SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-QSB

(Mark One)

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

                For the quarterly period ended September 30, 1997 

                                       OR

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



                          Commission File Number 0-5633


                           ENVIRONMENT ONE CORPORATION
                 (Name of small business issuer in its charter)


           New York                                             14-1505298  
--------------------------------------------------------------------------------
(State or other  jurisdiction  of                           (IRS Employer
incorporation of organization)                             Identification No.)


   2773 Balltown Road, Niskayuna, NY                            12309-1090
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)


                    Issuer's telephone number (518) 346-6161



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                             Yes  [ X ]    No  [   ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares of Common  Stock,  par value $.10 as of September 30, 1997:
4,237,338.


Transitional Small Business Disclosure Format (check one):
 
                             Yes  [   ]    No  [ X ]
<PAGE>
                           Environment One Corporation
                                   FORM 10-QSB



                                      INDEX



                                                                 

Part I. Financial Information-

Item 1. - Financial Statements
Consolidated Balance Sheets September 30, 1997 and
December 31, 1996                                                

Consolidated Statements of Income for the Nine Months
Ended September 30, 1997 and 1996                                

Consolidated Statements of Income for the Three Months
Ended September 30, 1997 and 1996                                

Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996                                

Notes to Consolidated Financial Statements                       

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

Part II. Other Information                                       

Signatures                                                       

<PAGE>
                         Part I - Financial Information                         
                                                                                
Item 1. Financial Statements
<TABLE>
<CAPTION>
                          Environment One Corporation
                          Consolidated Balance Sheets
                    September 30, 1997 and December 31, 1996


                  Assets                            9/30/97          12/31/96
                                                 ------------      ------------
<S>                                              <C>              <C>    
Current Assets
     Cash and Cash Equivalents .............     $  1,023,019            62,637
     Accounts Receivable, Net ..............        6,152,584         4,931,421
     Inventories
             Raw Materials .................        1,535,611         1,439,020
             Work in Process ...............          242,776           469,001
             Finished Goods ................          125,741           364,079
                                                 ------------      ------------
                                                    1,904,128         2,272,100
Other Current Assets .......................          519,916           347,577
                                                 ------------      ------------
     Total Current Assets ..................        9,599,647         7,613,735
                                                 ------------      ------------


Property, Plant and Equipment
     Land ..................................          334,491           334,491
     Buildings .............................        2,294,862         2,271,832
     Machinery and Equipment ...............        5,225,364         5,024,175
     Construction in Progress ..............          157,698            50,689
     Less: Accumulated Depreciation ........       (4,755,173)       (4,310,173)
                                                 ------------      ------------
     Net Property, Plant and Equipment .....        3,257,242         3,371,014
Other Assets ...............................          231,150           269,792
                                                 ------------      ------------
Total Assets ...............................       13,088,039        11,254,541
                                                 ============      ============


   Liabilities and Shareholders' Equity
                                                                   
Current Liabilities
     Current Installments - Long Term Debt .          338,100           338,100
     Note Payable - Bank ...................                0            75,000
     Accounts Payable ......................        2,211,445         1,918,866
     Accrued Expenses ......................        1,681,724         1,296,170
                                                 ------------      ------------
          Total Current Liabilities ........        4,231,269         3,628,136

Deferred Compensation ......................          339,294           369,461
Minority Interest ..........................           63,391            43,068
Long Term Debt .............................        1,246,919         1,500,494
                                                 ------------      ------------
      Total Liabilities ....................        5,880,873         5,541,159
                                                 ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                          Environment One Corporation
                          Consolidated Balance Sheets
                    September 30, 1997 and December 31, 1996
                                  (continued)


                                                    9/30/97          12/31/96
                                                 ------------      ------------
<S>                                              <C>              <C>    
Shareholders' Equity
     Common Stock at Par Value .............          425,772           416,997
     Additional Paid in Capital ............        7,958,571         7,446,789
     Accumulated Deficit ...................         (757,064)       (2,076,164)
                                                 ------------      ------------
                                                    7,627,279         5,787,622
     Less: Treasury Stock at Cost ..........         (420,113)          (74,240)
                                                 ------------      ------------
       Total Shareholders' Equity ..........        7,207,166         5,713,382
                                                 ------------      ------------

Total Liabilities and Shareholders' Equity .     $ 13,088,039        11,254,541
                                                 ============      ============
</TABLE>
         (See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
<TABLE>
<CAPTION>
                         Environment One Corporation
                      Consolidated Statements of Income
            For the Nine Months Ended September 30, 1997 and 1996


                                                 Nine Months Ended September 30,
                                                 -------------------------------
                                                     1997               1996
                                                 ------------      ------------
<S>                                              <C>               <C>
Revenue ....................................     $ 17,227,902        15,307,202
                                                 ------------      ------------
Costs and Expenses

          Cost of Sales ....................       10,819,066        10,446,106

          Selling and Marketing ............        1,896,824         1,726,926

          General and Administrative .......        2,359,796         1,489,956

          Interest Expense, Net ............          105,282           195,478

         Other Income, Net .................          (83,566)          (45,388)
                                                 ------------      ------------

Total Expenses, Net ........................       15,097,402        13,813,078
                                                 ------------      ------------

Net Income Before Taxes ....................        2,130,500         1,494,124

Income Tax Expense .........................          811,400           566,505
                                                 ------------      ------------

Net Income .................................     $  1,319,100           927,619
                                                 ============      ============

Per Share Amounts:
Primary Earnings per Common Share ..........     $       0.30              0.22
Fully Diluted Earnings per Common Share ....             0.29              0.22
                                                 ============      ============
</TABLE>
        (See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
<TABLE>
<CAPTION>
                         Environment One Corporation
                      Consolidated Statements of Income
           For the Three Months Ended September 30, 1997 and 1996

                                                  Three Months Ended September 30,
                                                   ------------------------------- 
                                                       1997              1996
                                                   -----------       -----------
<S>                                                <C>               <C> 
Revenue .....................................      $ 6,977,174         6,033,821
                                                   -----------       -----------

Costs and Expenses

          Cost of Sales .....................        4,126,376         3,876,205

          Selling and Marketing .............          676,143           643,684

          General and Administrative ........        1,038,755           720,294

          Interest Expense, Net .............           23,336            65,650

         Other Expense (Income), Net ........          (73,345)          134,702
                                                   -----------       -----------

Total Expenses, Net .........................        5,791,265         5,440,535
                                                   -----------       -----------

Net Income Before Taxes .....................        1,185,909           593,286

Income Tax Expense ..........................          450,100           225,705
                                                   -----------       -----------

Net Income ..................................      $   735,809           367,581
                                                   ===========       ===========

Per Share Amounts:
Primary Earnings per Common Share ...........      $      0.16              0.09
Fully Diluted Earnings per Common Share .....             0.16              0.09
                                                   ===========       ===========
</TABLE>
        (See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
<TABLE>
<CAPTION>
                                    Environment One Corporation
                                 Consolidated Statements of Income
                       For the Nine Months Ended September 30,1997 and 1996

                                                                    Nine Months Ended September 30,
                                                                    ------------------------------- 
                                                                         1997              1996
                                                                     -----------      -----------
<S>                                                                  <C>              <C>  
Cash Flows-Operating Activities:

Net Income .....................................................     $ 1,319,100          927,619

Adjustments to Reconcile Net Earnings
to Net Cash Provided (Used) by Operating Activities:

Non-cash Compensation Expense ..................................         130,006          102,495
Gain on Curtailment of Defined Benefit Pension Plan ............         (63,000)               0
Depreciation and Amortization ..................................         465,552          447,003
Decrease (Increase) - Accounts Receivable, Net .................      (1,221,163)      (1,723,818)
Decrease (Increase) - Inventories ..............................         367,972          (30,268)
Decrease (Increase) - Prepaid Expenses .........................        (172,339)         (84,928)
Decrease (Increase) - Other L/T Assets .........................          18,090          131,847
Increase (Decrease) - Accounts Payable .........................         292,579          648,968
Increase (Decrease) - Accrued Expenses and Other Liabilities.....        455,968          437,217
Increase (Decrease) - Minority Interest ........................          20,323           (9,528)
                                                                     -----------      -----------

Net Cash Provided (Used) by Operating Activities ...............       1,613,088          846,607
                                                                     -----------      -----------

Cash Flows Used in Investing Activities:
Capital Expenditures ...........................................        (331,228)        (395,254)
                                                                     -----------      -----------

Cash Flows From Financing Activities:
Increase (Decrease) - Note Payable to Bank .....................         (75,000)        (175,000)
Increase (Decrease) - Long Term Debt ...........................        (253,575)        (253,719)
Issuance of Common Stock .......................................           7,097            2,073
(Increase) - Treasury Stock ....................................               0          (34,489)
                                                                     -----------      -----------

Net Cash Provided (Used) by Financing Activities ...............        (321,478)        (461,135)
                                                                     -----------      -----------

Net Increase (Decrease) in Cash and Cash Equivalents .........           960,382           (9,782)

Cash and Cash Equivalents at Beginning of Period .............            62,637           91,115
                                                                     -----------      -----------

Cash and Cash Equivalents at End of Period ...................       $ 1,023,019           81,333
                                                                     ===========      ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                    Environment One Corporation
                                 Consolidated Statements of Income
                       For the Nine Months Ended September 30,1997 and 1996

                                                                    Nine Months Ended September 30,
                                                                    ------------------------------- 
                                                                         1997              1996
                                                                     -----------      -----------
<S>                                                                  <C>              <C>  
Supplemental disclosure of non-cash financing activity:

  Issuance of 65,681 shares of common stock held in trust,
  recorded as treasury stock as part of the Company's
  deferred compensation plan for certain executive officers,
  reduced by 5,363 shares issued in July, 1997 to a       
  participant ................................................       $   339,294             --
                                                                     ===========      ===========

  Exchange of 892 and 2,390 shares of common stock in
  partial payment of exercise price on stock options during
  1997 and 1996, respectively ..................................     $     6,579           14,340
                                                                     ===========      ===========

  Tax benefit from exercise of stock options ...................     $     7,414           31,425
                                                                     ===========      =========== 

Cash paid during the year for:

  Interest                                                           $   127,629          197,892
                                                                     ===========      =========== 
  Income Taxes                                                       $   777,394          469,946
                                                                     ===========      =========== 
</TABLE>
                   (See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
                           Environment One Corporation
                   Notes to Consolidated Financial Statements
              For the Nine Months Ended September 30, 1997 and 1996
                                   (Unaudited)

         1.  In  the  opinion  of   management,   the   accompanying   unaudited
consolidated  financial statements contain all adjustments,  which are only of a
normal   recurring   nature,   necessary  to  fairly  present   Environment  One
Corporation's financial position as of September 30, 1997 and December 31, 1996,
the results of operations for the three and nine months ended September 30, 1997
and 1996 and cash flows for the nine months ended  September  30, 1997 and 1996.
Operating results for any quarter are not necessarily  indicative of results for
any future periods.

         2. Net earnings per share  computations  are based on primary and fully
diluted  number of shares of  Common  Stock  outstanding  for the three and nine
months ended  September  30, 1997 and 1996  (September  30,  1997,  three months
4,460,745  and 4,475,987  shares,  nine months  4,431,542 and 4,475,987  shares;
September 30, 1996,  three months  4,248,140 and 4,263,234  shares,  nine months
4,248,186 and 4,264,890 shares).

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128,  "Earnings per Share" (Statement 128),
which  establishes  standards for computing  and  presenting  earnings per share
(EPS).  This  Statement  simplifies  the standards for computing EPS making them
comparable to international EPS standards and supersedes  Accounting  Principals
Board  Opinion  No.  15,  "Earnings  per  Share"  and  related  interpretations.
Statement 128 replaces the  presentation of primary EPS with the presentation of
basic EPS. It also  requires dual  presentation  of basic and diluted EPS on the
face of the income  statement for all entities with complex  capital  structures
and requires a reconciliation  of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.

Basic EPS excludes  dilution  (such as the effect of the  Company's  outstanding
stock  options)  and  is  computed  by  dividing  income   available  to  common
stockholders by the weighted average number of common shares outstanding for the
period.  Diluted  EPS  reflects  the  potential  dilution  that  could  occur if
securities of other  contracts to issue common stock were exercised or converted
into common  stock or resulted in the  issuance of common stock that then shared
in the  earnings  of the entity  (such as the  Company's  stock  options).  This
Statement is effective for financial  statements issued for periods ending after
December  15,  1997,  including  interim  periods.  Earlier  application  is not
permitted.  This Statement  requires  restatement of all  prior-period  EPS data
presented.

The Company will present its EPS information in accordance with Statement 128 as
of December 31, 1997. Management  anticipates that the effect of the adoption of
this  Statement  will not have a material  effect on the Company's  consolidated
financial statements.

         3. In January,  1996,  the Company  concluded an agreement  with PROTEC
Fire Detection,  plc of Nelson,  Lancashire,  England for the sale of its Cirrus
IFD  product  line.  In a two-stage  transaction  with an  approximate  value of
$750,000, the Company transferred all Cirrus IFD assets and operations to PROTEC
and simultaneously  entered into a product technology  development contract that
was concluded in 1996. The pre-tax impact of the sale, net of certain  expenses,
was a gain of  $176,000  and is  recorded as other  income in the  statement  of
income for the nine months ended September 30, 1996.
<PAGE>
                   Notes to Consolidated Financial Statements
        For the Nine Months Ended September 30, 1997 and 1996, continued

         4. In September,  1996, the Company recognized the potential default of
a note receivable from General Testing Corporation incurring a pre-tax write-off
of $136,000.  After failure to receive timely payments on the note, the Company,
through legal counsel,  served notice of default on the note to General  Testing
Corporation.  General Testing  Corporation did not cure the payment  defaults in
the period required.

         5.  In  the  fourth  quarter  of  1997,  the  Company  anticipates  the
termination of its defined benefit  pension plan in favor of a matching  program
within  its 401K  plan.  This  will  result  in a gain  from  curtailment  of an
estimated  $63,000 offset  entirely by one-time costs to terminate the plan. The
income and expense are recorded in other  income and general and  administrative
expense, respectively in the third quarter of 1997.

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

Results of Operations
The following  information  should be read in conjunction  with the consolidated
financial  statements  and notes  thereto  included in Item 1 of this  Quarterly
Report,  and  the  consolidated  financial  statements  and  notes  thereto  and
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  contained in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996.

                  Nine Months Ended September 30, 1997 and 1996
                   (all figures rounded to the nearest 000's)

Revenue for the period  increased  $1,921,000 or 12.5% over the same period last
year.  Increased  revenues  were  recorded over the first nine months of 1996 in
both Sewer Systems and Detection Systems businesses.

Revenue's from the Company's Sewer Systems business continue to show improvement
over prior periods benefited by a surge in third quarter 1997 revenue over 1996.
Management is of the opinion that the addition of a more  powerful  distribution
network,  increases  in the number  and size of  municipal  projects,  continued
growth in the overall market and realignment of its sales  territories  accounts
for this growth.  Shipments to two large municipal projects,  one in Indiana and
one in Texas, were begun in the third quarter of 1997 and will continue into the
fourth quarter.

As part  of the  Detection  Systems  business  revenue  increase,  sales  of the
Company's Hydrogen Control Cabinet (HCC) showed significant improvement over the
same period last year.  During 1996, the Company did not record sales in quarter
one due to project  order  delays.  For 1997,  steady  shipments of the HCC were
recorded during the first six months of the year while shipments slowed somewhat
during the third  quarter.  Helping to offset the  reduced  third  quarter  1997
shipments of the Hydrogen Control Cabinet were sales of the recently  introduced
Generator  Gas Analyzer  which  continues to show a growing  market  acceptance.
Generator Condition Monitor sales improved  significantly  during the first nine
months of 1997 over 1996  buoyed by strong  results in all three  quarters.  The
Company announced a major order with Hitachi of Japan that includes both GCM and
HCC products with shipments beginning in the fourth quarter of 1997.
<PAGE>
            Nine Months Ended September 30, 1997 and 1996, continued
                   (all figures rounded to the nearest 000's)

The Company  finished its commitment to manufacture  and supply Cirrus IFD units
to PROTEC early in the third quarter of 1997.

Cost of sales  increased  $373,000  when  compared to the same period last year.
Expressed  as a percent of sales,  cost of sales  decreased  by 5.4 points  from
68.2% to 62.8%. The resulting improvement in gross margin is mainly attributable
to reduced  direct  material  and labor costs  expressed  as a percent of sales.
Indirect labor costs remained flat while indirect  non-labor  costs increased in
the categories of maintenance,  incoming  freight and small tools reflecting the
impact of higher variable indirect  manufacturing costs as a result of increased
shipments during the period.

Selling and Marketing costs increased $170,000 compared to the first nine months
of 1996. The majority of this increase resulted from increased  expenditures for
sales  promotion and literature  along with selling and marketing labor costs as
the  Company  continues  its  effort  to  support  the  Sewer  Systems  business
distribution  network.  During the first quarter of 1997, the Company closed its
Sewer System sales offices in Georgia and Texas.  During 1996, the Company added
new and more powerful  distributors in both areas along with opening a new sales
office in New Mexico allowing for a smooth  transition in territory  realignment
despite closing of the two offices.

General and Administrative costs, including research and development,  increased
$870,000  over the  same  period  last  year.  Research  and  development  costs
increased  $38,000  while  other  general  and  administrative  costs  increased
$832,000.

The major portion of the increase in other general and  administrative  costs is
attributable to an increased growth performance  sharing expense accrual. In the
first quarter of 1996, the Company  implemented a new growth performance sharing
plan to take the place of its profit  sharing plan.  Targets for growth in sales
and  operational  earnings along with return on assets were  established and are
reviewed on an annual basis.  Quarterly  expense  accruals are made based on the
performance of the Company.  Other expense categories showing increases over the
same  period  last  year  include  training,   legal,  consultant  and  investor
relations.  Consultant  expense  accruals  were  made  in  anticipation  of  the
termination of the Company's defined benefit pension plan in favor of a matching
program  within  the  Company's  401K  plan.  Training  expenses  grew  due to a
company-wide training initiative begun in late 1996 with acceleration during the
second and third quarters of 1997.

Interest expense  decreased  $90,000 over the same period last year. The primary
reason  for the lower  interest  expense  is  reduced  borrowing  on the line of
credit.  In the third quarter of 1997,  the Company had no short term  borrowing
and  was  able  to make  overnight  investments  with  available  funds  thereby
generating interest income.

Other income  increased  $38,000 over the same period last year. The majority of
the other income in 1997 reflects the  recognition of a curtailment  gain as the
Company  plans to  terminate  its  defined  benefit  pension  plan in favor of a
matching program within its 401K plan.  During 1996, the Company recorded income
from the first quarter sale of the Incipient Fire Detector to PROTEC and a third
quarter loss  resulting  from the  write-off of the note  receivable  to General
Testing Corporation.
<PAGE>
                 Three Months Ended September 30, 1997 and 1996
                   (all figures rounded to the nearest 000's)

Revenue for the period  increased  $943,000,  or 15.6% over the same period last
year. Revenue increases from the same period in 1996 were recorded in both Sewer
Systems and Detection Systems businesses.

Revenue's from the Company's Sewer Systems business continue to show improvement
over prior  periods.  Management  is of the opinion  that the addition of a more
powerful  distribution  network,  increases  in the number and size of municipal
projects,  continued  growth in the overall market and  realignment of its sales
territories accounts for this growth. Shipments to two large municipal projects,
one in Indiana  and one in Texas,  were  begun in the third  quarter of 1997 and
will continue into the fourth quarter.

As part  of the  Detection  Systems  business  revenue  increase,  sales  of the
Company's Generator Condition Monitor (GCM) showed significant  improvement over
the same period last year while  shipments of Hydrogen  Control  Cabinets  (HCC)
slowed  against the  comparative  period in 1996.  Helping to offset the reduced
shipments of the Hydrogen Control Cabinet were sales of the recently  introduced
Generator Gas Analyzer which continues to show a growing market acceptance.  The
Company announced a major order with Hitachi of Japan that includes both GCM and
HCC products with shipments beginning in the fourth quarter of 1997.

The Company  finished its commitment to manufacture  and supply Cirrus IFD units
to PROTEC early in the third quarter of 1997.

Cost of Sales  increased  $250,000  when  compared to the same period last year.
Expressed in percent of sales,  cost of sales  decreased from 64.2% in the third
quarter of 1996 to 59.1% in the third quarter of 1997. The resulting improvement
in gross  margin is mainly  attributable  to reduced  direct  material and labor
costs when expressed as a percent of sales.  Indirect costs  increased  slightly
reflecting  the  impact of higher  variable  indirect  manufacturing  costs as a
result of increased shipments during the period.

Selling and Marketing costs increased  $32,000  compared to the third quarter of
1996.  The majority of this increase  resulted from  increased  expenditures  in
sales  promotion and  literature  costs along with selling and  marketing  labor
costs as the Company  continues its effort to support the Sewer Systems business
distribution network.

General and Administrative costs, including research and development,  increased
$318,000  over the same  period  last  year  with  increases  reflected  in both
categories.

In the other general and administrative  costs area, increased expenses over the
prior comparative  quarter were recognized in growth performance  sharing (bonus
expense) due to the Company's  growth in sales and earnings and return on assets
(which  drive the bonus  pool  calculation),  consultant  and  training  expense
categories.  Consultant  expense  accruals  were  made  in  anticipation  of the
termination of the Company's defined benefit pension plan in favor of a matching
program  within  the  Company's  401K  plan.  Training  expenses  grew  due to a
company-wide training initiative begun in late 1996 with acceleration during the
second and third quarters of 1997.
<PAGE>
            Three Months Ended September 30, 1997 and 1996, continued
                   (all figures rounded to the nearest 000's)

Interest expense  decreased $42,000 over the third quarter of 1996. In the third
quarter of 1997,  the Company had no short-term  borrowing on its line of credit
and  was  able  to make  overnight  investments  with  available  funds  thereby
generating interest income.

Other income increased  $208,000 over the same period last year. The majority of
this  increase was due to the General  Testing note  write-off  during the third
quarter of 1996. However,  the Company also recognized a curtailment gain as the
Company  plans to  terminate  its  defined  benefit  pension  plan in favor of a
matching program within its 401K plan.

                        Financial Position and Liquidity
                   (all figures rounded to the nearest 000's)

Cash needs for the first nine  months of 1997 were met  primarily  by short term
borrowing on the  Company's  line of credit during the first three months of the
year along with cash flow provided from operating  activities  during the second
and third quarters. During the period, the Company was able to reduce short term
borrowing by $75,000 and end the period with no borrowing on its line of credit.
Capital  expenditures  decreased  by $64,000  over the same period in 1996 while
long term debt was reduced by $254,000 for the year. During the same period last
year,  the Company  reduced short term borrowing by $175,000 (net line borrowing
at  September  30,  1996 was  $375,000)  along with  reducing  long term debt by
$254,000.

During the first quarter of 1997, the Company  improved its method of banking by
initiating a "target  balance"  program with Fleet Bank. This program allows the
maximum use of outstanding check float and provides for overnight  investment of
available funds when line of credit borrowing is zero.

Continued control over inventory,  operating  expenses and capital  expenditures
along with forecasted cash receipts and line of credit  availability will enable
the Company to meet its  day-to-day  working  capital  requirements  in the near
term.

The line of credit,  which  expired in April of 1997,  was  approved for renewal
with borrowing  capability  increasing from $2.5 million to $5.0 million. At the
same  time,  a pricing  modification  to the  Company's  term loan was agreed to
allowing  the Company to purchase a fixed rate swap.  In  consideration  for the
renewal  and  pricing  modification,   the  lender  has  modified  certain  loan
covenants.  Management is of the opinion that the revised  covenants are in line
with the increased borrowing available to the Company.

  Cautionary Statement for the Purposes of the "Safe Harbor" Provisions of the
                Private Securities Litigation Reform Act of 1995
                                                         
The Private  Securities  Litigation  Reform Act of 1995 (the  "Act")  provides a
"safe harbor" for  forward-looking  statements to encourage companies to provide
prospective  information about themselves while limiting unwarranted litigation,
provided  that  the  statements  are  identified  as  forward-looking   and  are
accompanied by meaningful cautionary statements regarding important factors that
could cause  actual  results to differ  materially  from those  projected in the
statement. The Company desires to take advantage of the "safe harbor" provisions
of the Act, and is including the  information set forth below in the Form 10-QSB
to point out the  inherent  difficulties  in  predicting  the  impact of certain
factors.
<PAGE>
  Cautionary Statement for the Purposes of the "Safe Harbor" Provisions of the
          Private Securities Litigation Reform Act of 1995, continued
                                               

While the Company believes that its assumptions  underlying any  forward-looking
statements are reasonable,  the following information includes important factors
which could cause the Company's  actual  results to differ  materially  from any
result  which  might be  projected,  forecasted,  estimated,  or budgeted by the
Company in its forward-looking statements, whether contained in this Form 10-QSB
or otherwise.

     1.  Heightened   competition,   including  the   intensification  of  price
competition,  the entry of new competitors, and the introduction of new products
by new and existing competitors.
     2. Failure to obtain new customers or retain existing customers.
     3. Adverse publicity and news coverage  impacting the Company's  reputation
and sales potential.
     4.  Inability  to carry out  marketing  and sales  plans due to  unforeseen
factors.
     5. Significant  economic  downturns in the geographic market areas serviced
by the Company.
     6. Higher service,  administrative,  or general expenses  occasioned by the
need  for  additional  advertising,  marketing,  administrative,  or  management
information systems expenditures.
     7.  A  lack  of  availability  of raw  materials,  necessary  manufacturing
equipment, or contract manufacturers to meet the Company's needs.
     8. Under utilization of the Company's manufacturing resources, resulting in
production inefficiencies and higher costs.
     9. Start-up expenses,  inefficiencies,  delays, and increased  depreciation
costs  in  connection  with  the  start  of  production  in new  facilities  and
expansions of existing facilities.
     10. The  acquisition  of fixed and other  assets,  including  inventory and
receivables,  and the making or  incurring  of any  expenditures  and  expenses,
including but not limited to depreciation and research and development expenses.
     11. Any  revaluation  of assets or related  expenses and the amount of, and
any changes to, tax rates.
     12. Loss or retirement of key executives.
     13. Any  activities  of parties  with which the Company has  agreements  or
understandings,  including  matters affecting any investment or joint venture in
which the Company has an investment.
     14. The amount,  type, and cost of the financing  available to the Company,
and any changes to that financing.
     15. Adverse results in significant litigation or regulatory proceedings.
     16. Adverse changes in laws, regulations,  interpretations, and enforcement
policies affecting the company and its business operations.
     17. Natural disasters,  work stoppages, and other events beyond the control
of the Company.

The foregoing list of factors  should not be construed as exhaustive,  or as any
admission regarding the adequacy of disclosures made by the Company prior to the
filing of this Form 10-QSB.
<PAGE>
                           Environment One Corporation
                                   FORM 10-QSB


                           Part II - Other Information


Item 1. Legal Proceedings

In the second  quarter of 1997,  the Company  was served  with a complaint  by a
former distributor,  Abaxial  Associates,  Inc., who was terminated for cause in
1996. The action was filed in the Ontario Court of Justice  (General  Division),
in  Toronto,  Canada.  Prior to  termination,  Abaxial  Associates,  Inc.  was a
distributor  for the  Company's  grinder  pumps in the Province of Ontario.  The
plaintiff's  complaint seeks monetary damages in the amount of $1,600,000,  plus
interest  and costs  based on  allegations  of  misrepresentation  and breach of
contract  relating to the Company's  termination  of its  relationship  with the
plaintiff.

Management of the Company is of the opinion that the claim, filed as a result of
termination  of the business  relationship  with Abaxial  Associates,  Inc.,  is
unsubstantiated  and  without  merit  and that the  Company  acted  properly  in
terminating  its  relationship  with  Abaxial  Associates,  Inc. The Company has
engaged  legal counsel in Toronto,  Canada and intends to vigorously  defend the
action.  Management  does not  currently  expect  the  action to have a material
impact on the results of the Company.  However,  it is possible that the results
of  operations  or cash flow of the Company in a particular  quarterly or annual
period  could  be  materially  affected  by  the  ultimate  outcome  of  pending
litigation matters.
<PAGE>


                                   SIGNATURES


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


                                                ENVIRONMENT ONE CORPORATION





Date: October 24, 1997                          By   /s/Stephen V.Ardia
                                                     ------------------
                                                     Stephen V. Ardia
                                                     Chairman, President and CEO




Date: October 24, 1997                          By:  /s/Philip W. Welsh
                                                     ------------------
                                                     Philip W. Welsh
                                                     Director of Finance
                                                     Treasurer