UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

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

For the quarterly period ended June 30, 1999
-------------

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

For the transition period from to

Commission file number: 1-4433
------

ARMATRON INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

Massachusetts 04-1052250
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2 Main Street, Melrose MA 02176
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (781) 321-2300

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $1
Par Value

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days. Yes X No .
----- -----

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
and Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes _____ No _____
----- -----

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares of the Registrant's common stock outstanding on July 30,
1999 was 2,459,749.

ARMATRON INTERNATIONAL, INC.
----------------------------

File No. 1-4433
_______________

PAGE(S)
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PART I - FINANCIAL INFORMATION

Item 1 Financial Statements
- ------ --------------------
Balance Sheet, June 30, 1999, 1998 and September 30, 1998 3

Consolidated Condensed Statements of Operations for the
three and nine months ended June 30, 1999 and 1998 4

Consolidated Condensed Statements of Cash Flows for the
nine months ended June 30, 1999 and 1998 5

Notes to Consolidated Condensed Financial Statements 6 - 13

Item 2
- ------
Management's Discussion and Analysis of Financial
Condition and Results of Operations 14 - 21

Item 3
- ------
Quantitative and Qualitative Disclosures about Market Risk 21

PART II - OTHER INFORMATION

Item 2
- ------
Changes in Securities and Use of Proceeds 21

Item 6
- ------
Exhibits and Reports on Form 8-K 21

SIGNATURES 22

EXHIBIT INDEX 23

ARMATRON INTERNATIONAL, INC.
Consolidated Balance Sheets
June 30, 1999 and 1998, and September 30, 1998

(Unaudited)
June 30, (Audited)
---------------------------- September 30,
1999 1998 1998
---- ---- ----

ASSETS
Current Assets:
Cash and cash equivalents $ 1,037,000 $ 729,000 $ 2,677,000
Trade accounts receivable, net 3,059,000 4,635,000 1,799,000
Inventories 2,723,000 2,404,000 2,088,000
Deferred taxes 36,000 113,000 37,000
Prepaid and other current assets 292,000 180,000 141,000
--------------------------------------------
Total Current Assets 7,147,000 8,061,000 6,742,000

Property and equipment, net 382,000 489,000 449,000

Other assets 106,000 107,000 139,000
--------------------------------------------

Total Assets $ 7,635,000 $ 8,657,000 $ 7,330,000
============================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable $ 1,356,000 $ 1,763,000 $ 802,000
Other current liabilities 941,000 1,000,000 925,000
Interest payable to related parties 1,713,000 1,274,000 1,395,000
Dividends payable to related parties 39,000 - -
Current portion under capital lease obligations 15,000 20,000 21,000
--------------------------------------------
Total Current Liabilities 4,064,000 4,057,000 3,143,000
--------------------------------------------

Long-term debt, related parties 2,715,000 4,715,000 4,715,000
--------------------------------------------
Long-term capital lease obligations, net of current portion - 15,000 10,000
--------------------------------------------
Deferred rent, net of current portion 5,000 24,000 18,000
--------------------------------------------

Stockholders' Equity (Deficiency):
Common stock, par value $1 per share, 6,000,000 shares
authorized; 2,606,481 shares issued at June 30,
1999 and 1998 and September 30, 1998 2,606,000 2,606,000 2,606,000
Preferred stock, par value $100 per share, 100,000 shares
authorized; 6,667 shares issued at June 30, 1999 667,000 - -
Additional paid-in capital 8,103,000 6,770,000 6,770,000
Accumulated deficit (10,139,000) (9,144,000) (9,546,000)
--------------------------------------------
1,237,000 232,000 (170,000)
Less: Treasury stock at cost - 146,732 shares
at June 30, 1999, 1998 and September 30, 1998 (386,000) (386,000) (386,000)
--------------------------------------------

Total Stockholders' Equity (Deficiency) 851,000 (154,000) (556,000)
--------------------------------------------

Total Liabilities and Stockholders' Equity (Deficiency) $ 7,635,000 $ 8,657,000 $ 7,330,000
============================================

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

ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Operations
for the Three and Nine Months Ended June 30, 1999 and 1998

(Unaudited)
Three Months Nine Months
Ended June 30, Ended June 30,
------------------------ -------------------------
1999 1998 1999 1998
---- ---- ---- ----

Net sales $4,003,000 $6,046,000 $8,340,000 $10,458,000

Cost of products sold 2,991,000 4,556,000 6,907,000 8,401,000

Selling, general and administrative expenses 652,000 766,000 1,719,000 1,807,000

Interest expense-related parties 80,000 119,000 318,000 357,000

Interest expense-third parties 6,000 8,000 20,000 24,000

Other (income) expense - net (15,000) (4,000) (70,000) (34,000)
-----------------------------------------------------
Income (loss) before taxes 289,000 601,000 (554,000) (97,000)

Provision for income taxes - - - -
-----------------------------------------------------
Net income (loss) 289,000 601,000 (554,000) (97,000)

Preferred stock dividends 39,000 - 39,000 -
-----------------------------------------------------
Net income allocated to common stock $ 250,000 $ 601,000 $ (593,000) $ (97,000)
=====================================================

Basic earnings (loss) per share:
- --------------------------------

Basic earnings (loss) per share $ .10 $ .24 $ (.24) $ (.04)
=====================================================

Weighted average number of
common shares outstanding 2,459,749 2,459,749 2,459,749 2,459,749
=====================================================

Diluted earnings (loss) per share:
- ----------------------------------

Diluted earnings (loss) per share $ .03 $ .24 $ (.24) $ (.04)
=====================================================

Weighted average number of
common shares outstanding 7,645,193 2,459,749 2,459,749 2,459,749
=====================================================

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

ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended June 30, 1999 and 1998

(Unaudited)
1999 1998
---- ----

OPERATING ACTIVITIES
Net loss $ (593,000) $ (97,000)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization 130,000 213,000
Amortization of deferred rent (13,000) (14,000)
Change in operating assets and liabilities (1,085,000) (359,000)
----------------------------

Net cash flow from (used for) operating activities (1,561,000) (257,000)
----------------------------

INVESTING ACTIVITIES
Payments for machinery and equipment (63,000) (127,000)
----------------------------
Net cash flow from (used for) investing activities (63,000) (127,000)
----------------------------

FINANCING ACTIVITIES
Payments on capital lease obligations (16,000) (13,000)
----------------------------
Net cash flow from (used for) financing activities (16,000) (13,000)
----------------------------

Net increase (decrease) in cash and cash equivalents (1,640,000) (397,000)

Cash and cash equivalents at beginning of period 2,677,000 1,126,000
----------------------------

Cash and cash equivalents at end of period $ 1,037,000 $ 729,000
============================

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

ARMATRON INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements (Unaudited)

1. Nature of Business

The Company operates principally in two segments, the Consumer Products
segment and the Industrial Products segment. There are no intercompany sales
between segments.

Operations in the Consumer Products segment involve the manufacture and
distribution of Flowtron Outdoor Products, which consist of insect control
devices including electronic bugkillers and biomisters, environmental
products including mulching leaf-eaters and compost bins, and storage and
handling products including plastic yard carts, plastic storage sheds and
doghouses which comprised 93%, 94% and 93% of the Company's sales for the
nine months ended June 30, 1999 and 1998, and for the year ended September
30, 1998. These products undergo periodic model changes and product
improvements. The Company distributes its consumer products primarily to
major retailers throughout the United States, with some products distributed
under customer labels. Substantially all of this segment's sales and
accounts receivable relate to business activities with such retailers.

The Industrial Products segment manufactures electronic obstacle avoidance
systems for transportation and automotive applications. These systems are
marketed under the trademark "Echovision". Echovision devices monitor back
blind spots and side blind spots to detect objects and alert operators to
potential hidden hazards, and feature intuitive audible warnings, visual
warnings, automatic activation, easy installation on any type vehicle and a
continuous system self-test.

2. Opinion of Management

In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (including normal
recurring adjustments) necessary to present fairly the consolidated
financial position as of June 30, 1999 and 1998, and September 30, 1998, and
the consolidated statements of operations for the three and nine months
ended June 30, 1999 and 1998 and the consolidated statements of cash flow
for the nine months ended June 30, 1999 and 1998. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K, as
amended, for the year ended September 30, 1998. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted. The year-end balance sheet data was derived from audited
financial statements, but does not include disclosures required by generally
accepted accounting principles. The accompanying unaudited, consolidated
condensed financial statements are not necessarily indicative of future
trends or the Company's operations for the entire year.

3. Merger Agreement and Plan of Merger

On April 21, 1999, the Board of Directors of the Company unanimously
approved a merger between the Company and Armatron Merger Corporation, a
newly formed Massachusetts corporation that was organized as a
nonsubstantive transitory vehicle to effect the following transactions
("MergerCo"), in which MergerCo will merge into the Company (the "Merger")
with the Company continuing as the surviving corporation (the "Surviving
Corporation"). In the Merger, (i) each outstanding share of Common Stock
will be converted into the right to receive $0.27 in cash (except that any
shares held by MergerCo or in the Company's treasury will be canceled and
any stockholder who properly dissents from the Merger will be entitled to
appraisal rights under Massachusetts law); (ii) each outstanding share of
common stock, $0.01 par value per share, of MergerCo will be converted
into one share of common stock, $.01 par value per share, of the Surviving
Corporation; and (iii) each outstanding share of Series A Preferred Stock,
$100 par value per share, of the Company will be converted into one share of
Series A Preferred Stock, $.01 par value per share, of the Surviving
Corporation.

Following the Merger, the Company will not list the common stock of the
Surviving Corporation on any national securities exchange or automated
quotation system and will delist the Company's Common Stock. If the Merger
is effected, it is anticipated that the Company will have fewer than 300
stockholders and will promptly request termination of registration under
Section 12(g) of the Securities Exchange Act of 1934.

4. Revenue Recognition

Revenue from product sales is recognized at the time the products are
shipped. Following industry trade practice, the Company's Consumer Products
segment offers extended payment terms for delivery of seasonal items. Sales
terms for the Company's Industrial Products segment are 30 days net. A
provision is recorded for sales allowances and incentives related to volume
and program incentives offered to the Company's various customers.

5. Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an
original maturity of less than three months to be cash equivalents. The
Company invests excess funds in short-term, interest-bearing United States
instruments. The Company has no requirements for compensating balances.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed Federally insured limits and in deposit accounts at its commercial
finance company. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.

6. Property and Equipment

Property and equipment are stated at cost. Depreciation is computed based
upon the estimated useful lives of the various assets using the straight-
line method with annual rates of depreciation of 10% to 33-1/3%.
Capitalized tooling costs are amortized over three years. Leasehold
improvements are amortized over the lesser of the term of the lease or the
estimated useful life of the related assets. Tooling and molding costs are
charged to a deferred cost account as incurred, prepaid tooling, until the
tooling or mold is completed. Upon completion the costs are transferred to
a property/equipment account. Maintenance and repairs are charged to
operations as incurred. Renewals and betterments that materially extend the
life of assets are capitalized and depreciated. Upon disposal, the asset
cost and related accumulated depreciation are removed from their respective
accounts. Any resulting gain or loss is reflected in earnings.

7. Use of Estimates

The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

8. Earnings (Loss) Per Share

Basic earnings (loss) per share was computed by dividing net loss, after
deducting preferred stock dividends, by the weighted average number of
shares of Common Stock outstanding during the period. Diluted earnings
(loss) per share was computed by dividing net loss by the weighted average
number of shares of Common Stock outstanding during the period plus the
incremental shares upon the assumed conversion of the preferred shares. For
the nine months ended June 30, 1999 conversion of the preferred shares would
have been anti-dilutive and, therefore was not considered in the computation
of the diluted earnings per share during this period. As a result, diluted
earnings per share for the nine months ended June 30, 1999 was not different
from the basis earnings per share.

9. Market Risk

The Company is not subject to market risk associated with risk sensitive
instruments as the Company does not transact its sales in other than United
States dollars, does not invest in investments other than United States
instruments and has not entered into hedging transactions.

10. New Accounting Pronouncements

In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" and SFAS No. 131 "Disclosure about Segments of an Enterprise and
Related Information." These pronouncements are effective for fiscal years
beginning after December 15, 1997. These new pronouncements did not have a
material effect on the Company's financial statements.

In 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use." This pronouncement does not have a
material impact on the Company's business or results of operations.

11. Year 2000 Date Conversion

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, forecast production needs and the timing of raw material
purchases, send invoices, or engage in similar normal activities.

The Company has completed the analysis and evaluation phase of its Year 2000
project and has determined that it is required to modify or replace
significant portions of its hardware and software so that its computer
systems will properly recognize dates beyond December 31, 1999. The Company
upgraded and modernized its major information systems, including its
operating and financial systems. The replacement systems are Year 2000
compliant. The Company began using its new systems during the second quarter
of fiscal 1999 and has not experienced any significant difficulties with the
systems. The Company utilized both internal and external resources to
reprogram or replace, and test the software for Year 2000 modifications.
The Company completed its Year 2000 project July 31, 1999. The total cost
of upgrading most of the Company's major operating and financial systems,
including the Year 2000 project, for fiscal years 1998 through 2000, is
estimated at $100,000 and is being funded through operating cash flows and
leasing arrangements. Of the total project cost, approximately $80,000 has
been expended and is attributable to the purchase of new software and
hardware. The remaining $20,000 will be expensed, as incurred, on additional
consulting, hardware and software, if required.

There can be no assurance the systems of other companies on which the
Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have material adverse effect on the Company.
The Company has been in communication with its major vendors to ensure
compatibility of systems. If such systems do not function properly the
Company could experience delays in receipt of its raw materials which would
result in delays in scheduled deliveries of shipments by the Company.

The Company continues to develop contingency plans to determine what
actions the Company will take if its trading partners are not Year 2000
compliant. The Company expects the contingency plan to be completed by the
end of the fourth quarter in fiscal 1999.

The costs of the project and the date on which the Company plans to complete
the Year 2000 modifications are based on management's best estimates, which
were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans
and other factors. However, there can be no assurance that these estimates
will be achieved and actual results could differ materially from those
plans. Specific factors that might cause such material differences include,
but are not limited to, the availability and cost of personnel trained in
this area, the ability to locate and correct all relevant computer codes,
and similar uncertainties.

12. Concentration of Credit Risk

Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of trade accounts
receivable. If any of the Company's major customers fail to pay the Company
on a timely basis, it could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's
export sales are not significant.

For the nine months ended June 30, 1999, Sears, Roebuck and Co. and Home
Depot, Inc. accounted for approximately 37% and 14%, respectively, of the
Company's net sales. At June 30, 1999, Sears, Roebuck and Co. and Home
Depot, Inc. accounted for approximately 58% and 9%, respectively, of the
Company's trade accounts receivable balance.

For the year ended September 30, 1998, Sears, Roebuck and Co. and Home
Depot, Inc. accounted for approximately 29% and 11%, respectively, of the
Company's net sales. At September 30, 1998, Sears, Roebuck and Co. and Home
Depot, Inc. accounted for approximately 44% and 2%, respectively, of the
Company's trade accounts receivable balance.

For the nine months ended June 30, 1998, Sears, Roebuck and Co. and Home
Depot, Inc. accounted for approximately 30% and 11%, respectively, of the
Company's net sales. At June 30, 1998, Sears, Roebuck and Co. and Home
Depot, Inc. accounted for approximately 48% and 7%, respectively, of the
Company's trade accounts receivable balance.

13. Supplemental Cash Flow Information

The Company's cash payments for interest and income taxes for the nine
months ended June 30, 1999 and 1998 were as follows:

1999 1998
---- ----

Interest paid - related parties $ - $ -
Interest paid - third parties $20,000 $23,000
Income taxes paid $ - $ -

14. Major Suppliers

The Company had purchased its plastic storage sheds, yard carts, compost
bins, and doghouses from one supplier. In July 1998, the Company
transferred its production molds for yard carts to a new supplier. In
November 1998, the Company transferred its production mold for compost bins
and storage sheds to the same new supplier. The new supplier is
producing the yard carts, storage sheds and compost bins and has
not experienced any significant difficulties in meeting scheduled
deliveries. The suppliers manufacture the products in accordance with the
Company's designs and specifications. The Company believes that other
suppliers could provide the required products although comparable terms may
not be realized. A change in suppliers could cause a delay in scheduled
deliveries of products to the Company's customers and a possible loss of
revenue, which would adversely affect the Company's results of operations.

15. Inventories

Inventories are stated on a first-in, first-out (FIFO) basis at the lower of
cost or market. Inventories consisted of the following at:

(Unaudited)
June 30, (Audited)
------------------------ September 30,
1999 1998 1998
---- ---- ----

Raw Material, primarily purchased
components $1,696,000 $1,658,000 $1,338,000
Work in Process 17,000 22,000 29,000
Finished Goods 1,010,000 724,000 721,000
--------------------------------------
$2,723,000 $2,404,000 $2,088,000
======================================

16. Other Assets

Other assets consisted of the following at:

(Unaudited)
June 30, (Audited)
-------------------- September 30,
1999 1998 1998
---- ---- ----

Other receivable, net of current portion -- -- $ 33,000
Note receivable - employee, due under
terms of an annual renewal note,
interest payable monthly at an
annual rate of 6%, secured by a
second mortgage 100,000 100,000 100,000
Other 6,000 7,000 6,000
-----------------------------------
$106,000 $107,000 $139,000
===================================

17. Other Current Liabilities

Other current liabilities consisted of the following at:

(Unaudited)
June 30, (Audited)
---------------------- September 30,
1999 1998 1998
---- ---- ----

Retirement plan $313,000 $ 331,000 $313,000
Salaries, commissions and benefits 141,000 183,000 62,000
Sales allowances and incentives 71,000 115,000 109,000
Professional fees 127,000 94,000 205,000
Warranty costs 54,000 71,000 57,000
Advertising costs 115,000 110,000 103,000
Freight charges 49,000 38,000 15,000
Other 71,000 58,000 61,000
------------------------------------
$941,000 $1,000,000 $925,000
====================================

18. Debt

Line of Credit with Related Parties

On April 20, 1999, the realty trust converted $2,000,100 of the principal
amount of debt owed to it by the Company into 6,667 shares of Series A
Convertible Preferred Stock, $100 par value per share (the "Preferred Stock")
of the Company. The Preferred Stock votes on an as converted basis with the
common stock, $1.00 par value per share (the "Common Stock") of the Company
and is convertible into 6,667,000 shares of Common Stock, which represents
the power to vote 73% of the shares of capital stock of the Company.

The Company had $2,715,000 outstanding under this line of credit at June 30,
1999. The Company had $4,715,000 outstanding under this line of credit at
June 30, 1998 and September 30, 1998. Repayment of this line of credit is
subordinate to the repayment of any and all balances outstanding on the
revolving line of credit from a commercial finance company, which is further
described below. At June 30, 1999, interest payments of $1,713,000
associated with this line were in arrears for the period November 1, 1995 to
June 30, 1999. On November 24, 1998, the Company received a waiver for the
covenant violation as to the interest payments. The waiver extends the due
date as to interest payments until September 30, 1999.

Note Payable

The Company has a revolving line of credit agreement with a commercial
finance company, Congress Financial Corporation, which permits combined
borrowings up to $3,500,000 in cash and letters of credit. This credit
agreement is collateralized by all assets of the Company and expires in
December 1999. The terms of this agreement include a borrowing limit which
fluctuates depending on the levels of accounts receivable and inventory
which collateralize the borrowings. The agreement contains various
covenants pertaining to maintenance of working capital, net worth,
restrictions on dividend distributions and other conditions. Interest on
amounts outstanding is payable on a monthly basis at an annual rate of 1
3/4% over the commercial base rate. The commercial base rate was 7.75% at
June 30, 1999. At June 30, 1999, the Company did not have borrowings other
than outstanding letters of credit amounting to approximately $15,000. At
June 30, 1999, pursuant to the borrowing formula under this credit agreement
approximately $1,871,000 was available.

19. Commitments and Contingencies

At June 30, 1999, the Company has commitments of $230,000 for the purchase
of capital expenditures, primarily tooling and dies used by the Company's
Industrial Products segment.

In January 1991, the California Department of Health Services issued a
Corrective Action Order (CAO) against the Company and a former subsidiary.
The CAO requires the Company and a former subsidiary to comply with a
Cleanup and Abatement Order that had been issued in 1990 against the Company
for soil contamination at the site of the former subsidiary. To date, no
determination has been made with regard to the extent of any environmental
damage and who may be liable. The Company does not believe, based on the
information available at this time, that the outcome of this matter will
have a material adverse effect on its financial position or results of
operations.

An action was filed in U.S. District Court, Central District of California
(the "Court") in late 1996 relating to the foreign arbitration award
described below. The Company was first joined as a party by the first
amended petition filed on March 3, 1997. The second amended petition was
filed on June 27, 1997. The action seeks confirmation and enforcement of a
foreign arbitration award in favor of Alsthom, currently and formerly
Chantiers de L'Atlantique ("Alsthom"), and Assurances Generales de France
("AGF") (collectively "Petitioners") against Respondents J.C. Carter Company,
Inc. ("JCC III"), the Company, Armatron-JCC, Inc., formerly known as J.C.
Carter Company, Inc. ("JCC II"), a former subsidiary of the Company, and ITT
Corporation and ITT Industries, Inc. (collectively "ITT"). The arbitration
related to certain cryogenic cargo pumps supplied in the 1970's by the J.C.
Carter Company Division of ITT ("JCC I") to Alsthom, which installed the
pumps in two liquid natural gas tanker ships, the Mourad Didouche and the
Ramdane Abane. The arbitration award was entered in favor of Alsthom and
AGF, an insurer subrogated to the rights of Alsthom, and against "J.C. Carter
Company" or "J.C. Carter Company, Inc." by the International Chamber of
Commerce in Paris in 1995. The amount of the award as to AGF is 62,431,000
French francs ("FF") and as to Alsthom is 5,469,000 FF (an aggregate of
approximately $7 million U.S. dollars at June 30, 1999), both with interest
from January 30, 1993 at the "French official rate."

Petitioners' operative pleading in the legal action, its Second Amended
Petition, seeks confirmation of the award against JCC III and, in addition,
seeks its confirmation and enforcement against the other Respondents,
including the Company, on the theories of fraudulent conveyance, collateral
estoppel and virtual representation, judicial estoppel and equitable
estoppel, and alter ego and/or successor liability relating to events
transpiring from 1983 through the completion of the foreign arbitration
proceeding in 1997. In 1983, the Company and ITT were parties to an asset
sale transaction involving the business and assets of JCC I. JCC II, a now
inactive California corporation, was formed at that time for purpose of
acquiring the assets and certain liabilities of JCC I and ceased transacting
business after the 1987 asset sale transaction with JCC III.

The Company answered the Second Amended Petition denying any liability,
asserting various affirmative defenses and cross-claims against ITT for
contractual indemnity and for equitable indemnity. ITT and JCC III have
cross-claimed against the Company.

At the present time the Company is unable to determine the outcome of the
claims asserted by and against the Company in the legal action because the
case is still in the discovery stage and because of the existence of
disputed issues of fact bearing on the outcome of those claims. The parties
have entered into settlement discussions. However, no final resolution has
been reached. The Court has scheduled a trial date of December 21, 1999.
There can be no assurance that the outcome as to any of these matters will
not have an adverse effect on the financial condition of the Company.

In November 1998, the Company was advised that it had been named as a
defendant in a lawsuit brought by a consumer of one of the Company's
products. The consumer claims that the product caused personal injury and
other damages. The Company believes that it has valid defenses. The Company
has insurance coverage for such claims and accrued its insurance deductible
amount in fiscal 1998 to cover the estimated defense costs associated with
this matter.

20. Related Party Transactions

The Company paid approximately $45,000 for legal services during the nine
months ended June 30, 1999 and 1998 to a law firm to which a Director of the
Company is a member.

As further described in Note 18, the Company has a $7,000,000 line of credit
arrangement from a realty trust operated for the benefit of the Company's
principal shareholders.

Item 2. Management's Discussion and Analysis of Financial Conditions and
- -------------------------------------------------------------------------
Results of Operations
- ---------------------

OVERVIEW

The Company operates principally in two segments, the Consumer Products
segment and the Industrial Products segment. Operations in the Consumer
Products segment involve the manufacture and distribution of Flowtron leaf-
eaters, bugkillers, yard carts, compost bins, biomisters, storage sheds and
doghouses which comprised 93%, 94% and 93% of the Company's sales for the
nine months ended June 30, 1999 and 1998 and for the year ended September
30, 1998, respectively. The Company distributes its consumer products
primarily to major retailers throughout the United States, with some
products distributed under customer labels. Substantially all of this
segment's sales and accounts receivable relates to business activities with
such retailers. The Industrial Products segment manufactures electronic
obstacle avoidance systems for transportation and automotive applications
and markets these systems under the trademark "Echovision". Production of
these systems began in fiscal 1996. There are no intercompany sales between
segments. For the nine months ended June 30, 1999, Sears Roebuck and Co.
and Home Depot, Inc. accounted for approximately 37% and 14%, respectively,
of the Company's net sales. At June 30, 1999, Sears Roebuck and Co. and
Home Depot, Inc. accounted for approximately 58% and 9%, respectively, of
the Company's trade accounts receivable balance. If any of the Company's
major customers fail to pay the Company on a timely basis, it could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company had purchased its plastic storage sheds,
yard carts, compost bins, and doghouses from one supplier. In July 1998,
the Company transferred its production molds for its yard carts to another
supplier and, in November 1998, the Company transferred its production molds
for its storage sheds and compost bins to this new supplier. The new
supplier is producing yard carts, storage sheds and compost bins and has not
experienced any significant difficulties in meeting scheduled deliveries.
The suppliers manufacture these products in accordance with the Company's
designs and specifications. The Company believes that other suppliers could
provide the required products although comparable terms may not be realized.
A change in suppliers could cause a delay in scheduled deliveries of
products to the Company's customers and a possible loss of revenue, which
would adversely affect the Company's results of operations.

On April 20, 1999, the realty trust operated for the benefit of the Company's
principal shareholders converted $2,000,100 of the principal amount of debt
owed to it by the Company into 6,667 shares of Series A Convertible
Preferred Stock, $100 par value per share (the "Preferred Stock") of the
Company. The Preferred Stock votes on an as converted basis with the common
stock, $1.00 par value per share (the "Common Stock") of the Company and is
convertible into 6,667,000 shares of Common Stock, which represents the
power to vote 73% of the shares of capital stock of the Company.

On April 21, 1999, the Board of Directors of the Company unanimously
approved a merger between the Company and Armatron Merger Corporation, a
newly formed Massachusetts corporation that was organized as a
nonsubstantive transitory vehicle to effect the following transactions
("MergerCo"), in which MergerCo will merge into the Company (the "Merger")
with the Company continuing as the surviving corporation (the "Surviving
Corporation"). In the Merger, (i) each outstanding share of Common Stock
will be converted into the right to receive $0.27 in cash (except that any
shares held by MergerCo or in the Company's treasury will be canceled and
any stockholder who properly dissents from the Merger will be entitled to
appraisal rights under Massachusetts law); (ii) each outstanding share of
common stock, $0.01 par value per share, of MergerCo will be converted into
one share of common stock, $.01 par value per share, of the Surviving
Corporation; and (iii) each outstanding share of Series A Preferred Stock,
$100 par value per share, of the Company will be converted into one share
of Series A Preferred Stock, $.01 par value per share, of the Surviving
Corporation.

FORWARD-LOOKING STATEMENTS

Management's discussion and analysis of the results of operations and
financial conditions and other sections of this report contain forward-
looking statements about its prospects for the future. Such statements are
subject to certain risks and uncertainties, which could cause actual results
to differ materially from those projected. Such risks and uncertainties
include, but are not limited to the following:

* The Company's consumer products business is cyclical and is affected
by weather and some of the same economic factors that affects the
consumer and lawn and garden industries generally, including interest
rates, the availability of financing and general economic conditions.
In addition, the lawn and garden products manufacturing business is
highly competitive. Actions of competitors, including changes in
pricing, or slowing demand for lawn and garden products due to general
or industry economic conditions or the amount of inclement weather
could result in decreased demand for the Company's products, lower
prices received or reduced utilization of plant facilities.

* Increased costs of raw materials can result in reduced margins, as can
higher transportation and shipping costs. Historically, the Company
has been able to pass some of the higher raw material and
transportation costs through to the customer. Should the Company be
unable to recover higher raw material and transportation costs from
price increases of its products, operating results could be adversely
affected.

* If progress in manufacturing of products is slower than anticipated or
if demand for products produced does not meet current expectations,
operating results could be adversely affected.

* If the Company is not successful in strengthening its relationship
with its customers, growing sales at targeted accounts, and expanding
geographically, operating results could be adversely affected.

* If the Company loses any of its major customers, operating results
could be adversely affected.

YEAR 2000 DATE CONVERSION

The Company has completed the analysis and evaluation phase of it Year 2000
project and has determined that it is required to modify or replace
significant portions of its hardware and software so that its computer
systems will properly utilize dates beyond December 31, 1999. The Company
upgraded and modernized its major information systems, including its
operating and financial systems. The replacement systems are Year 2000
compliant. The Company began using its new systems during the second quarter
of fiscal 1999 and has not experienced any significant difficulties with the
systems. The Company utilized both internal and external resources to
reprogram or replace, and test the software for Year 2000 modifications.
The Company completed its Year 2000 project July 31, 1999. The total cost
of upgrading most of the Company's major operating and financial systems,
including the Year 2000 project, for fiscal years 1998 through 2000, is
estimated at $100,000 and is being funded through operating cash flows and
leasing arrangements. Of the total project cost, approximately $80,000 has
been expended and is attributable to the purchase of new software and
hardware. The remaining $20,000 will be expensed, as incurred, on additional
consulting, hardware and software, if required.

The Company has been in communication with its major vendors to ensure
compatibility of systems. If such systems do not function properly the
Company could experience delays in receipt of its raw materials which would
result in delays in scheduled deliveries of shipments by the Company.

The Company expects to begin developing contingency plans to determine what
actions the Company will take if its trading partners are not Year 2000
compliant. The Company expects the contingency plan to be completed by the
end of the third quarter in fiscal 1999.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary cash requirements are for operating expenses,
including labor costs, raw material purchases and funding of accounts
receivable. Historically, the Company's sources of cash have been
borrowings from banks and finance companies and notes from related parties.

During the nine months ended June 30, 1999, operating activities used
$1,561,000 of cash primarily due to the net loss of $593,000, the increases
in accounts receivable of $1,260,000, inventories of $635,000 and prepaid
and other current assets of $151,000, offset by the increases in accounts
payable of $554,000 and interest payable to related parties of $318,000.

The Company Consumer Products segment is subject to seasonal fluctuations.
The Company manufactures its products primarily in the first three quarters
of its fiscal year with most product shipments occurring in the third and
fourth quarters of the Company's fiscal year. Inventories were built up so
that the Company will have the necessary products available for timely shipment
to its customers during the Company's third and fourth quarters. In addition,
accounts payable increased due to the increased purchasing activities of the
Company in support of its inventory buildup.

Other current liabilities decreased $59,000 To $941,000 at June 30, 1999 as
compared to $1,000,000 at June 30, 1998. Salaries, commissions and benefits
decreased approximately $42,000 to $141,000 at June 30, 1999 as compared to
$183,000 at June 30, 1998 primarily due to cost containment efforts of the
Company. Sales allowances and incentives decreased approximately $44,000 to
$71,000 at June 30, 1999 as compared to $115,000 at June 30, 1998 due to less
incentives being offered by the Company as compared to those offered in the
prior year. Accrued professional fees increased approximately $33,000 to
$127,000 at June 30,1999 as compared to $94,000 at June 30, 1998 primarily due
to estimated legal defense costs associated with product liabilities.

The Company has a $3,500,000 revolving line of credit agreement with a
commercial finance company. This credit agreement is collateralized by all
assets of the Company and expires in December 1999. The terms of this
agreement include a borrowing limit which fluctuates depending on the levels
of accounts receivable and inventory which collateralize the borrowings.
The agreement contains various covenants pertaining to maintenance of
working capital, net worth restrictions on dividend distributions and other
conditions. Interest on amounts outstanding is payable at 1 3/4% over the
commercial base rate. The commercial base rate was 7.75% at June 30, 1999.
At June 30, 1999, the Company did not have borrowings other than outstanding
letters of credit amounting to approximately $15,000. At June 30, 1999,
pursuant to the borrowing formula under this credit agreement approximately
$1,871,000 was available.

The Company has a $7,000,000 line of credit with a realty trust operated for
the benefit of the Company's principal shareholders. This line of credit,
with interest at 10%, requires monthly payments of interest only, and is
collateralized by all assets of the Company. Such collateral is subordinate
to the revolving line of credit agreement with the finance company. On April
20, 1999, the realty trust operated for the benefit of the Company's
principal shareholders converted $2,000,100 of the principal amount of debt
owed to it by the Company into 6,667 shares of Series A Convertible
Preferred Stock, $100 par value per share of the Company. The Company had
$2,715,000 outstanding under this line of credit at June 30, 1999. The
Company had $4,715,000 outstanding under this line of credit at June 30,
1998 and September 30, 1998. Repayment of this line of credit is
subordinate to the repayment of any and all balances outstanding on the
revolving line of credit from the commercial finance company. At June 30,
1999, interest payments of $1,713,000 associated with this line were in
arrears for the period November 1, 1995 to June 30, 1999. On November 24,
1998, the Company received a waiver for the covenant violation as to the
interest payments. The waiver extends the due date as to the interest
payments until September 30, 1999.

Sales terms for the Industrial Products segment are 30 days net. Following
industry trade practice, the Consumer Products segment offers extended
payment terms for delivery of seasonal product items such as the bugkillers,
electric leaf-eater, biomister, compost bin, yard carts and storage sheds,
resulting in fluctuating requirements for working capital.

In January 1991, the California Department of Health Services issued a
corrective action order (CAO) against the Company and a former subsidiary to
comply with a Cleanup and Abatement order which had been issued in 1990.
The CAO requires the Company and a former subsidiary to comply with a
cleanup and abatement order that had been issued in 1990 against the Company
for soil contamination at the site of the former subsidiary. To date, no
determination has been made with regard to the extent of any environmental
damage and who may be liable. The Company does not believe, based upon the
information available at this time, that the outcome of this matter will
have a material adverse effect on its financial position or results of
operations.

The action seeks confirmation and enforcement of a foreign arbitration award
in favor of Alsthom, currently and formerly Chantiers de L'Atlantique
("Alsthom"), and Assurances Generales de France ("AGF") (collectively
"Petitioners") against Respondents J.C. Carter Company, Inc. ("JCC III"),
the Company, Armatron-JCC, Inc., formerly known as J.C. Carter Company, Inc.
("JCC II"), a former subsidiary of the Company, and ITT Corporation and ITT
Industries, Inc. (collectively "ITT"). The arbitration related to certain
cryogenic cargo pumps supplied in the 1970's by the J.C. Carter Company
Division of ITT ("JCC I") to Alsthom, which installed the pumps in two
liquid natural gas tanker ships, the Mourad Didouche and the Ramdane Abane.
The arbitration award was entered in favor of Alsthom and AGF, an insurer
subrogated to the rights of Alsthom, and against "J.C. Carter Company" or
"J.C. Carter Company, Inc." by the International Chamber of Commerce in
Paris in 1995. The amount of the award as to AGF is 62,431,000 French
francs ("FF") and as to Alsthom is 5,469,000 FF (an aggregate of
approximately $7 million U.S. dollars at June 30, 1999), both with interest
from January 30, 1993 at the "French official rate."

At the present time the Company is unable to determine the outcome of the
claims asserted by and against the Company in the legal action because the
case is still in the discovery stage and because of the existence of
disputed issues of fact bearing on the outcome of those claims. The parties,
have entered into settlement discussions, however, no final resolution has
been reached. The Court has scheduled a trial date of December 21, 1999.
There can be no assurance that the outcome as to any of these matters will
not have an adverse effect on the financial condition of the Company.

In November 1998, the Company was advised that it had been named as a
defendant in a lawsuit brought by a consumer of one of the Company's
products. The consumer claims that the product caused personal injury and
other damages. The Company believes that it has valid defenses. The Company
has insurance coverage for such claims and has accrued its insurance
deductible amount in fiscal 1998 to cover the estimated defense costs
associated with this matter.

During the nine months ended June 30, 1999, the Company made cash
investments of $63,000 in capital expenditures primarily for tooling and
dies used in production and manufacturing equipment. At June 30, 1999, the
Company has commitments of approximately $230,000 for the purchase of
capital expenditures, primarily for tooling and dies used by the Company's
Industrial Products segment.

The Company believes that its present working capital, credit arrangements
with a commercial finance company and related parties, and other sources of
financing will be sufficient to finance its seasonal borrowing needs,
operations and investment in capital expenditures in fiscal 1999. Other
sources of financing, provided by the Company's principal stockholder, are
available to finance any working capital deficiencies.

RESULTS OF OPERATIONS

Three Months Ended June 30, 1999
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The results of consolidated operations for the three months ended June 30,
1999 resulted in a net income of $250,000, or a basic earnings per share of
$.10, as compared with net income of $601,000, or a basic earnings per share
of $.24 per share, for the three months ended June 30, 1998.

Sales decreased $2,043,000, or 33.8%, to $4,003,000 for the three months
ended June 30, 1999, as compared to $6,046,000 for the corresponding period
in the previous year. The decrease in sales was attributable to a 35.4%
decrease in sales of Company's Consumer Products offset by a 9.5% increase
in sales of Company's Industrial Products.

Operating profit is the result of deducting operating expenses excluding
interest expense, general corporate expenses, and income taxes from total
revenue.

Sales and operating profit for the Consumer Products segment for the three
months ended June 30, 1999 were approximately $3,772,000 and $525,000,
respectively, as compared to $5,835,000 and $898,000, respectively, for the
three months ended June 30, 1998. Sales of the Consumer Product segment
decreased $2,063,000, or 35.4%, primarily due to decreased sales of
bugkiller and shed products. Customers delayed deliveries and orders of
bugkiller products due to unseasonable weather conditions. The Company
anticipates that sales of the Consumer Products segment for the remainder of
the fiscal year will be lower than the level of sales in fiscal 1998 due to
the unseasonable weather conditions being experienced throughout the United
States.

Sales and operating profit for the Industrial Products segment for the three
months ended June 30, 1999 were $231,000 and $19,000, respectively, as
compared to sales of $211,000 and operating loss of $1,000, for the three
months ended June 30, 1998. The increase in net sales for the Industrial
Products segment of $20,000, or 9.5%, was due to increased shipments of the
Company's Echovision systems to this segment's major customer. During the
three months ended June 30, 1999, this customer accepted additional
Echovision systems that were previously scheduled for the prior quarters.
The Company anticipates that sales of the Industrial Products will
approximate the same levels as those of fiscal 1998.

Selling, general and administrative expenses were $652,000 and $766,000 for
the three months ended June 30, 1999 and 1998, respectively. Selling,
general and administrative expenses, as a percentage of sales, were 16.3%
during the three months ended June 30, 1999 as compared to 12.7% during the
three months ended June 30, 1998. The increase in the percentage was due to
the decrease in sales at a greater percentage than the expenses.

Taxes were not provided during the three months ended June 30, 1999 as the
Company has net operating loss carryforwards available to offset such tax
provision.

Nine Months Ended June 30, 1999
- -------------------------------

The results of consolidated operations for the nine months ended June 30,
1999 resulted in a net loss of $593,000, or a basic loss per share of $.24
per share, as compared with net loss of $97,000, or a basic loss per share
of $.04, for the nine months ended June 30, 1998.

Sales decreased $2,118,000, or 20.3%, to $8,340,000 for the nine months
ended June 30, 1999, as compared to $10,458,000 for the corresponding period
in the previous year. The decrease in sales was attributable to a 21.4%
decrease in sales of Consumer Products and a 1.2% decrease in sales of
Industrial Products.

Operating profit is the result of deducting operating expenses excluding
interest expense, general corporate expenses, and income taxes from total
revenue.

Sales and operating profit for the Consumer Products segment for the nine
months ended June 30, 1999 were approximately $7,756,000 and $312,000,
respectively, as compared to $9,867,000 and $782,000, respectively, for the
nine months ended June 30, 1998. Sales decreased $2,111,000, or 21.4%,
primarily due to decreased sales of bugkiller and shed products. Product
lines within the Consumer Products segment are subject to seasonal
fluctuations, with most shipments occurring in the spring and summer
seasons. The Company anticipates that sales of the Consumer Products
segment for the remainder of the fiscal year will be lower than the same
level of sales in fiscal 1998 due to the unseasonable weather conditions
being experienced throughout the United States.

Sales and operating loss for the Industrial Products segment for the nine
months ended June 30, 1999 were $584,000 and $34,000, respectively, as
compared to sales of $591,000 and operating loss of $5,000, for the nine
months ended June 30, 1998. Net sales for the Industrial Products segment
decreased $7,000, or 1.2%. The Company anticipates that sales of the
Industrial Products will approximate the same levels as those of fiscal 1998.

Selling, general and administrative expenses decreased $88,000, or 4.9%, to
$1,719,000 for the nine months ended June 30, 1999, as compared to
$1,807,000 for the nine months ended June 30, 1998. Selling, general and
administrative expenses, as a percentage of sales, were 20.6% during the
nine months ended June 30, 1999 as compared to 17.3% during the nine months
ended June 30, 1998.The increase in the percentage was due to the decrease
in sales at a greater percentage than the decrease in expenses.

Additional tax benefits from losses on operations during the nine months
ended June 30, 1999 were offset by changes to the related valuation
allowance.

Item 3. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------

PART II - Other Information

Item 2. Changes in Securities and Use of Proceeds
- --------------------------------------------------

On April 20, 1999, the Company issued 6,667 shares of Series A Convertible
Preferred Stock, $100 par value per share (the "Preferred Stock"), to the
Housman Realty Trust (the "Trust") at a purchase price of $300.00 per share.
Payment was made by converting $2,000,100 of the principal amount of debt
owed to the Trust by the Company pursuant to a Promissory Note dated January
11, 1990, as amended, in the original principal sum of $7,000,000. The
Preferred Stock votes on an as converted basis with the common stock, $1.00
par value per share (the "Common Stock"), of the Company which represents the
power to vote 73% of the shares of capital stock of the Company.

The Preferred Stock may be converted into 6,667,000 shares of Common Stock at
the request of the Preferred Stockholder provided, however, the Company shall,
prior to the date of conversion of the Preferred Stock, take such corporate
action as may be necessary to increase its number of authorized but unissued
shares of Common Stock to such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Preferred Stock. Each share of Preferred Stock shall automatically
be converted into shares of Common Stock in the event of (a) the conversion
of 75% of all outstanding shares of Preferred Stock into Common Stock,
effective upon such conversion, or (b) the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended.

The transaction was a private placement exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended, to an accredited
investor as defined in Regulation D thereunder.

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

(a) Exhibits

27 - Financial Data Schedule

(b) Reports on Form 8-K

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

ARMATRON INTERNATIONAL, INC.

August 12, 1999 By: /s/ Charles J. Housman
----------------------
Charles J. Housman
Chairman of the Board,
President and Director
Chief Executive, Financial
and Accounting Officer

EXHIBIT INDEX

Exhibit 27 Financial Data Schedule