borrowings                                      427,354                411,108
    Accounts payable                                           170,289                166,954
    Accrued expenses                                           211,937                164,973
    Income taxes payable                                        74,156                 74,156
                                                            -----------          -------------

      Total Current Liabilities                                883,736                817,191

 Commitments

 STOCKHOLDERS' EQUITY:
    Common Stock - $0.001 par value, 200,000,000
      shares authorized, 6,345,749 and 5,995,269  
      shares issued at June 30, 1998 and 
      December 31, 1997, respectively                            6,346                  5,995
    Additional paid-in capital                               4,308,668              4,099,799
    Amount due from shareholders                                (7,500)                (7,500)
    Unrealized gain (loss) on securities available for sale                               (50)
    Retained earnings (accumulated deficit)                 (2,998,795)            (2,686,078)
                                                            -----------          -------------

 TOTAL STOCKHOLDERS' EQUITY                                  1,308,719              1,412,166
                                                            -----------          -------------

 TOTAL LIABILITIES  &  STOCKHOLDERS' EQUITY                 $2,192,455             $2,229,357
                                                            ===========          =============

</TABLE>
The accompanying notes are an integral part of these financial statements.
Sequential Page 3 of 12 <PAGE>

<TABLE>
<CAPTION>

 POWERCOLD CORPORATION                                    CONSOLIDATED STATEMENTS OF OPERATIONS
 AND SUBSIDIARIES                                         FOR THE THREE AND SIX MONTH PERIODS  
 UNAUDITED                                                ENDED JUNE 30, 1998 AND JUNE 30, 1997
---------------------------------------------------------------------------------------------------

                                                    THREE MONTHS ENDED           SIX MONTHS ENDED
<S>                                            <C>           <C>           <C>           <C>
                                               JUNE 30,      JUNE 30,      JUNE 30,      JUNE 30,
                                                 1998          1997          1998          1997
                                               ----------    ----------    ----------    ----------
 SALES REVENUE:
    Product Sales                               $150,916       $22,530      $180,440       $30,747
    Services                                      43,168        48,921        83,542        75,927
                                               ----------    ----------    ----------    ----------

       Total Revenue                             194,084        71,451       263,982       106,674

 COST OF REVENUE:
    Product Sales                                140,361        37,475       193,115        62,654
    Services                                         884                         884           500
                                               ----------    ----------    ----------    ----------

       Total Cost of Revenue                     141,245        37,475       193,999        63,154
                                               ----------    ----------    ----------    ----------

       Gross Margin                               52,839        33,976        69,983        43,520

 OPERATING EXPENSES:
    Sales and Marketing                          148,576        73,976       215,458       113,918
    General and Administrative                   126,559       148,023       234,324       282,789
    Research and Development                                    19,985                      49,163
                                               ----------    ----------    ----------    ----------

     Total Operating Expenses                    275,175       241,984       449,782       445,870
                                               ----------    ----------    ----------    ----------

       Operating Income (Loss)                  (222,336)     (208,008)     (379,799)     (402,350)

       Equity in loss of Unconsolidated 
         affiliate                                            (100,000)                   (427,593)
       Gain on sale of 35 of interest in
         unconsolidated affiliate                 37,121                      37,121
                                               ----------    ----------    ----------    ----------

       Income (Loss) Before Other Income        (185,215)     (308,008)     (342,678)     (829,943)

 OTHER INCOME (EXPENSE):
    Interest and Other Income                     43,307        50,124        49,089        77,203
    Interest and OtherExpense                     (5,836)       (7,711)      (12,797)      (17,915)
    Other Expense                                              (25,504)       (6,333)      (25,695)
                                               ----------    ----------    ----------    ----------

       Total Other Income (Expense)               37,471        16,909        29,959        33,593
                                               ----------    ----------    ----------    ----------

 Income (Loss) Before Provision
    For Income Taxes                            (147,744)     (291,099)     (312,719)     (796,350)

 PROVISION (BENEFIT)
    For Income Taxes Current                                   (58,080)                   (124,156)
                                               ----------    ----------    ----------    ----------

 Net Income (Loss)                             ($147,744)    ($233,019)    ($312,719)    ($672,194)
                                               ==========    ==========    ==========    ==========

 NET INCOME (LOSS) PER SHARE                      ($0.02)       ($0.04)       ($0.05)       ($0.11)
                                               ==========    ==========    ==========    ==========

 WEIGHTED AVERAGE NUMBER OF SHARES             6,231,507     5,873,873     6,156,525     5,856,170
                                               ==========    ==========    ==========    ==========

</TABLE>
The accompanying notes are an integral part of these financial statements.
Sequential Page 4 of 12 <PAGE>

<TABLE>
<CAPTION>

 POWERCOLD CORPORATION                                           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 AND SUBSIDIARIES                                                 FOR THE THREE AND SIX MONTH PERIODS  
 UNAUDITED                                                        ENDED JUNE 30, 1998 AND JUNE 30, 1997
---------------------------------------------------------------------------------------------------------------------------------

                                                                                          UNREALIZED GAIN
                                                                  ADDITIONAL     AMOUNTS     (LOSS) ON
                                                COMMON  STOCK       PAID-IN      DUE FROM    SECURITIES  ACCUMULATED
                                             STOCK      AMOUNT      CAPITAL    STOCKHOLDERS   FOR SALE    (DEFICIT)      TOTAL 
                                            ----------  --------  -----------      --------   ---------  ------------  -----------
<S>                                         <C>         <C>       <C>              <C>        <C>        <C>           <C>

 Balances At April 1, 1997                  5,838,269    $5,838   $4,036,633       ($7,500)   ($19,626)    ($405,620)  $3,609,725

 Issuance of Common Stock For Accounts 
 Payable                                       40,000        40       24,958                                               24,998

 Unrealized gain (loss) on securities as
    available for sale                                                                          (4,312)                    (4,312)

 Net Income (loss) For The Three Month 
 Period  
 Ended June 30, 1997                                                                                        (233,019)    (233,019)
                                            ----------  --------  -----------      --------   ---------  ------------  -----------

 Balances At June 30, 1997                  5,878,269    $5,878   $4,061,591       ($7,500)   ($23,938)    ($638,639)  $3,397,392
                                            ==========  ========  ===========      ========   =========  ============  ===========



 Balances At April 1, 1998                  6,143,149    $6,143   $4,136,621       ($7,500)      ($134)  ($2,851,053)  $1,284,077

 Issuance of Common Stock For Accounts 
 Payable                                       85,000        85       72,165                                               72,250

 Sale of Common Stock                         117,647       118       99,882                                              100,000

 Net Income (loss) For The Three Month 
 Period  
 Ended June 30, 1998                                                                               134      (147,742)    (147,608)
                                            ----------  --------  -----------      --------   ---------  ------------  -----------

 Balances At June 30, 1998                  6,345,796     $6,346   $4,308,668  $    (7,500)          $0  ($2,998,795)  $1,308,719
                                            ==========  ========  ===========      ========   =========  ============  ===========

</TABLE>










The accompanying notes are an integral part of these financial statements.
Sequential Page 5 of 12                              
<PAGE>

<TABLE>
<CAPTION>
 POWERCOLD CORPORATION                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
 AND SUBSIDIARIES                                           FOR THE THREE AND SIX MONTH PERIODS  
 UNAUDITED                                                  ENDED JUNE 30, 1998 AND JUNE 30, 1997
------------------------------------------------------------------------------------------------------

                                                      THREE MONTHS ENDED          SIX MONTHS ENDED
                                                 <C>           <C>           <C>           <C>      
                                                 JUNE 30,      JUNE 30,      JUNE 30,      JUNE 30,
                                                   1998          1997          1998          1997
                                                 ----------    ----------    ----------    ----------
 CASH FLOWS FROM OPERATING ACTIVITIES:
    Net Income (Loss)                            ($147,742)    ($233,019)    ($312,717)    ($672,194)
 Adjustments to reconcile net income (loss)
      to net cash used in operating activties
    Depreciation and Amortization                   24,424        54,440        48,847       108,629
    Net loss on sale of securities                                25,504         5,100        25,695
    Equity in unconsolidated affiliate                           100,000                     427,593
    Common stock issued for expenses                72,250        24,998       109,220        24,998
    Changes in assets and liabilities
      Trade accounts receivable                     12,953       (59,705)       (9,769)      (32,415)
      Interest receivable                           (9,918)                     48,164
      Other receivable                              (4,583)                     (4,583)
      Inventories                                   11,233           653        28,159       (10,959)
      Prepaid expenses and other assets                (77)          710         4,126           502
      Accounts payable and expenses                  2,800        65,246         3,335        80,828
      Accrued expenses                              28,117                      46,964
      Income taxes payable                                       (58,080)                   (174,158)
                                                 ----------    ----------    ----------    ----------

      Net Cash Used By
        Operating Activities                       (10,543)      (79,253)      (33,154)     (221,481)
                                                 ----------    ----------    ----------    ----------

 CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                            (6,120)                    (12,367)
    Disposition of property and equipment                                        1,234
    Purchase of certificate of deposit                                                      (100,000)
    Proceeds from sale of sercurities                            585,849        16,858       995,830
    Purchase of securities                          (2,997)     (189,881)      (27,522)     (563,601)
    Advances to affiliated company                 (81,281)     (216,768)      (71,894)     (216,768)
                                                 ----------    ----------    ----------    ----------

    Net Cash Provided (Used) By
      Investing Activities                         (84,278)      173,080       (81,324)      103,094

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock         100,000                     100,000
    Proceeds from short term borrowings              3,643        24,342        28,643       123,508
    Proceeds related short term borrow                            11,750                      11,750
    Payments on capital lease
    Repayment of short term borrowings                          (222,543)      (12,397)     (514,824)
    Repayment related short term borrow                                                      (15,000)
                                                 ----------    ----------    ----------    ----------

    Net Cash Provided (Used) By 
      Financing Activities                         103,643      (186,451)      116,246      (394,566)
                                                 ----------    ----------    ----------    ----------

 NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                              8,822       (92,624)        1,768      (512,953)

 CASH AND CASH EQUIVALENTS
    AT BEGINNING OF PERIOD                          (4,780)      645,185         2,274     1,065,512
                                                 ----------    ----------    ----------    ----------

 CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                 $4,042      $552,561        $4,042      $552,561
                                                 ==========    ==========    ==========    ==========

 INTEREST PAID                                      $5,836        $7,711       $12,797       $17,915
 INCOME TAXES PAID                                                                           $50,000

 NONCASH INVESTING ACTIVITIES:
   Unrelated (loss) on sale of securities             $218       ($5,312)         $134      ($24,938)

</TABLE>

The accompanying notes are an integral part of these financial statements.
Sequential Page 6 of 12 <PAGE>


POWERCOLD CORPORATION AND                         Notes to Consolidated
SUBSIDIARIES                                      Financial Statements at
(Unaudited)                                       June 30, 1998



The condensed consolidated financial statements of PowerCold Corporation and
Subsidiaries included herein have been prepared without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.  Although,
certain information normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted, PowerCold Corporation believes that the disclosures are adequate to
make the information presented not misleading. The condensed consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in PowerCold Corporation's annual report
on Form 10-K for the fiscal year ended December 31, 1997.

The condensed consolidated financial statements included herein reflect all
normal recurring adjustments that, in the opinion of the management, are
necessary for a fair presentation.  The results for the interim periods are not
necessarily indicative of trends or of results to be expected for a full year.





































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


GENERAL BUSINESS


PowerCold is a solution provider of energy efficient products for users of
industrial and commercial refrigeration systems world-wide. The Company
operates across many market sectors from large industrial food processors to
small commercial air conditioning systems. The firm's focus is to give
customers products and systems that allow them to benefit from current changes
occurring in the natural gas and electrical utility marketplace. Refrigeration
is the most energy intensive operation most business operators face. PowerCold
has the opportunity to provide products and systems, that customers require to
take advantage of these changes, to improve profitability by reducing their
operating costs.

Deregulation of the gas and electric utilities will provide continuing
opportunities, creating new markets for more efficient refrigeration systems.
PowerCold has the products, experience and creative ability to package unique
refrigeration systems for the multi-billion dollar refrigeration market. The
Company is acquiring synergistic businesses, and marketing alliances are being
formed with major utility companies and established refrigeration companies for
these products and services.

The Company's business operations are supported by a management team with over
(150) years experience. The Company maintains administrative corporate offices
in Cibolo, Texas, and Philadelphia, Pennsylvania. Engineering and manufacturing
facilities are located in Cibolo, Texas.

Currently there are three wholly owned operating subsidiaries of PowerCold;
RealCold Products, Inc., Nauticon, Inc. and Technicold Services, Inc. These
subsidiaries manufacture, market and provide consulting services for commercial
refrigeration and freezing systems for use world-wide. Nauticon manufactures
and markets a unique product line of patented evaporative heat exchange systems
for the HVAC and refrigeration industry.  These companies offer unique and
innovative products, which compliment and secure PowerCold's position in the
refrigeration and air conditioning industry.

RealCold Products, Inc., a wholly owned subsidiary of the Company, located in
Cibolo, Texas, designs and produces unique products and commercial
refrigeration packaged systems for the refrigeration industry. RealCold
Products was reorganized with its new name in March 1997, replacing RealCold
Systems Inc. and RealCold Maintenance Systems, Inc. RealCold Products supports
all engineering and manufacturing of commercial refrigeration packages and
freezer systems.

RealCold Products Packaging - There are proposed alliances with other
refrigeration companies, whereas RealCold Products packages various components
adding value for a total turnkey refrigeration system. Management believes the
Company should improve income and profits as this entity provides the industry
expertise for its custom packaged products.

The Company originally developed and patented the most advanced, cost-effective
and environmentally safe "IQF - Individual Quick Freeze" systems in the
industry. RealCold Products now supports the "Quick Freeze" systems, and plans
to develop the product for the rapidly growing frozen food industry in the

                  Sequential Page  8 of 14<PAGE>

emerging markets of Asia and Latin America where electrical power is expensive
and often not reliable.

WittCold Systems, Inc., a Wittemann Company and wholly owned subsidiary of
Dover Corporation acquired RealCold Systems Inc., (a former wholly owned
subsidiary of  PowerCold), whereas the Company receives a long term royalty
payment. The two combined companies provide world wide market support for
industrial refrigeration systems and merchant CO2 plants.  Wittemann is the
world's leading manufacturer of carbon dioxide systems and refrigeration
accessories employed by brewers and other fermentation processors. The
acquisition culminated after a successful (50/50) joint venture between the two
companies for the manufacture and marketing of Merchant Carbon Dioxide Plants
and Refrigeration System Packages. The venture has produced over $8M in sales
revenue. Only the per cent of sales royalty is booked and consolidated by the
Company.

It is management's belief that revenue from the royalty alliance with WittCold
Systems may not be as high as previously projected for 1998, because of the
overseas exchange rate versus the strong US dollar. WittCold relies mainly on
the international market for sales and revenue from its Merchant CO2 systems.
Todate there are over $30M in proposals for new CO2 and industrial
refrigeration systems world wide. 

Nauticon, Inc., a wholly owned subsidiary of the Company, manufactures and
markets a product line of patented evaporative heat exchange systems for the
air conditioning and refrigeration industry, which significantly reduces
electric power consumption during peak electrical rate periods for most air
conditioning and refrigeration users. The patented products are innovative and
unique in design, use new material technology, are simple to manufacture, and
have low operating costs. They are used for condensers, fluid coolers, booster
coolers, and cooling towers. Nauticon products may revolutionize the air
conditioning and refrigeration industry; an industry that faces serious changes
for the first time in years due to energy and environmental concerns worldwide.

The product is operating to specifications after delays in product development,
and Nauticon management is excited about the prospects for substantial growth
in revenues for 1998. There are over 130 systems installed to date, and the
Company expects to double growth annually over the next three years. Nauticon
recently installed 35 condensers at a new shopping center in California. There
is the potential for an additional 50 systems for other shopping centers. The
initial order was very competitive, whereas the application test ran on site
for four weeks. Todate there are over $1M of proposals out for new system
orders projected over the next few months. Nauticon now has 16 distributors
throughout the US, and is in negotiations with some of the largest OEM
refrigeration manufactures for product manufacturing and marketing alliances.
The prospects for these alliances, if negotiated successfully, should support a
revenue growth that will far exceed current and future revenue projections.
Primary sales targets are the large OEM refrigeration manufacturers that could
produce and distribute product under their own private label. Besides marketing
direct through agents in the US, other market outlets will be through major
distributors worldwide.

Technicold Services, Inc. (TSI) offers consulting engineering services,
including process safety management compliance and ammonia refrigeration and
carbon dioxide system design. TSI also provides operation, maintenance and
safety seminars for ammonia refrigeration technicians and supervisors. TSI also
publishes a quarterly newsletter, COLD TALK, which reaches over (2000)
refrigeration supervisors and technicians.

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Rotary Power International, Inc. (RPI) - The worlds only manufacturer of
stratified charge rotary engines and large rotary engines. PowerCold currently
owns 30% of RPI and was to acquire 100% of RPI, but the merger between the two
companies was not successful. PowerCold's prime interest is the Industrial
Natural Gas engine business with its compact packaged screw compressor
refrigeration system.

Deregulation of gas and electric utilities is creating major changes in energy
use and costs. RPI's natural gas engines enhance the customers' economic
benefits by reducing energy costs while supporting the environment with a clean
burning energy source. Supermarkets, as the initial target market, have been
estimated to save a minimum of 15% energy savings with one engine per store.
The market includes over 30,000 supermarkets, which consume 4% of the
electrical energy used in the US. Also, through associated overseas markets
there is a complementary demand and need for low cost energy for similar
refrigeration systems in remote areas of the world.

New Acquisitions - The Company is continually seeking related acquisitions and
joint venture partners with synergistic energy efficient products; to enhance
and support its growth plans and goals, and to become a comprehensive industry
wide solution provider for the refrigeration and air conditioning industry.
Over the last ninety days, the Company has signed Letter's of Intent to Acquire
the following two businesses.  Formal Agreements are being prepared and will be
consummated when both parties accept the terms and conditions of the final
agreements.

Channel Ice Technologies - The Company plans to acquire, through a newly formed
subsidiary company, Channel Freeze Technologies, Inc., eighty percent (80%) of
the related assets and business of Channel Ice Technologies from Los Angeles,
CA. based Sir Worldwide, LLC for cash, royalties and stock options.

Channel Ice Technologies has a proprietary, patented (8 patents and 3 pending)
multi purpose freezing system that is highly efficient. It can be employed for
freezing virtually any liquid or semi liquid product in a variety of industries
including: ice plants, fish, meat and produce food products, fruit and juice
products, food by-products, recreational snow for theme parks and ski resorts,
plus many other applications.  The Channel Ice System was introduced to the
market in 1995, todate there are ten (10) systems produced.  Installations are
in Mexico, Japan, the Philippines and the United States.  A system is presently
being installed in Singapore and another to be installed in Haiti.

A major new application for the Channel Ice System is in municipal water
systems, pulp and paper plants, refineries and utilities where solids are
economically separated from industrial waste by the freeze/thaw method.  The
water in the frozen sludge drains off during thaw and the remaining materials
are then disposed of and recycled at a greatly reduced cost.

Rotary Power Enterprise, Inc. - The Company has agreed to acquire 100% of
Rotary Power Enterprise, Inc. for stock.  Rotary Power Enterprise, Inc.
recently signed an Agreement to acquire the Natural Gas Engine Business assets
of Rotary Power International, Inc. (RPI) (OTC BB: RPII). The entire right,
title and interest in and to RPI's Rotary Power Natural Gas and Propane Engine
Business includes the intellectual property, licenses, contracts, inventory and
manufacturing capability for the 65 Series Natural Gas and Propane Fueled
Engines. Included are exclusive agreements with Mazda Motor Corporation and
Hussmann International, Inc). PowerCold owns approximately thirty per cent
(30%) equity interest in RPI, which manufactures and markets rotary engines.

Rotary Power Enterprise will have the exclusive right to sell Mazda rotor

                 Sequential Page  10 of 14<PAGE>

engines in North America, modified for natural gas and propane applications
except for passenger automobiles and minivan applications. The Company also
plans to have the exclusive right to distribute, market and sell the Series 580
and 40 natural gas/propane engine for stationary industrial/ commercial
applications and oil and gas field applications. Hussmann has the exclusive
right to purchase rotary engines for supermarket rack systems for operation of
refrigeration equipment in North America.

Jack Kazmar will remain as President of Rotary Power Enterprise.  Prior to
establishing Rotary Power Enterprise, Mr. Kazmar was a Marketing Consultant
with Rotary Power International from 1993 - 1997.  His background and
experience includes over 30 years in the commercial heating, ventilation and
air conditioning equipment industry:  Vice President of Sales and Marketing,
ICC, a manufacturer of Desiccant based dehumidification equipment; President
and Co-Founder, Skil-Aire Corporation, a manufacturer of standardized
commercial heating, ventilation and air conditioning products; General Manager,
Fedders Corporation, Residential and Commercial Products Division, Climatrol
and Airtemp Applied; and direct sales and field management with Worthington
Corporation. Mr. Kasmar holds a Bachelor of Science - Mechanical Engineering
from Lafayette College.

The Company's mission is to be a solution provider of energy efficient products
for the multi-billion dollar refrigeration, air condition and power industry.
The Company's goal is to achieve profitable growth and increase shareholder
value - providing superior products and services through related acquisitions
and joint ventures.

Management intends to continue to utilize and develop the remaining intangible
assets of the Company. It is Management's opinion that the Company's cash flow
generated from such intangible assets will not be impaired, and that recovery
of its intangible assets, upon which profitable operations will be based, will
occur.

The Company is currently live on the INTERNET, a worldwide information network.
The real time system will provide anyone, shareholder, investor or customer,
with Company news releases, financial data and product information.
PowerCold Web Page  http://www.powercold.com.


RESULTS OF OPERATIONS - Second Quarter 1998

Revenue for the three and six months periods ended June 30, 1998 increased
(272%) to $194,084 and (247%) to $263,982 respectively as compared to $71,451
and $106.674 for the same periods respectively in 1997.

Net Loss for the three and six months periods ended June 30, 1998 decreased
(158%) to ($147,744) and (215%) to ($312,719) respectively as compared to
($233,019) and ($672,194) for the same periods respectively in 1997.

Net Loss per share for the three and six month periods ended June 30, 1998 were
($0.02) and ($0.05) respectively compared to ($0.04) and ($0.11) for the same
periods respectively in 1997.  Net loss per share was based on weighted average
number of shares of 6.231,507 for June 30, 1998 compared to 6,156,525 for the
same three month period in 1997.

The Company's Consolidated Balance Sheets as of the second quarter ended June
30, 1998 compared to the second quarter ended June 30, 1997:  Total assets
decreased 1.7% to $2,192,455 compared to $2,229,357; total current liabilities
increased 8.1% to $883,736 compared to $817,191; total stockholders' equity

                 Sequential Page  11 of 14<PAGE>

decreased 7.3% to $1,308,719 compared to $1,412,166; and the Company has no
long term debt.

Company revenues will continue to improve throughout 1998; because of the new
marketing and sales program, the industry acceptance for Nauticon condensers,
and the new packaging program for RealCold Products.  The operating loss was
due to general Company operating overhead, and should continue to decrease as
revenue increases. The Company's asset base, as well as revenues, should
continue to grow through new proposed acquisitions.

Management intends to continue to utilize and develop the intangible assets of
the Company. It is Management's opinion that the Company's cash flow generated
from current intangible assets is not impaired, and that recovery of its
intangible assets, upon which profitable operations will be based, will occur.

Management believes that its working capital may not be sufficient to support
both its operations and growth plans for acquisitions and joint ventures for
the near future. Therefore, to support the Company's growth and goals,
management is seeking additional funding for this purpose.


Financial Summary: 

                              Three Months Ended        Six Months Ended
                      June 30, 1998  June 30, 1997 June 30, 1998 June 30, 1997
                      -------------- ------------- ------------- --------------


Sales/Revenue              $194,084       $71,451      $263,982       $106,674

Net Loss                  ($147,744)    ($233,019)    ($312,719)     ($672,194)

Net Loss Per Share          ($0.02)       ($0.04)       ($0.05)        ($0.11)

Shares Outstanding (Avg.) 6,231,507     5,873,873     6,156,525      5,856,170



Total Assets                                         $2,192,455     $2,229,357

Total Liabilities - Current                            $883,736       $817,191

Total Liabilities - Long Term                             $0.00          $0.00

Total Stockholders Equity                            $1,308,719     $2,229,357


"Safe Harbor" Statement

Forward looking statements made herein are based on current expectations of the
Company that involves a number of risks and uncertainties and should not be
considered as guarantees of future performance. These statements are made under
the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995. The factors that could cause actual results to differ materially include;
interruptions or cancellation of existing contracts, impact of competitive
products and pricing, product demand and market acceptance risks, the presence
of competitors with greater financial resources than the Company, product
development and commercialization risks and an inability to arrange additional
debt or equity financing.

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PART II. OTHER INFORMATION


Item 1.   Legal Proceedings.

          None

Item 2.   Changes in Securities

          None.

Item 3.   Defaults Upon Senior Securities.

          None.

Item 4.   Submission of Matters to a Vote of Security Holders

          None.

Item 5.   Other Information.

          None.

Item 6    Exhibits and Reports on Form 8-K.

          Exhibit (27) - Financial Data Schedule






























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                             POWERCOLD CORPORATION

                                   FORM 10-Q

                                 JUNE 30, 1998


Signature


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


                                   Date: August 10, 1998


                                   POWERCOLD CORPORATION


                                   /s/Francis L. Simola
                                   ----------------------------
                                   Francis L. Simola
                                   President and CEO
































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