SECURITIES AND EXCHANGE COMMISSION

                               	Washington, D.C. 20549

                                        	FORM 10-K
(Mark One)
  X  	Annual Report Pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934 (Fee Required) OR

         	Transition Report Pursuant to Section 13 or 15(d) of the
          Securities Exchange Act of 1934.

For the fiscal year ended                 	Commission File Number 0-19013
December 31, 1996

                       			ADVANCED ENVIRONMENTAL SYSTEMS, INC.
                  	(Exact name of registrant as specified in charter)

		New York			                                    		84-1059226		
(State or other jurisdiction of       (I.R.S. Employer Identification Number)
incorporation or organization)                                  

730 17th Street, Suite 712  
Denver, Colorado                                             80202  
(Address of principal executive offices)                   (Zip Code)

                                	(303) 571-5564
           	(Registrant's telephone number, including area code)

                    			Stock registered pursuant to Section 12 (g):
 
	                    		Common Stock, $.0001 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 requirements for the past 90 days.   X     Yes 	    No 	   

The aggregate market value of the voting stock held by non-affiliates of the 
registrant was approximately $501,278.  This calculation is based upon the 
average bid and asked prices of the stock on March 18, 1997 of $.0027.
                                 
The number of shares of the registrant's $.0001 par value common stock 
outstanding as of March 14, 1997 was 531,667,515.

Indicate by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K is not contained herein, and will not be 
contained, to the best of registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of this 
Form 10-K or any amendment to this Form 10-K. [  ]

It is anticipated that Item 10, 11, 12 and 13 will be incorporated by 
reference from either a definitive proxy statement on an amendment
filed under cover of Form 10-K/A filed within 120 days of December 31, 1996.



                                       	PART I
Items 1 and 2.  Business and Properties

     	(a)	General Development of Business.  
Advanced Environmental Systems, Inc. ("AES") was incorporated in New York 
under the name Northwest Passage of North America, Inc. in 1986.  In 1988, 
AES acquired Advanced Energy Corporation ("AEC"). International Catalyst, 
Inc. ("Incat") is a wholly-owned subsidiary of AEC.  Incat provides catalyst 
handling services to the petroleum refining and petrochemical/chemical 
industry.
  
Unless the context requires otherwise, the term "Company" includes AES and 
its subsidiaries, AEC and Incat.  All the Company's revenues from operations 
are derived from the operations of Incat.

In April 1990, certain shareholders of the Company exchanged their shares of 
the Company's common stock for shares of common stock of Industrial Services 
Technologies, Inc. ("IST"). As a result, the Company became an approximately 
62% owned subsidiary of IST.  IST also owns 100% of the outstanding shares of
the voting preferred stock of the Company.  See Items 7 Management's Discussion
and Analysis of Financial Condition and Results of Operations.

     	(b)	Financial Information about Industry Segments.  
For the fiscal year ended December 31, 1996 the Company had revenues in one 
industry segment only, and, therefore, this sub item is inapplicable.  

     	(c)	Narrative Description of Business.  

     	General.  

Incat is primarily engaged in providing highly specialized catalyst handling 
services to petroleum refineries and petrochemical/chemical plants.  Incat 
operates from facilities in the Los Angeles and Houston metropolitan areas.  


            Catalyst - Refining

Catalysts play a critical role in both petroleum and petrochemical processing.
A wide range of catalysts are used to stimulate a variety of chemical processes.
Catalyst materials are generally small, solid particles composed of a porous 
clay base, impregnated with an active ingredient.   This active ingredient is
usually a metal such as  platinum with a high recovery value.   Catalysts are
used to promote a chemical reaction during the manufacturing process.  The 
purpose may be to remove impurities from a product, change the molecular 
structure, enhance octane rating or accelerate production of a process.

The life of a catalyst ranges from a few months to several years, depending
upon the process or the build up of impurities.  When the catalysts cease to 
function properly, the catalysts must be removed from the reactor vessel.  The 
removed material might be cleaned and reinstalled or it may be discarded and 
new material loaded into the reactor.   Incat's role is to perform this 
catalyst change.    Incat performs many of these catalyst handling projects 
in a total inert (nitrogen) atmosphere.  Management believes that by 
eliminating oxygen from the project's atmosphere the work can be accomplished
with less risk.   Incat's customers are responsible for providing the new and
disposing of the spent, catalyst.

The four most common catalysts processes in petroleum refining are:

         * Catalytic cracking
         * Catalytic reforming
         * Hydro-treating
         * Hydro-cracking

The above catalyst processes are used in a bed environment, which may also be 
found in either petrochemical or chemical plants.


                   Catalyst - Chemical

In addition to using the above catalyst processes in a bed environment,  
chemical plants also employ catalyst in  reactors which are tubular 
structures containing thousands of tubes.   These reactors require very 
precise loading parameters for catalyst and can require as many as seven 
charges or zones per tube.  In the past either the customer or a contractor 
had to pre-weigh and pre-bag each zone and color code prior to loading the 
reactor.  This method  is costly and inefficient.

In  1996, Incat with another entity developed a new loader which can load tubes
with increased accuracy and speed.  The Company has two such loading devises.
Expenditures for research and development of the loader or other developments 
have not been material for the last three fiscal years.


               Project & Resources

A typical project begins with the planning and coordination of the shutdown
with the customer.  Once the scope of work is determined, the appropriate
resources are assigned.  These resources include:

* Life support services - inert or hazardous atmosphere entry for 
 catalyst handling, inspection, repair and cleaning and continuous
 environmental analyzers.
 
* Vacuum and catalyst unloading services - vacuum removal of 
 catalyst and support material, inert or atmospheric, wet or dry, 
 various vacuuming removal and cleanup of residues, filters and 
 process units, dust control and collection and recovery of catalyst 
 and catalyst residue having precious metal content.
 
* Catalyst and support media loading - under inert or atmospheric 
 conditions, by sock or dense loading methods, tubular reactor and 
 reformer furnace loading, pressure differential testing and prebagging 
 and weighing material for loading.
 
* Prescreening and screening services, respectively, of catalyst and 
 support materials.
 
* Inspection services using closed circuit video inspection under inert 
 or hazardous conditions.
 
* Mechanical services involving removal and replacement of reactor 
 heads, quench lines and temperature indicators, cleaning removal 
 and replacement of vessel internals, vessel blinding and welding 
 under inert conditions.
 
* Refrigeration and recirculation services including inert gas refrigeration 
 and recirculation during catalyst vacuum operations, forced cooling of 
 process vessels and furnaces, and forced ventilation of vessels, tanks, 
 and furnaces.


          Marketing  

Texas and California are first and second in the United States for production
of petroleum products.  The Company's two facilities are well placed to 
support these markets.

Project revenues typically range from $80,000 to $120,000; however, 
Incat has worked on projects exceeding $1,000,000.   Management 
believes that, although Incat's prices are medium to high for the
industry,  the high quality of its work combined  with safety and 
rapid rate of installation will allow it to continue to charge higher 
than average prices for its services.

Sales are usually generated through solicitation efforts directed at 
potential customers, which consist primarily of Fortune 500 companies.   
Incat employs full time sales personnel.  A significant portion of  the 
Company's sales are generated through reputation and referrals.  As an IST 
affiliate, Incat receives many referrals and sometimes may function as a 
subcontractor of an affiliate. 
 
Incat enjoys a high level of repeat business and the Company believes it will 
continue to attract new customers based on its ability to perform safe, rapid 
and efficient services.  Most projects are awarded on a bid basis;  However,
Incat has won many contracts as the sole bidder.  Because future sales are 
contingent upon Incat's ability to provide high quality service,  management 
is committed to a philosophy of planned growth.  Incat is committed to not 
expanding services until it has the trained manpower to maintain its 
standards.  Incat has and will continue to decline work where it does not 
have adequate manpower to maintain its standards.


    	Competition and Significant Customers.  

Management's estimate of United States expenditures in the catalyst handling
industry for 1996 were approximately $ 75,000,000.   Size as indicated by
revenues places Incat as the second largest catalyst handling contractor in 
the United States.   Although the catalyst handling industry is highly 
competitive, Incat's management believes opportunities exist for expansion 
within and beyond its present markets, including foreign and the tubular 
loading market. 

Although Management believes opportunities for growth for Incat exist , there 
can be no assurances that Incat will experience growth or meet its goals.  
The catalyst handling  business is subject to a variety of economic, 
socio-economic and political forces that can determine when the petroleum 
refineries and petrochemical/chemical  plants shut down and make their reactors 
available for catalyst change out.  Other companies that provide catalyst 
handling services may have more resources than Incat.  In addition, in recent 
years additional catalyst companies have entered the market and  other catalyst 
handling companies could be established in the future. 

For the year ended December 31, 1996, Exxon  and Arco were responsible for 
27% and 17% , respectively, of Incat's sales.  For the year ended December 31, 
1995, Koch was responsible for 11% of Incat's sales.  Foreign sales have been 
concentrated among a few major customers; however, none of these customers 
accounted for 10% or more of Incat's sales for the years ended December 31, 
1996 and 1995.

     	Foreign Sales.  
During the year ended December 31, 1996 approximately 7% of Incat's sales 
were outside the United States, as contrasted with approximately 4% and 8% 
in the years ended December 31, 1995 and 1994.   The primary overseas markets 
for the Company's services during these periods, were Asia, Central America, 
Caribbean, and Mexico.  Incat's revenues derived from Mexican customers 
were negatively affected by recent political and economic events in Mexico.   
The Company derived no revenue from Mexico in 1996 and 1995 as compared
with $400,000 in 1994.   Management believes the political and economic events 
in Mexico which negatively impacted revenue are improving.   In addition,  
management believes there are significant opportunities in South America and 
Caribbean markets.   Typically, the Company's foreign sales have been to a few 
large customers and, therefore, the loss of any of these customers could have
an adverse effect on foreign sales.

All foreign sales are payable in U.S. dollars and, accordingly, there are no 
currency risks associated with such revenues.  Foreign customers typically 
pay the amounts due Incat more slowly than U.S. customers, and foreign taxes 
are sometimes withheld at the time of payment by some foreign customers.  
Except for the delay in the receipt of some payments, Incat has not 
experienced any special risks associated with its foreign operations.  The 
Company currently has no assets permanently located outside the U.S., but may
in the future keep catalyst-handling units in strategic foreign locations if
sales in these regions warrant the relocation of the units.


     	Backlog.  

Typically, Incat's customers do not sign contracts until work commences on a 
project.  As of March 31, 1997, Incat had no material backlog supported by 
signed contracts.   Because many of the Company's contracts are performed
within short time periods after receipt of an order, the Company does not 
believe backlog is a meaningful indicator of its sales activity.

           Quarterly Fluctuations

The Company's revenues and operating income have historically been subject
to significant, quarterly fluctuations with respect to catalyst handling 
services.  This is due primarily to the timing of shutdowns at plant facilities
and rescheduling of work by customers.  Accordingly, it is anticipated that 
the Company's quarterly results will fluctuate and the results of one quarter 
should not be deemed to be representative of the results of any other quarter 
or for the year.

         Insurance
 
The Company maintains worker's compensation insurance for its employees, 
general liability insurance and other coverage for normal business risks in 
the primary amount of $1,000,000 and umbrella policies with coverage limits 
of $25,000,000 in the aggregate.  The Company is responsible for the payment 
of incurred claims up to specified individual and aggregate limits, over 
which a third party insurer is contractually liable for any additional 
payment of such claims.  The program has a minimum and maximum premium as 
well as a per occurrence loss limitation per line of coverage.  The premium, 
above the minimum is based on the actual loss experience, subject to the per 
occurrence loss limitation per line of coverage of $250,000 in 1996 and 
$50,000 in 1997 and the pre-set  maximum premium.  Accordingly, the 
Company bears certain economic risks related to these coverages.  The Company
records an accrual equal to the estimated costs expected to result from 
incurred claims plus an estimate of claims incurred but not reported based 
on the best available information.  However, the nature of these claims is 
such that actual development of the claims may vary significantly from the 
estimated accruals.   All changes in the accrual estimates are accounted for 
on a prospective basis and could have a significant impact on the Company's 
financial position or results of operations.

Many of the Company's contracts require it to indemnify its customers for 
injury, damage or loss arising in connection with their projects, and provide
for warranties of materials and workmanship.   There can be no assurance that
the Company's insurance coverage will protect it against the incurrence of 
loss as a result of such contractual obligations.

         Environmental Matters.  

Various environmental protection laws have been enacted and amended during  
the past 20 years in response to public concern over the environment.   The 
operations of the Company and its customers are subject to these evolving  
laws and the related regulations, which are enforced by the Environmental 
Protection Agency and various other federal, state and local environmental, 
safety and health agencies and authorities.  Although the Company believes 
that its operations are in material compliance with such laws and 
regulations, there can be no assurance that significant costs and liabilities
will not be incurred due to increasingly stringent environmental restrictions 
and limitations.  Historically, however, the cost of measures taken to comply
with these laws has not had a material adverse effect on the financial 
condition of the Company.  

     	Employees and Property.  
Incat has approximately 135 full-time employees.  Incat owns no real 
property.  It conducts its operations from leased facilities located in Los 
Angeles,  and Houston Metropolitan areas.  Incat's headquarters are located 
in a 20,000 square foot facility in Friendswood, outside of Houston, for 
which Incat pays a monthly rental of $7,194 pursuant to a lease expiring in 
August 1999.  California operations are located in a 17,000 square foot 
facility in Carson, California.   The lease for this facility will expire in 
June 30, 1998.  The current monthly rental is $7,286.  The Company 
believes its facilities will be adequate for its operations for the year.


Item 3.       	Legal Proceedings.  

During 1995, an Incat employee initiated litigation for damages in respect 
of injuries claimed to have occurred while performing catalyst services at 
a refining facility.  Incat has not been named a party in the proceedings as 
the customer is being defended by Incat's general liability insurer pursuant 
to the customer's  demand for coverage as an additional insured on a 
contractual indemnity.  

Demand has also been made on Incat and its general liability insurer for 
indemnification by a customer regarding a total of $219,000 which it paid to
three employees of the Company for alleged injuries sustained in October 1995 
at the customer's facility.  The Company's insurer requested information
from the customer documenting liability and damages in connection with
the demand.  The requested information was not provided to the Company's 
insurer, and the Company's insurer accordingly has not made a determination 
regarding the Company's duty to defend, indemnify, and treat the customer 
as an additional insured under the Company's insurance policies.
  
The Company believes that, to the extent it may have any liability with 
respect to the claims described in the above paragraphs the Company 
would be covered by its workers' compensation and general liability 
insurance carriers.  The initial premium paid by Incat with respect 
to these policies is subject to adjustment based on certain insurance 
components plus losses during the applicable policy periods.  Based on 
current estimates prepared by Incat's insurers, the Company believes its  
$175,000 retrospective insurance premium accrual  is adequate.  This amount 
represents a general reserve pending the resolution of the above claims, and 
various other open routine claims incidental to the Company's business which 
affect the same policy years and, therefore, the retrospective premium 
adjustments.  However, due to the uncertainty of various factual and legal 
issues which may affect these claims, there can be no assurance as to the 
outcome of these claims or the adequacy of the amount reserved.


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

No matter was submitted during the fourth quarter of  the fiscal year covered
by this Report to a vote of security holders, and, therefore, this Item is 
inapplicable.  




                             	PART II


Item 5.	    Market for Registrant's Common Equity and Related Stockholders.  

The Company's Common Stock is quoted in the over-the-counter market through 
the "pink sheets" and is not quoted on any established stock exchange or 
NASDAQ.  Trading in the Company's securities is limited and sporadic and 
prices are highly volatile.  Quotations provided below are the high and low 
bid for the quarters indicated based on inter-dealer quotations, without 
retail mark-up, mark-down or commission, and do not necessarily represent 
actual transactions.  



		                            			Common Stock
	Quarter Ended                      	High    	Low

	March 31, 1995	                 			.005     .002
	June 30, 1995	              		    	.005     .002
	September 30, 1995	             			.004     .002
	December 31, 1995	               		.006     .002
	March 31, 1996	                 			.003     .002
	June 30, 1996                  				.010     .002
	September 30, 1996	             			.004     .003
	December 30, 1996	            		  	.003     .0015



The Company had 2,014 shareholders of record as of March 14, 1997.  The 
Company has not declared or paid any cash dividends on its common stock 
and it is not anticipated that any such dividends will be paid on the common 
stock in the near future.  AEC and Incat are restricted in their ability to 
pay dividends pursuant to their respective loan agreements with FINOVA 
Capital Corporation ("FINOVA") and Wells Fargo Bank (Texas) NA 
("Wells Fargo") and, accordingly, as a practical matter, the Company also 
is restricted in its ability to pay cash dividends on its common stock without
the consent of the lenders.
    
Item 6.  	Selected Financial Data

The following summarizes certain financial information concerning the
Company and is based upon the audited consolidated financial statements of 
the Company.  The information presented for the year ended December 31, 1993 
is unaudited.    All information presented below should be read in conjunction 
with the Company's consolidated financial statements and the notes thereto.

<TABLE>
                            HISTORICAL AS OF:
                             (In Thousands)

<CAPTION>
                            DEC 31     DEC 31     DEC 31   DEC 31   MAR 31    
Balance Sheet:              1996       1995       1994      1993     1993     
                                                                                
<S>                         <C>        <C>        <C>      <C>       <C>     
Working Capital          
 (Deficiency)           $  (318)    $ (115)    $  651    $  118    $   629      
Total Assets              4,991       4,996     5,716     4,467      5,997      
Total Liabilities         4,265       3,918     3,765     2,877      3,921      
Long Term
  Obligations
  and Series A
  Redeemable
  Convertible
  Preferred Stock         1,176       1,586     1,657    2,013      2,112       
Common and other
  Stockholders'
  Equity                    693         841     1,609    1,156      1,588      
</TABLE>

<TABLE>
                  For the    For The    For The    For The      For The     For The        
                   Year       Year       Year       Year      Nine Months   Year      
                   Ended      Ended      Ended      Ended        Ended      Ended          
                   DEC 31     DEC 31     DEC 31     DEC 31       DEC 31     MAR 31    
                    1996       1995       1994       1993        1993        1993                                           
                                                  (UNAUDITED)                  
<S>                  <C>       <C>        <C>        <C>         <C>         <C>  
Service Revenues  $ 11,195   $10,448    $12,756    $12,004      $8,062     $10,869 
Costs & Expenses
 Service Costs       8,541     7,359      8,313      8,270       5,873       6,986     
 SG&A                2,723     2,751      2,453      2,235       1,705       2,338      
Retrospective
  insurance
  adjustment(1)       (379)      300        -          -           -           -                     
 Management Fees, 
 (Related Party)       152       112         96        97          72          88        
 Service and  
 Guarantee fees,
 (Related Party)        -         -          50        50          -           -     
 Interest Expense      275       255        211       270         206         260       
 Deprec. & Amort.      452       480        622       686         491         591       

Income(Loss) 
 Before Taxes         (569)     (809)     1,061       396        (335)        606     

Net Income(Loss)      (186)     (696)       535       (38)       (407)        292     

Net Income(Loss)
 attributable 
 to Common
 shareholders         (242)     (768)       453      (138)      (482)         192       

Net income(Loss)
 per Common share    (.0005)  (.0013)      .0009    (.0002)    (.0009)      .0004     


(1) See footnote 4 (Commitments and Contingencies) To the audited financial 
    statements, and Items 3 and Item 7 for further discussions.

</TABLE>

                                                      
Item 7.   Management's Discussion and Analysis of Financial Condition and 
          Results of Operations.

      Results of Operations. 

     	General.  
The Company expects a continued demand for its services in the foreseeable
future.  The oil refinery, petrochemical and chemical processing industries 
continue to rely on outside contractors for the performance of critical 
services.  The limitations on growth are due to more competition, timing of 
shutdowns at plant facilities and rescheduling of work by customers.   The 
Company continues to recruit, hire and train additional employees and the 
Company's ability to continue to grow will depend, in part, on its ability to
continue this process, and a stronger demand for the Company's services.

   	Periods ended December 31, 1996 and 1995.

The Company experienced an increase in 1996 revenues of 7% or $747,000.  
The increase in revenue was primarily attributable to rescheduling of 1995 
work in the first quarter of 1996 and work subcontracted to affiliated 
companies on two large projects in the first quarter.

Cost of services as a percentage of service revenues was 76.3% and 70.4%, 
respectively, for the 1996 and 1995 fiscal years. The 5.9% increase in 
cost of goods sold (COGS) as a percentage of services revenues for the fiscal
year 1996 is attributable to a 10.1% increase in direct service costs  and  a
decrease of 4.2% in indirect service costs.   The 10.1% increase in direct 
costs is mainly attributable to work performed in the first and third 
quarter of 1996.   Due in part to a shift of significant revenues from the 
fourth quarter of 1995 to the first quarter of 1996,  employee travel and 
overtime expenses and cost of  hiring contract laborers increased direct 
costs significantly in the first quarter.  The Company was unable to bill its
customers the increased costs.  The third quarter was a slow period in which 
services for catalyst handling were performed at low profit margins.  The 
4.2% decrease in indirect costs as a percentage of revenue is mainly 
attributable to the closing of the Company's Southern region office and the 
curtailment of  the Company's Gulf Coast regional office.

For the fiscal year ended December 31, 1996, the Southern region office 
closure and the curtailment of the Gulf Coast office resulted in a reduction 
of administrative overhead of approximately $300,000 from 1995. In conjunction 
with the closing of these two offices, the Company increased its sales force 
in the Southwestern and Western regions.  It also devoted more resources 
to pursuing international opportunities, incurring an additional $153,000 in 
selling, general & administrative (SG&A) costs for the year ended December 31, 
1996 as compared to $64,000 in 1995.  As a result of the increase in the sales 
force, overall SG&A expenses are comparable to prior year. 

Interest expense increased $20,000 from $255,000 for the year ended 
December 31, 1995 to $275,000 for the corresponding 1996 period.  The 
increase is due to the increased utilization by the Company  of its line of 
credit and a loan obtained in the fourth quarter to meet its working capital 
needs.

Depreciation and amortization decreased $28,000 from $480,000 for the year 
ended December 31, 1995 to $452,000 for the year ended December 31, 1996 
due to older equipment being fully depreciated.

During the year ended December 31, 1995, the retrospective insurance premium 
adjustment  was reduced to  $175,000 from $300,000 in 1995.  (See item 3; 
"Legal Proceedings")  In addition, during the year ended December 31, 1996, 
the Company received a refund of approximately $254,000 due to better than 
expected workers' compensation and general liability losses for periods 
covered under the Company's previous insurance program.

For the fiscal year ended December 31, 1996, the Company had a pretax loss 
of $569,000 as compared to a pretax loss of  $809,000 for the same period 
in 1995.  The loss in 1996 is primarily due to the Company's increased cost
of services in the first quarter of 1996 and lower than anticipated profit 
margins on services rendered.  The pretax loss was reduced by insurance 
premium adjustments and refunds totaling approximately $379,000.


                      Periods ended December 31, 1995 and 1994

The Company experienced a decrease in 1995 revenues of 18% or $2,308,000.  The
decrease in revenue was primarily attributable to shifts in timing of 
refinery shutdowns and rescheduling of work which totaled approximately 
$4,240,000.  Approximately $3,190,000 of the $4,240,000 was completed during 
the first quarter of 1996.  Approximately, $1,050,00 of the $4,240,00 was 
lost to competitors because the Company did not have the available manpower 
and resources in 1996 to perform the rescheduled work.   During 1995, the 
Company added 13 new customers with revenues of approximately $728,000.

The decline in revenues was also impacted by the uncertain economic 
conditions in Mexico which contributed to a decline in foreign revenues of 
approximately $400,000.

Cost of services as a percentage of service revenues were 70.4% and 65.2%, 
respectively, for the 1995 and 1994 fiscal years.  The increase in COGS for 
the fiscal year 1995 was primarily attributable to a 4% increase in indirect 
service costs as a percentage of service revenues.  1995 indirect service 
costs remained approximately the same as 1994 while service revenues 
decreased 18% causing the indirect service costs as a percentage of service 
revenues to increase 4%.   The Company's direct costs as a percentage of
service revenues for the years ended December 31, 1995 and 1994 are comparable.

Selling, general and administrative expenses increased from $2,453,000 for the
year ended December 31, 1994 to $2,751,000 for the corresponding 1995 period.
The expenses have also increased as a percentage of sales from 19.2% in 1994 
to 26.3% in 1995.  The largest factor in this increase was the opening of the
Gulf Coast regional office in December 1994 which resulted in additional SG&A
costs of approximately $270,000 for the year ended December 31, 1995. 

Interest expense increased $44,000 from $211,000 for the year ended 
December 31, 1994 to $255,000 for the corresponding 1995 period.  The 
increase was due to an increase in the financial institution debt by 
approximately $400,000 to finance equipment purchases.

Depreciation and amortization decreased $142,000 from $622,000 for the year 
ended December 31, 1994 to $480,000 for the year ended December 31, 1995 due 
to older equipment being fully depreciated.

For the fiscal year ended December 31, 1995, the Company had a pretax loss of
$809,000 as compared to a pretax income of $1,061,000 for the same period in 
1994.  This is primarily due to the Company having a decrease in net service 
revenues.  While net service revenues decreased 18% or $2,308,000, service 
costs and expenses decreased by only 11% or $954,000.  In addition, 
the Company had an increase in selling, general & administrative expenses of 
$298,000 of which $270,000 was associated with the opening of the Gulf Coast 
regional office and incurred a retrospective insurance premium adjustment of 
$300,000.  These additional costs in conjunction with the shortfall in 
revenues significantly contributed to the pretax loss of $809,000.



     Periods ended December 31, 1994 and 1993
     (Unaudited and Recasted to a Calendar year end)

Revenues increased 6.3% or $752,000 from $12,004,000 to $12,756,000 for the year
ended December 31, 1994 as compared to the 12 months ended December 31, 1993.
The Company added 13 new customers which contributed approximately $1,099,000
in new revenues.   Revenue increases were impacted by approximately $1,000,000 
resulting from work originally scheduled for the fourth quarter of  1994 being 
rescheduled for 1995.

Cost of services as percentage of service revenues was 65.2% and 68.9%, 
respectively, for the year ended December 31, 1994 and the 12 months ended
December 31, 1993.   Improvement in gross margin percentages from 31.1% to 
34.8% for 1994 as compared to 1993 is partially attributable to certain non-
recurring costs incurred in 1993 not repeating in fiscal year 1994.   These
costs included equipment maintenance costs of a one-time nature and the costs
of idle personnel who were not reassigned when service contracts were re-
scheduled from the fourth quarter of 1994 to fiscal year 1995. Additionally, 
subcontract revenues totaling were approximately $971,000 for the 12 month 
period ended December 31, 1993 as compared to $851,000 in fiscal year 1994 
which had the effect of reducing gross margins during both periods but with 
greater impact for 1993 because of its larger relationships to total revenues.

Selling, general and administrative expenses increased from $2,235,000 for 
the 12 month period ended December 31, 1993 to $2,453,000 for the cor-
responding 1994 period.  The expenses increased as a percentage of sales 
from 18.6% to 19.2% in 1994.  The primary factors of the increase in 1994
were (1) an approximate $128,000 increase in the Company's health insurance
premiums from 1993 to 1994, and (2) a reduction of workers compensation
expense totaling $248,000 during the year ended December 31, 1993 due to a 
retroactive experience rated premium adjustment in California which did not
reoccur during 1994.

Interest expense decreased $59,000 from $270,000 for the 12 month period 
ended December 31, 1993 to $211,000 for the fiscal year 1994 due to the 
payoff of notes totaling $207,000 and continued amortization of 
financial institution debt totaling $258,000 during fiscal year 1994 without 
any additional borrowings  during the year.  Depreciation and amortization 
decreased from $686,000 for the year ended December 31, 1993 to $622,000 for
the corresponding 1994 period.

The Company's pretax income increased $665,000 to $1,061,000 for the 
fiscal year 1994 as compared to $396,000 for the corresponding period of the 
prior year is primarily due to the increase in revenue volume and gross margins.

The provision for income taxes differed from the Federal statutory rate 
primarily due to the effect of state income taxes, amortization of the excess
of purchase price over fair value of net assets acquired, meals and 
entertainment expenses not deductible for income tax purposes and foreign 
income taxes.

       
     	Liquidity and Capital Resources.  

The Company had a working capital deficit of $(318,000) at December 31, 1996 
as compared to a working capital deficit of  $(115,000) at December 31, 1995.  
The decrease in working capital is primarily due to losses from operations.

During the year, the Company expended $219,000 for capital equipment.
These expenditures were funded by cash on hand since no further amounts
were available under the Company's loan agreement with FINOVA Capital
Corporation ("FINOVA"), which had previously provided a loan facility
for the Company to purchase capital equipment.  At December 31, 1996, the 
balance of the FINOVA loan was $1,166,000. 

The agreements with FINOVA (the "Loan Agreements") provide that within 
the 15 day period following its receipt of the annual financial statements of 
AEC and Incat, FINOVA may require that the principal amounts payable to 
FINOVA be prepaid in an amount not to exceed 50% of AEC's Excess Cash 
Flow during the preceding fiscal year.  Excess Cash Flow is defined as the 
operating income of AEC and its subsidiaries, determined on a consolidated 
basis, before depreciation, amortization, interest, income taxes and management 
fees, reduced by capital expenditures and further reduced by (a) any payments 
of principal and/or interest to FINOVA and dividends to IST with respect to 
IST's repayment of  its FINOVA loan and  (b) interest on the Company's 
revolving line of credit facility.   There was no excess cash flow for the 
years ended December 31, 1995 and 1996.   The FINOVA loan is guaranteed by the 
Company and Incat and secured by a security interests in all assets of AEC and 
Incat. 

On March 31, 1997, the loan from FINOVA was amended and increased
to include an additional $94,000 in long-term financing, which was used to 
repay certain accumulated dividends to IST.  Additionally, the interest rate 
was reduced to 3% plus the prime rate in effect from time to time and the 
maturity date of the loan was extended from December 31, 1997 to March 31, 
2000.  Under the amended note, the loan is to be repaid in monthly principal 
and interest installments (approximately $19,000 in principal plus accrued 
interest) with all unpaid interest and principal due March 31, 2000.  As a 
result of the amendment, the monthly amount required to service the Company's
obligation to FINOVA was reduced from approximately $52,000 to 
approximately $26,000 per month assuming a current prime rate of 8.5%.     

The FINOVA Loan Agreements require AEC to maintain, on a consolidated 
basis with its subsidiaries, a ratio of current assets to current liabilities
of not less than .8-to-1 and a ratio of total debt to shareholders' equity of
not more than 4-to-1 and a ratio of Operating Cash Flow to Annual Debt Service 
(as defined in the Loan Agreements) of at least 1.4-to-1.  AEC was not in 
compliance with these covenants at December 31, 1996.  However, FINOVA 
waived these requirements for the year ended December 31, 1996 and 
modified the ratio of Operating Cash Flow to Annual Debt Service to no 
less than 1.4 computed as of the end of each fiscal quarter rolling forward
on a cumulative quarter basis to December 31, 1997, commencing with the 
quarter ending March 31, 1997.   For 1998 and subsequent years, the Operating 
Cash Flow to Annual Debt will be determined quarterly on a trailing 12 month 
basis.   The Company believes it will remain in compliance with the covenants, 
as modified during the 1997 year.

In 1991, AES received $500,000 from IST in the form of a convertible debenture,
which was subsequently converted into Series A preferred stock. In conjunction
with these transactions, IST had a note payable to FINOVA ("the IST FINOVA 
note"), under which IST's Series A preferred stock of the Company was pledged 
as collateral.  The Company had not classified the Series A preferred stock as 
Common and Other Stockholders' Equity due to the Company's redemption of
shares of Series A preferred stock,  the proceeds of which IST applied to 
repay the IST FINOVA Note.  On March 31, 1997, IST repaid the FINOVA Note 
and the Company classified 11,657,000 shares of Series A redeemable preferred 
stock as equity.

The holder of Series A preferred stock is entitled to receive cumulative cash
dividends of 14% per annum, payable in monthly installments.  The Company 
declared and paid $28,000, $44,000, and $54,000, of such dividends during the
years ended December 31, 1996, 1995, and 1994, respectively.  The holder of 
Series B preferred stock is entitled to receive cumulative cash dividends of 
14% per annum, payable in quarterly installments.  The Company declared 
$28,000 of Series B dividends during each of the years ended December 31, 
1996, 1995, and 1994.   Amounts to be paid in respect of dividends on and 
redemption of the Series A and B Preferred Shares will be approximately 
$33,000 for the year ending December 31, 1997.   At December 31, 1996, the
Company owed IST approximately $150,000 in cumulative and unpaid dividends on
Series B preferred stock.  Of this amount, $94,000 was paid subsequent to 
year-end to IST which then repaid the IST FINOVA Note.

During 1996, Incat had a $1,400,000 revolving working capital credit facility
with Wells Fargo Bank (Texas) NA ("Wells Fargo").  In November 1996, interest
on the credit facility was increased to 2.0% over prime (10.25% at 
December 31, 1996) from the previous rate of prime plus 0.5%.  The line is 
collateralized by Incat's accounts receivable and inventory and is guaranteed
by AEC.   $519,000 had been drawn at December 31, 1996.   Subsequent to 
year-end, the Company received a commitment letter from Wells Fargo agreeing 
to extend the term of the credit facility to September 30, 1997.  Wells Fargo
agreed to increase the credit facility to $1,600,000 for the three months 
ended June 30, 1997 at which time the credit facility will return to 
$1,400,000.  The interest rate will be 2.5% plus the prime rate in effect 
from time to time during the renewal period.  The closing of the renewal is 
subject to certain conditions which the Company believes it will meet.

Wells Fargo requires Incat to comply with a variety of financial and 
operational covenants, including restrictions on the Company's ability to pay
dividends.   The Company was not in compliance with certain covenants and 
from September 30, 1996 through the date of this report, Wells Fargo has been
advancing funds under the line pursuant to a forbearance agreement with the 
Company.   In conjunction with the closing of the renewal of  the credit 
facility, Wells Fargo has agreed to waive all rights and remedies available 
pursuant to the working capital agreement and modify the covenants.  
Management believes the Company will remain in compliance with the modified 
covenants during 1997.
 
Net worth decreased from $841,000 at December 31, 1995 to $693,000 at 
December 31, 1996.  The decrease is net of the classification of $94,000 from
Series A Preferred stock to equity and due to losses from operations of 
$186,000 less dividends declared on preferred stock totaling $56,000. 

After evaluating the economics of  flow bin leasing operations, the 
Company subsequent to year end has entered into an agreement to sell its 
flow bins for $500,000.    The proceeds  to be received in April and 
May 1997 will be used for working capital and to purchase additional 
equipment.   The Company has budgeted in excess of  $200,000 in 
fiscal 1997 to purchase additional capital equipment. 

Operating activities, proceeds from the Wells Fargo working capital facility 
and sale of flow bins combined with the Company's reduced term debt service 
requirements should result in the Company generating sufficient cash to 
provide for the Company's working capital needs during the coming year.  
However, given the highly competitive and cyclical nature of the catalyst 
handling industry, there are no assurances that the Company will not incur 
additional operating losses or need additional funding from other sources.   
The Company currently has no plans to obtain additional funding.  There are 
no assurances that its credit facility with Wells Fargo will be renewed on its
expiration in September 1997 or that funds will be available from other 
sources if needed. 


     Cash Flows for the Year Ended December 31, 1996.

The Company generated approximately $496,000 in cash flow from operations
during the year ended December 31, 1996.  Financing activities resulted in a
$312,000 outflow of cash.  The outflow of cash is primarily due to preferred
stock redemption and dividends of  $177,000, a net decrease in the line of 
credit of  $206,000, and proceeds and payments of  $425,000 and $354,000 
from/on notes payable, respectively.  The primary use of cash flow from 
investing activities was the purchase of equipment totaling $219,000.

     Cash Flows for the Year Ended December 31, 1995.

The Company generated approximately $614,000 in cash flow from operations up 
from $104,000 in 1994.  The Company's reduction in trade and unbilled 
receivables was the major factor impacting the cash provided from operating
activities during the year ended December 31, 1995.   Financing  activities 
resulted in an outflow of cash of approximately $66,000 primarily due to 
preferred stock redemptions and dividends of $177,000 and proceeds and payments
of $425,000 and $313,000 from/on notes payable, respectively.  Investing 
activities used cash of $488,000 to purchase equipment.  The Company continued 
its commitment to investing in equipment. 

     Cash Flows for the Year Ended December 31, 1994.

The Company generated approximately $104,000 in cash flow from operations 
during the year ended December 31, 1994.   Net positive cash flow from  
financing activities was approximately $146,000.   This was accomplished by 
an increase in drawings on Incat's line of credit of $789,000 less reductions
of debt and preferred stock redemptions and dividends totaling $643,000.   A 
primary use of cash flow from investing activities was the Company self-
funding of equipment purchases totaling approximately $244,000.

The Company's fixed debt services and other requirements include debt service
of approximately $46,000 per month and monthly preferred stock redemption and
dividend payments totaling approximately $14,500 for the year ending December
31, 1994.     

     Impact of Recently Issued Accounting Standards.

In fiscal 1996, the Company adopted Financial Accounting Standards Board
Statement 121 "Impairment of Long-Lived Assets" (FAS 121).  In the event
that facts and circumstances indicate that the cost of assets or other assets
may be impaired, an evaluation of recoverability would be performed.  If an 
evaluation is required, the estimated future undiscounted cash flows associated
with the asset would be compared to the asset's carrying amount to determine
if a write-down to market value or discounted cash flow value is required.
Adoption of FAS 121 had no effect on the December 31, 1996 financial 
statements.

In fiscal 1996, the Company adopted Financial Accounting Standards Board
"Accounting for Stock-Based Compensation" (FAS 123).  FAS 123 encourages,
but does not require, companies to recognize compensation expense for grants
of stock, stock options, and other equity instruments to employees based on
fair value.  Companies that do not adopt the fair value accounting rules must
disclose the impact of adopting the new method in the notes to the financial
statements.  Transactions in equity instruments with non-employees for goods
or services must be accounted for on the fair value method.  The Company
has elected not to adopt the fair value accounting prescribed by FAS 123 for
employees, and is subject only to the disclosure requirements prescribed by
FAS 123.  The pro forma effect on the Company's net loss and earnings per
share by applying FAS 123 to the Company's stock options is insignificant.

     Effects of inflation

The effect of inflation has been minimal over the past three years and 
inflation is not expected to have a significant impact on the Company's 
operations in 1997. 

     Certain Factors Influencing Results and Accuracy of Forward-Looking 
     Statements

This 10-K report contains forward-looking statements within the meaning of 
Section 27A of the Securities Act of 1933.  Discussions containing such 
forward-looking statements may be found in the material set forth under  
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations", as well as within the 10-K report generally.  In addition, when 
used in this 10-K report, the words "believes" and "anticipates", "expects" 
and similar expressions are intended to identify forward-looking statements.   
Generally, these statements relate to business plans or strategies, or 
projected or anticipated benefits or other consequences of such plans or 
strategies, or projections involving anticipated revenues, earnings or other 
aspects of operating results.  Such forward-looking statements are subject to
a number of risks and uncertainties, some of which are briefly discussed in 
Item 1 and 2, "Business and Properties"; Item 3, "Legal Proceedings" and
above in  Item 7, "Management's Discussion and Analysis of Financial 
Condition and Results of Operations".  All phases of the Company's operations
are subject to a number of uncertainties, risks and other influences,  many 
of which are beyond the control of the Company, and any one of which, or a 
combination of which, could materially affect the results of the Company's 
operations and whether forward-looking statements made by the Company 
ultimately prove to be accurate.

The following discussion outlines certain factors that in the future could 
affect the Company's results and cause them to differ materially from those 
that may be set forth in any forward-looking statement made by or on behalf 
of the Company.  The Company cautions the reader, however, that this list of 
risk factors and others discussed elsewhere in this report may not be 
exhaustive.

Competition.  The Company competes with numerous large and small companies, 
some of which have greater financial and other resources than the Company.   
Competition in the catalyst handling services is intense and is based on 
quality of service, price, safety considerations and availability of personnel.

Market Factors.  The Company is dependent on the petroleum refining, 
petrochemical/chemical processing industries' reliance on outside contractors 
for the performance of catalyst handling services.  In addition, the Company 
is and will continue to be affected by the timing and scheduling of shut downs 
by petroleum refineries and petrochemical/chemical  plants, which causes 
fluctuations in quarterly operating results. 

Availability of Management and Supervisory Personnel.  The Company 
employs in its operations managerial personnel and project supervisors 
with substantial experience and training.   The growth of the business will 
depend on, and may be restricted by, its ability to retain these personnel 
and to recruit and train additional supervisory employees.  The competition 
to recruit and retain qualified staff and managerial personnel is intense.

Potential Liability and Insurance.  The operations of the Company involve 
significant risks of liability for personal injury and property damage.  
While the Company believes that it operates safely and prudently, there can 
be no assurance that accidents will not occur or that the Company will not 
incur substantial liability in connection with the operation of its business.
In addition, recent accidents within the petroleum refining and 
petrochemical/chemical industries may result in additional regulations of 
independent contractors serving those industries.  The Company maintains 
workers compensation insurance, general liability insurance, auto liability 
insurance, and umbrella policies, but such insurance is subject to coverage 
limits.  Such insurance includes, commencing in the current year, coverage of
losses or liabilities relating to certain environmental damage or pollution.  
Although the Company believes that it conducts its operations prudently 
and that it minimizes its exposure to such risks, the Company could be 
materially adversely affected by a claim that was not covered or only 
partially covered by insurance.  See Items 1 and 2; "Business and Properties"
and Item 3; "Legal Proceedings".

Developments and Technology.  The catalyst industry is characterized by 
developing technology.  Changes in technology could affect catalyst 
consumption and the need for catalyst handling services as well as how
catalyst services are providing.  There are no assurances the Company will 
have exclusive rights to the tubular loader discussed in Item 1 and 2, 
"Business and Properties" or that other devices will not be developed by
the Company's competitors.

Availability of Resources.  During the past two years, the Company 
experienced operating losses.   While the Company has implemented various 
changes in its operations, the losses have negatively affected the Company's 
available resources.

Item 8.	  Financial Statements and Supplementary Data


ADVANCED ENVIRONMENTAL SYSTEMS, INC.
REPORT ON AUDIT OF
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, 1994


	INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditor's Report	

Consolidated Balance Sheets - December 31, 1996 and 1995	

Consolidated Statements of Operations - For the Years Ended December 31, 
1996, 1995, and 1994	

Consolidated Statement of Changes in Common and Other Stockholders' Equity - 
For the Period from January 1, 1994 through December 31, 1996	

Consolidated Statements of Cash Flows - For the Years Ended December 31, 
1996, 1995, and 1994	

Notes to Consolidated Financial Statements	

Independent Auditor's Report on Supplementary Information	

Schedule I - Financial Information of Registrant	

Schedule II - Valuation and Qualifying Accounts	




	INDEPENDENT AUDITOR'S REPORT





The Stockholders and Directors
Advanced Environmental Systems, Inc.
Denver, Colorado


We have audited the accompanying consolidated balance sheets of Advanced 
Environmental Systems, Inc. and subsidiaries as of December 31, 1996 and 
1995, and the related consolidated statements of operations, changes in 
common and other stockholders' equity and cash flows for each of the years 
in the three-year period ended December 31, 1996.  These consolidated 
financial statements are the responsibility of the Company's management.  
Our responsibility is to express an opinion on these consolidated financial 
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audits to 
obtain reasonable assurance about whether the consolidated financial 
statements are free of material misstatements.  An audit includes examining, 
on a test basis, evidence supporting the amounts and disclosures in the 
consolidated financial statements.  An audit also includes assessing the 
accounting principles used and significant estimates made by management, as 
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial position
of Advanced Environmental Systems, Inc. and subsidiaries as of December 31, 
1996 and 1995, and the results of their operations and their cash flows for 
each of the years in the three-year period ended December 31, 1996, in 
conformity with generally accepted accounting principles.



/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP


Denver, Colorado
February 21, 1997






             ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS







                                                       December 31,    
                                                      1996        1995        


                                    ASSETS


Current Assets:

     Cash and cash equivalents                     $ 151,000    $ 186,000

     Trade accounts receivable, net of 
          allowance for doubtful
          accounts of $40,000:
               Related companies                     161,000      154,000  
               Other                               1,178,000    1,468,000
     Unbilled trade receivables                      203,000       17,000
     Income tax receivable, net                      488,000      201,000
     Asset held for sale                             157,000         -
     Deferred tax asset                              404,000      260,000
     Prepaid and other current assets                 62,000      168,000
               Total current assets                2,804,000    2,454,000

Property and Equipment, net                        1,179,000    1,538,000

Intangibles and Other Assets:
     Intangibles, net of accumulated 
        amortization of $592,000 and
        $549,000, respectively                       958,000    1,001,000
     Other                                            50,000        3,000
               Total other assets                  1,008,000    1,004,000

Total Assets                                      $4,991,000   $4,996,000




                     LIABILITIES AND STOCKHOLDERS' EQUITY


Current Liabilities:

     Accounts payable, including payables 
       to related companies of
       $282,000 and $407,000, respectively        $1,304,000    $ 904,000
     Revolving loans                                 519,000      725,000
     Current portion of long-term debt:
         Financial institutions                      184,000      348,000
         Related parties                             425,000        1,000
     Accrued expenses                                690,000      591,000
               Total current liabilities           3,122,000    2,569,000

Long-term Debt                                       982,000    1,171,000

Deferred Income Taxes                                161,000      178,000

Commitments and Contingencies (Note 4)

Redeemable Convertible Preferred Stock -
     Series A, 4,074,000 and 30,648,000 shares 
          issued and outstanding, respectively;
          4,074,000 shares were redeemed subsequent
          to December 31, 1996                       33,000      237,000

Common and Other Stockholders' Equity: 
    Preferred stock, $.0001 par value; 
          750,000,000 shares authorized:
          36,249,000 and 24,592,000 shares 
          of Series A and B issued and
          outstanding, respectively; 
          liquidation preference of $295,000        96,000        2,000

   Common stock, $.0001 par value; 2,250,000,000 
          shares authorized; 531,668,000 shares 
          issued and outstanding                    53,000       53,000
   Additional paid-in capital                      548,000      548,000
   Retained earnings(deficit)                       (4,000)     238,000
           Total stockholders' equity              693,000      841,000

Total Liabilities and Stockholders' Equity      $4,991,000   $4,996,000

      See accompanying notes to these consolidated financial statements.




            ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS


                                     For the Years Ended                
                                         December 31,                   
                              1996          1995        1994                    


Net Service Revenues     $11,195,000    $10,448,000  $12,756,000     
Cost and Expenses:
   Service costs and
      expenses             8,541,000      7,359,000    8,313,000     
   Selling, general 
      and administrative   2,723,000      2,751,000    2,453,000     
   Management fees, 
      related party          152,000        112,000       96,000       
  Interest, including 
      interest paid to 
      related parties of
      $15,000, $2,000, 
      and $10,000, 
      respectively           275,000        255,000      211,000      
  Depreciation and 
      amortization           452,000        480,000      622,000     
  Retrospective insurance 
      adjustments           (379,000)       300,000         -                
         Total expenses   11,764,000     11,257,000   11,695,000    

Income (Loss) Before 
  Income Taxes              (569,000)      (809,000)   1,061,000    

Income Tax Expense 
  (Benefit)                 (383,000)      (113,000)     526,000      

Net Income (Loss)           (186,000)      (696,000)     535,000    

Dividends on Preferred 
  Stock                      (56,000)       (72,000)     (82,000)    

Net Income (Loss) 
  Attributable to Common
  Stockholders             $(242,000)     $(768,000)   $ 453,000   

Net Income (Loss) Per 
  Common Share and 
  Common Share 
  Equivalent                $  (.0005)     $ (.0013)    $ .0009      

Weighted Average Shares 
  Outstanding               531,668,000   531,668,000  531,668,000 


      See accompanying notes to these consolidated financial statements.
  


              ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENT OF CHANGES IN COMMON AND OTHER STOCKHOLDERS' EQUITY
            FOR THE PERIOD FROM JANUARY 1, 1994 THROUGH DECEMBER 31, 1996
          
          
          
                              Series A and B                           
                              Preferred Stock       Common Stock     
                            Shares    Amount      Shares     Amount            
          
Balances, January 1, 1994  24,592,000  $ 2,000   531,668,000  $ 53,000
          
  Dividends on 
    preferred stock          -           -            -         -        
  Net income                 -           -            -         -      
         
Balances, Dec. 31, 1994    24,592,000    2,000   531,668,000   53,000    
          
  Dividends on 
    preferred stock          -           -            -         -        
  Net loss                   -           -            -         -        
          
Balances, Dec. 31, 1995    24,592,000    2,000   531,668,000   53,000    
          
  Transfer of preferred
    stock from redeemable
    classification         11,657,000   94,000        -         -
  Dividends on 
    preferred stock          -           -            -         -      
  Net loss                   -           -            -         -      
          
Balances, Dec. 31, 1996    36,249,000  $96,000   531,668,000 $53,000   

                                                                  Total
                               Additional      Retained        Stockholders'
                                Paid-in     Earnings(deficit)     Equity

Balances, January 1, 1994      $  548,000      $ 553,000         $1,156,000

  Dividends on 
    preferred stock                -            (82,000)           (82,000)
  Net income                       -            535,000            535,000

Balances, Dec. 31, 1994         548,000       1,006,000          1,609,000
  Dividends on
    preferred stock                -            (72,000)           (72,000)
  Net loss                         -           (696,000)          (696,000)

Balances, Dec. 31, 1995         548,000         238,000            841,000

   Transfer of preferred
     stock from redeemable
     classification                -               -                94,000
  Dividends on
    preferred stock                -            (56,000)           (56,000)
  Net loss                         -           (186,000)          (186,000)

Balances, Dec. 31, 1996      $ 548,000         $ (4,000)         $ 693,000

          
           See accompanying notes to these consolidated financial statements.





            ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                For the Years Ended 
                                                    December 31,     
                                             1996       1995       1994      

Cash Flows from Operating Activities:
  Net income (loss)                     $(186,000)  $(696,000)  $ 535,000 
  Adjustments to reconcile net 
    income (loss) to net cash
    from operating activities:
      Depreciation and amortization      452,000      480,000     622,000     
      Loss on sale of equipment           12,000          -         6,000      
      Deferred income tax expense 
        (benefit)                       (310,000)    (213,000)     66,000   
      Changes in operating assets 
        and liabilities:
        Decrease (increase) in:
          Trade accounts receivable      284,000      875,000  (1,403,000) 
          Unbilled trade receivables    (186,000)     172,000    (189,000) 
          Prepaid expenses and other      59,000       (3,000)    (27,000) 
          Income tax receivables        (140,000)    (109,000)    (92,000)     
        Increase (decrease) in:
          Accounts payable               412,000      (24,000)    640,000     
          Accrued expenses                99,000      132,000     (42,000)    
          Income taxes payables             -             -       (12,000)    
      Net cash provided by operating 
        activities                       496,000      614,000     104,000     

Cash Flows from Investing Activities:
    Purchase of property and equipment  (219,000)    (488,000)   (244,000)   
    
Cash Flows from Financing Activities:
    Proceeds from revolving 
      line-of-credit                  11,998,000    4,910,000   8,982,000       
    Repayments on revolving 
      line-of-credit                 (12,204,000)  (4,911,000) (8,193,000)    
    Proceeds from notes payable          425,000      425,000        -         
    Repayments of notes payable         (354,000)    (313,000)   (469,000)    
    Redemption of Series A 
      preferred stock                   (121,000)    (105,000)    (92,000)     
    Dividends declared                   (56,000)     (72,000)    (82,000)     
      Net cash provided by (used in) 
        financing activities            (312,000)     (66,000)    146,000      

Increase (Decrease) in Cash 
     and Cash Equivalents                (35,000)      60,000       6,000       

Cash and Cash Equivalents, 
   beginning of year                     186,000      126,000     120,000      

Cash and Cash Equivalents, 
   end of year                         $ 151,000    $ 186,000   $ 126,000     


Supplemental Disclosures of Cash Flow
     Information:


     Cash paid for income taxes       $    -        $ 203,000   $ 283,000     

     Cash paid for interest           $ 261,000     $ 327,000   $ 219,000     

     Equipment purchased through 
       capital leases                 $    -        $  63,000   $   -          


      See accompanying notes to these consolidated financial statements.

 
        ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT 
              ACCOUNTING POLICIES:

Nature of Operations - Advanced Environmental Systems, Inc. (AES) was 
incorporated in New York.  AES and its subsidiaries are collectively referred
to as the Company.  The Company performs catalyst handling services for the 
refining petrochemical and chemical industries.  Divisions of the Company 
operate or market services in primarily southwest and western United States, 
South and Central America, the Caribbean, and Asia.  Industrial Services 
Technologies, Inc. (IST) owns approximately 62% of the common stock of the 
Company and all of the preferred stock.

Principles of Consolidation - The consolidated financial statements of the 
Company include the accounts of AES and its subsidiaries, which include 
Advanced Energy Corporation (AEC), which is principally a corporate vehicle 
through which AES acquired International Catalyst, Inc. (Incat), the 
operating company.  All significant intercompany accounts and transactions 
have been eliminated in consolidation.

Cash and Cash Equivalents - The Company considers all highly liquid monetary 
instruments purchased with an original maturity of three months or less to be
cash equivalents.

Property and Equipment - Property and equipment are stated at cost, less 
accumulated depreciation.  Depreciation is computed using straight-line and 
accelerated methods over estimated useful lives of three to seven years.  
Maintenance and repairs are charged to expense as incurred, and expenditures 
for major improvements are capitalized.  When assets are retired, or 
otherwise disposed of, the property accounts are relieved of costs and 
accumulated depreciation and any resulting gain or loss is credited or 
charged to income.

Asset Held for Sale - Subsequent to year-end, the Company entered into an 
agreement to sell its flow bin equipment for $500,000.  The Company has 
segregated these assets held for sale on the balance sheet.  At December 31, 
1996, this equipment had a net book value of approximately $157,000. 

Intangibles - Intangibles consist primarily of the  excess of purchase price 
over fair value of  net assets acquired (goodwill) in connection with the 
acquisition of Incat. This goodwill is being amortized over 30 years on a 
straight-line basis.  The Company periodically reviews the recoverability of 
goodwill based on expected future income.  Due to operating losses in the 
past two years, if such losses were to continue, it is reasonably possible 
the Company's estimate in connection with the recovery of goodwill and/or its
remaining life would materially change within the forthcoming year.  If the 
results of such an assessment indicates that goodwill is impaired, or its 
life is less than its remaining term, the amount of the impairment will be 
expensed, or the remaining amortization period will be decreased. 

Revenue Recognition - Unbilled receivables represent contracts which are in 
progress for which billings were prepared subsequent to the balance sheet 
date.  The Company's contracts are based either on time and materials or 
fixed fees.  For time and material contracts, revenue is recognized at agreed
upon rates as incurred.  For fixed fee contracts, the Company follows the 
percentage of completion method of reporting income which takes into account 
the cost, estimated earnings, and revenue to date on contracts not yet 
completed.  

Income Taxes - The Company accounts for income taxes under the liability 
method, which requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the
financial statements.  Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial statements and 
tax bases of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse. 

Impairment of Long-Lived Assets - In fiscal 1996, the Company adopted 
Financial Accounting  Standards Board Statement 121 "Impairment of Long-Lived
Assets" (FAS 121).  In the event that facts and circumstances indicate that 
the cost of assets or other assets may be impaired, an evaluation of 
recoverability would be performed.  If an evaluation is required, the 
estimated future undiscounted cash flows associated with the asset would be 
compared to the asset's carrying amount to determine if a write-down to 
market value or discounted cash flow value is required.   Adoption of FAS 121
had no effect on the December 31, 1996 financial statements.

Stock-Based Compensation - In fiscal 1996, the Company adopted Financial 
Accounting Standards Board "Accounting for Stock-Based Compensation" 
(FAS 123).  FAS 123 encourages, but does not require, companies to recognize 
compensation expense for grants of stock, stock options, and other equity 
instruments to employees based on fair value.  Companies that do not adopt 
the fair value accounting rules must disclose the impact of adopting the new 
method in the notes to the financial statements.  Transactions in equity 
instruments with non-employees for goods or services must be accounted for on
the fair value method.  The Company has elected not to adopt the fair value 
accounting prescribed by FAS 123 for employees, and is subject only to the 
disclosure requirements prescribed by FAS 123. 

Net Income (Loss) per Common Share - Net income (loss) per common share is 
computed by dividing net income, less dividends on preferred stock, by the 
weighted average number of common and common equivalent shares outstanding 
during each period.  Common stock options outstanding and common stock which 
would be issued upon conversion of preferred stock are not included in the 
computations because their effect would be antidilutive or would not be 
material.

Use of Estimates - The preparation of the Company's consolidated financial 
statements in conformity with generally accepted accounting principles 
requires the Company's management to make estimates and assumptions that 
affect the amounts reported in these financial statements and accompanying 
notes.  Actual results could differ from those estimates.  The Company makes 
various significant estimates which are discussed within the notes to the 
consolidated financial statement.

Reclassifications - Amounts in prior years are reclassified as necessary to 
conform with the current year's presentation.  Such reclassifications had no 
effect on net income (loss).

2.	PROPERTY AND EQUIPMENT:

Property and equipment is summarized by major classifications as follows:



                             	DECEMBER 31,       DECEMBER 31,
                                	1996	               1995

Equipment                     $	2,992,000        	3,453,000
Furniture and fixtures           	313,000          	352,000
Transportation equipment         	391,000          	391,000
                               	3,696,000        	4,196,000
Accumulated depreciation      	(2,517,000)      	(2,658,000)
                              $	1,179,000       $	1,538,000

Depreciation expense charged to operations was $409,000, $439,000, and 
$524,000 for the years ended December 31, 1996, 1995, and 1994, respectively.


3.	RELATED PARTY TRANSACTIONS:

The Company paid IST management fees of $152,000, $112,000, and $96,000 
during the years ended December 31, 1996, 1995, and 1994, respectively.  
Pursuant to the Company's loan agreement with a financial institution, future
management fees to IST are limited to $180,000 annually.

The Company has retained a stock transfer agent of which a major stockholder 
is also a stockholder of IST.  Fees paid to the stock transfer agent were not
significant.  A director of the stock transfer agent is also a director of 
the Company.

The Company has an annual lease, which expired December 31, 1996, for a 
regional facility with a company controlled by certain officers and directors
of the Company and/or IST.  The Company has paid lease costs of approximately
$39,000, each of the years ended December 31, 1996, 1995, and 1994.  

See Notes 5 and 6 for additional related party transactions.


4.	COMMITMENTS AND CONTINGENCIES:

Operating Leases - Incat has entered into operating leases for operating 
facilities and vehicles for various periods through 1996.  Total rent expense
on these leases for the year ended December 31, 1996, 1995, and 1994, was 
approximately $333,000, $382,000, and $364,000, respectively.  Non-cancelable
future minimum lease commitments under these leases are as follows:


	YEARS ENDED
	DECEMBER 31,	


    1997            $	275,000
    1998             	193,000
    1999              	85,000
    2000               	3,000

                    $	556,000


Contingencies - Various claims arising in the ordinary course of business are 
pending against the Company.  To the extent any liability may exist with 
respect to these claims, the Company believes that resolution of these 
matters would be covered by its workers' compensation and general liability 
insurance carriers.  The initial premiums paid with respect to these policies
are subject to adjustment based on certain components plus losses during the 
applicable policy periods.  Based on current estimates prepared by the 
Company's insurers, the Company adjusted its retrospective insurance premium 
accrual from $300,000 as of December 31, 1995 to $175,000 at December 31, 
1996.  This amount is reflected in accrued expenses and represents a general 
reserve pending the resolution of these claims incidental to the Company's 
business.  However, due to the uncertainty of various factual and legal 
issues which may affect these matters, there can be no assurance as to the 
ultimate outcome of these matters or the adequacy of the amount reserved. 


5.	STOCKHOLDERS' EQUITY:

In 1991, AES received $500,000 from IST in the form of a convertible debenture, 
which was subsequently converted into Series A preferred stock.  In 
conjunction with these transactions, IST has a note payable to a financial 
institution, under which the Series A preferred stock and other stockholders'
equity was pledged as collateral.  The Company had not classified the Series 
A preferred stock as Common and Other Stockholder's Equity due to AES 
redeeming preferred stock and IST applying those funds to repay the IST note.
Subsequent to year-end, IST repaid the financial institution note which has 
enabled the Company to classify 11,657,000 shares of Series A redeemable 
preferred stock as equity.

The holder of Series A preferred stock is entitled to receive cumulative cash 
dividends of 14% per annum, payable in monthly installments.  The Company 
declared and paid $28,000, $44,000, and $54,000, of such dividends during the 
years ended December 31, 1996, 1995, and 1994, respectively.  The holder of 
Series B preferred stock is entitled to receive cumulative cash dividends of 
14% per annum, payable in quarterly installments.  The Company declared 
$28,000 of such dividends during each of the years ended December 31, 1996, 
1995, and 1994.  At December 31, 1996, the Company owed IST approximately 
$150,000 in cumulative and unpaid dividends on the Series B preferred stock, 
which is included in accounts payable, related party.  Of this amount, 
$94,000 was paid subsequent to year-end to IST.  In connection with the 
financial institution debt amendment (Note 6), IST repaid its financial 
institution note. 

At December 31, 1996, 15,731,000 shares of Series A preferred stock and 
24,592,000 Series B preferred stock were outstanding.  Both Series A and 
Series B preferred stock have a liquidation preference of $.008133 per share 
plus any unpaid accrued dividends.  Each share of the Series A and Series B 
preferred stock is convertible into one share of common stock at the option 
of the holder.  The Company may redeem all or any part of the Series A and 
Series B preferred stock at $.008133 per share.  During the years ended 
December 31, 1996, 1995, and 1994, 14,917,000, 12,969,000, and 11,265,000 
shares of Series A preferred stock were redeemed, respectively.  Subsequent 
to year-end, 4,074,000 shares of Series A preferred stock were redeemed. 

As of December 31, 1996, the remaining 709,677,000 shares of authorized 
preferred stock may be issued in such series and preferences as determined 
by the Board of Directors.

Stock Option Plan - The Company has a Stock Option Plan under which 
25,000,000 shares of  common stock have been reserved for issuance.  During 
fiscal 1991, the Company granted options to purchase 18,261,013 shares of 
common stock at $.015 per share.  As of December 31, 1996, 7,028,594 options 
were forfeited by employees no longer employed by the Company, and 163,129 
options have been exercised, leaving 11,069,290 options outstanding.  Options 
are exercisable for a seven-year period from the date of the grant.  As of 
December 31, 1996, all outstanding options were exercisable.

In 1995, the Board of Directors changed the exercise price of all outstanding 
options from $.015 to $.008.  All other option terms remained unchanged.  The 
pro forma effect on the Company's net loss and earnings per share by applying 
FAS 123 to these repriced options is insignificant. 


6.	NOTES PAYABLE AND LONG-TERM DEBT:

Notes payable and long-term debt consisted of the following:



                                                	December 31,	
                                             	1996         	1995	

Related Parties

Note to shareholder.  The note accrued 
interest at prime plus 2% (10.25% at 
December 31, 1996) and was repaid in 
January 1997.                              $	425,000       $    -    


Note to shareholder.  The note bears 
interest at 10% and is due on demand.         	-             	1,000

                                           $	425,000        $	1,000


Financial Institutions


Notes payable to a financial institution 
with interest at prime plus 3.5% (11.75% 
at December 31, 1996). The loan is 
collateralized by substantially all 
assets of the Company.                  $	1,166,000     $	1,458,000

Other                                        	-             	61,000
                                         	1,166,000      	1,519,000

Less current portion                      	(184,000)      	(348,000)

                                          $	982,000     $	1,171,000


Long-term debt maturities excluding prepayment rights and redemptions of 
Series A preferred stock are as follows:

	YEARS ENDED
	DECEMBER 31,	

    1997                                                   $	184,000
    1998                                                    	235,000
    1999                                                    	235,000
    2000                                                    	512,000

                                                         $	1,166,000

Subsequent to year-end, the above note with the financial institution was 
amended and increased to include an additional $94,000 in long-term 
financing, which was used to repay certain accumulated dividends to IST.  
Additionally the interest rate was reduced to 3% plus the prime rate in 
effect from time to time.  Under the amended note, the above balance is to be
repaid in monthly principal and interest installments (approximating $19,000 
in principal plus accrued interest) with all unpaid interest and principal 
due March 31, 2000.  The financial institution may require AEC to prepay the 
outstanding balance based upon 50% of annual excess cash flows as defined in 
the agreement.  In 1996, there were no excess cash flows.  

Incat has a $1,400,000 line-of-credit with a financial institution, renewable 
annually in July, with interest at prime plus 2% (totaling 10.25% at 
December 31, 1996)  collateralized by Incat's accounts receivable and 
inventory and guaranteed by AEC, of which $519,000 has been drawn at 
December 31, 1996.  Subsequent to year-end, the Company received a commitment
letter from the financial institution agreeing to extend the term of the 
line-of-credit to September 30, 1997 and modify its covenants.  The financial
institution agreed to increase the line-of-credit to $1,600,000 for the three
months ended June 30, 1997 at which time the line-of-credit will return to 
$1,400,000.  The interest rate was changed to 2.5% plus the prime rate in 
effect from time to time during the renewal period.  The closing of the 
renewal is subject to certain conditions which management believes it will
meet.

The Company's notes payable and the line-of-credit with financial institutions 
have various financial and operational covenants and restrictions as to the 
Company's ability to pay dividends.  The Company was not in compliance with 
certain covenants as of year-end on its notes and line-of-credit.    The 
covenants that pertain to the line-of-credit and notes payable were modified 
subsequent to year-end and as such, management believes the Company will 
remain in compliance with the modified covenants during 1997. 


7.	INCOME TAXES:

The provision for income taxes consists of the following:


                                       YEAR ENDED DECEMBER 31,	
                                   	1996       	1995       	1994	


Current:
      Federal                   $	(96,000)  $   	-      $	265,000
      State                      	(14,000)      	-        	83,000
      Foreign                     	37,000    	100,000    	112,000

                                  (73,000)   	100,000    	460,000

Deferred - Federal              	(310,000)  	(213,000)    	66,000

Income tax expense (benefit)   $	(383,000) $	(113,000)  $	526,000


The actual income tax expense differs from the "expected" income tax expense 
(benefit) (computed by applying the U.S. Federal corporate income tax rate of 
35% for the years ended December 31, 1996 and 1995 and 34% for all previous 
periods) as follows:



                                    	1996          	1995          	1994	

Computed "expected" tax expense
  (benefit)                      $	(199,000)    $	(275,000)     $	361,000
State income taxes, net of 
  Federal income tax benefit       	(14,000)      	(27,000)       	55,000
Foreign income taxes                	37,000       	100,000       	112,000
Non-deductible expenses             	28,000        	85,000        	98,000
Other                             	(235,000)        	4,000      	(100,000)

                                 $	(383,000)    $	(113,000)     $	526,000

The components of the Company's deferred tax assets and liabilities at 
December 31, 1996 are as follows:


Current deferred tax assets (liabilities):
      Net operating loss                                        $	271,000
      Prepaid expenses                                           	(25,000)
      Vacation accrual reserve                                    	45,000
      Other                                                      	113,000

      Net current deferred tax asset                            $	404,000

      Long-term deferred tax liability - depreciation 
           and capital lease treatments                         $	161,000


As of December 31, 1996, the Company has income tax loss carryforwards 
of approximately $678,000, which will expire in the year 2011.  The Company 
has estimated that loss will be utilized to offset future income.  Therefore,
it has been recorded as a deferred asset.


8.	401(K) PLAN:

Several affiliates of IST, including the Company, have a 401(k) plan.  All 
active, full-time, non-union employees are eligible to participate in the 
plan after 1,000 hours of service.  Employees may make before-tax 
contributions from 1% to 15% of total compensation with a maximum 
contribution of $9,500.  Employer matching contributions are made at the 
discretion of the board of directors, and may not exceed 3% of the employee's
compensation.  Employees are fully vested in their individual contributions 
and vest in company matching contributions at a rate of 20% per year (fully 
vested after 5 years).  The Company made matching contributions to the plan 
totaling approximately $-0-, $-0-, and $34,000 during the years ended 
December 31, 1996, 1995, and 1994.


9.	CONCENTRATIONS OF CREDIT RISK:  

Credit risk represents the accounting loss that would be recognized at the 
reporting date if counterparties failed completely to perform as contracted. 
Concentrations of credit risk (whether on or off balance sheet) that arise 
from financial instruments exist for groups of customers or counterparties 
when they have similar economic characteristics that would cause their 
ability to meet contractual obligations to be similarly effected by changes 
in economic or other conditions.

The Company's receivables are concentrated from customers in the petrochemical 
industry.  To reduce this risk, the Company has a policy to examine the credit 
worthiness of its customers prior to performing services on their behalf.  The 
Company's concentrations of credit risk also arise from the Corporation's 
receivables in relation to the location of customers as presented in the 
following table.


                             	1996	             	1995	

Asia                      $    -            $  	339,000
North America              	1,339,000        	1,283,000

                          $	1,339,000       $	1,622,000

As of December 31, 1996, the Company had receivable balances due from 
customers which represented 14%, 17%, and 32% of the total accounts 
receivable balance.

For the years ended December 31, 1996, 1995, and 1994, the Company had 
sales with customers which represented the following percentage of total 
revenues for each year:

                            	1996	      	1995        	1994	

Customer 1                   	17%        	6%          	11%
Customer 2                   	27%        	3%           	3%
Customer 3                    	1%       	11%          	12%



Information about the Company's sales in the United States and international 
markets is presented below:

	REGION                             	1996	         1995            	1994	

United States                   $	10,458,000    $	9,992,000     $	11,784,000
Central America and Caribbean        	-             	-              	413,000
Asia                                	287,000       	335,000         	381,000
South America                       	450,000       	121,000         	178,000

                                $	11,195,000   $	10,448,000     $	12,756,000


In accordance with FASB Statement No. 105, Disclosure of Information 
about Financial Instruments with Off-Balance-Sheet Risk and Financial 
Instruments with Concentrations of Credit Risk, the credit risk amounts 
shown do not take into account the value of any collateral or security.  The 
amounts of credit risk shown do not represent expected losses.




	INDEPENDENT AUDITOR'S REPORT
	ON SUPPLEMENTARY INFORMATION



Our audit was made for the purpose of forming an opinion on the basic 
consolidated financial statements taken as a whole.  The schedules to the 
consolidated financial statements referred to in the index are presented for 
the purposes of additional analysis and are not a required part of the basic 
consolidated financial statements.  Such information for the year ended 
December 31, 1996, 1995, and 1994 has been subjected to the auditing 
procedures applied in the audit of the basic consolidated financial 
statements.  In our opinion, such information is fairly stated in all 
material respects in relation to the basic consolidated financial statements 
taken as a whole. 



/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP



February 21, 1997
Denver, Colorado




ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
              SCHEDULE I - FINANCIAL INFORMATION OF REGISTRANT -
                           CONDENSED BALANCE SHEETS



                                         December 31,      December 31,
                                            1996               1995           


                                    ASSETS

Current Assets:
     Due from subsidiaries                 $359,000           $ 76,000
     Prepaid and other current assets         3,000              3,000
               Total current assets         362,000             79,000

Other Assets:
     Investment in subsidiaries             879,000          1,202.000    

Total Assets                             $1,241,000         $1,281,000



                     LIABILITIES AND STOCKHOLDERS' EQUITY


Current Liabilities:
      
    Related party accounts payable      $   4,000         $   114,000
    Related party notes payable           425,000               1,000
    Related party accrued expenses 
      and other current liabilities        86,000              88,000
          Total current liabilities       515,000             203,000

Redeemable Convertible Preferred Stock:
     Series A $.0001 par value; 4,074,000 
       and 30,648,000 shares issued and 
       outstanding, respectively; 
       4,074,000 shares were redeemed
       subsequent to December 31, 1996      33,000           237,000 

Common and Other Stockholders' Equity:
    Preferred stock, $.0001 par value, 
      750,000,000 shares authorized 
      36,249,000 and 24,592,000 shares 
      of Series A and B issued and 
      outstanding, respectively;
      liquidation preference of 
      $295,000                              96,000            2,000

   Common stock, $.0001 par value; 
      2,250,000,000 shares authorized; 
      531,668,000 shares issued and 
      outstanding, respectively             53,000           53,000
   Additional paid-in capital              548,000          548,000
   Retained earnings(deficit)               (4,000)         238,000
         Total stockholders' equity        693,000          841,000

Total Liabilities and Stockholders' 
   Equity                               $1,241,000       $1,281,000




            ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
              SCHEDULE I - FINANCIAL INFORMATION OF REGISTRANT -
                      CONDENSED STATEMENTS OF OPERATIONS

 
                                              For the Year Ended    
                                                  December 31,        
                                       1996          1995         1994          

Equity in undistributed earnings 
     (loss) of subsidiaries            $(323,000)  $(836,000)    $409,000    
Dividend income                          149,000     142,000      146,000       
General, selling and administrative       (2,000)     (3,000)     (15,000)  
Interest expense                         (15,000)        -           -
Income tax (expense) benefit               5,000       1,000       (5,000)    

Net income (loss)                      $(186,000)  $(696,000)    $535,000     





             ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
              SCHEDULE I - FINANCIAL INFORMATION OF REGISTRANT -
                      CONDENSED STATEMENTS OF CASH FLOWS

                                                               
                                              For the Year Ended     
                                                  December 31,       
                                         1996         1995         1994      
                 

Cash Flows from Operating Activities:
   Net income (loss)                  $(186,000)   $(696,000)   $ 535,000     
   Adjustments to reconcile net 
    income (loss) to net cash 
    from operating activities:
       Equity in undistributed 
        (earnings)losses of
        subsidiaries                   323,000       836,000     (409,000)    
       Amortization                       -            2,000        2,000       
       Decrease (increase) in:
         Due from subsidiaries        (283,000)       46,000      (25,000)     
       Increase (decrease) in:
         Accounts payable:
           Trade                          -           (1,000)     (34,000)   
           Related party              (110,000)       28,000       86,000       
       Related party accrued 
         expenses and liabilities        9,000       (12,000)      23,000      
       Net cash provided by (used 
           in) operating activities   (247,000)      203,000      178,000   

Cash Flows from Financing Activities:
     Proceeds from related party debt  425,000          -            -        
     Repayment of related party debt    (1,000)     (26,000)      (4,000)       
     Redemption of preferred stock    (121,000)    (105,000)     (92,000)      
     Dividends declared                (56,000)     (72,000)     (82,000)      
          Net cash provided by (used 
             in) financing activities  247,000     (203,000)    (178,000)     

Decrease in Cash and Cash Equivalents     -             -            -  

Cash and Cash Equivalents, 
    beginning of period                   -             -            -  

Cash and Cash Equivalents, 
    end of period                    $    -         $   -         $  -    





             ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
             FOR THE YEARS ENDED DECEMBER  31, 1996, 1995 and 1994
          
          

                    Balance at   Charged to  Charged to              Balance at
                    Beginning    Costs and     Other                   End of
Classification      of Period    Expenses    Accounts    Deductions    Period  
          
Year Ended 
  Dec 31, 1996:

    Excess of 
     purchase price 
     over the value
     of assets 
     acquired      $ 204,000   $  42,000       $   -      $    -     $ 246,000
    Deferred loan 
     fees            157,000       1,000           -           -       158,000
    License rights   158,000         -             -           -       158,000
    Other             30,000        -              -           -        30,000
          
Year Ended
  Dec 31, 1995:          
          
   Excess of 
    purchase price 
    over the value
    of assets 
    acquired      $  162,000   $  42,000      $    -     $    -    $   204,000
   Deferred loan 
    fees             146,000      11,000           -          -        157,000
   License rights    145,000      13,000           -          -        158,000
   Other              30,000        -              -          -         30,000
          

Year Ended 
  Dec 31, 1994:
          
   Excess of 
    purchase price 
    over the value 
    of assets 
    acquired     $  120,000   $  42,000       $   -      $    -    $  162,000
   Deferred loan 
     fees           135,000      11,000           -           -       146,000
   License rights    97,000      48,000           -           -       145,000
   Other             25,000       5,000           -           -        30,000
          
  


Item 9.	  Disagreements on Accounting and Financial Disclosure.

None of the events specified in this Item has occurred and, therefore, 
it is inapplicable.  





                                   	PART IV


Item 14   	Exhibits, Financial Statements, Schedules and Reports on Form 8-K.

	(a)(1)(2)  See Item 8.  

	(b)        Reports on Form 8-K.  
A form 8-K was filed on December 11, 1996.  Exhibits are incorporated 
herein by reference.

	(c)        See the Exhibit Index.


                                 	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.  

                      			ADVANCED ENVIRONMENTAL SYSTEMS, INC.
           
Date:  April 14, 1997          			By: /s/ J. Daniel Bell            			
                                      J. Daniel Bell, President



Pursuant to the requirements of the Securities Exchange Act of 1934, this 
Report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated.  

Date:  April 14, 1997	            By: /s/ J. Daniel Bell            
			                                  J. Daniel Bell, President and
				        			                         Director


Date:  April 14, 1997             By: /s/ Alfred O. Brehmer        
	                          		        Alfred O. Brehmer, Secretary, 
          					                         Treasurer and Director


                        	EXHIBIT INDEX

Number	    Exhibit Name

 3	        Certificate of Incorporation, as amended, and Bylaws, filed as 
           Exhibits to the Company's Annual Report on Form 10-K for the year 
           ended March 31, 1992, which Exhibits are incorporated herein by 
           reference.

 4(a)	     Form of Common Stock Certificate and forms of Class A, Class B, 
           Class C and Class D Warrant Certificates, filed as Exhibits to the 
           Company's Registration Statement on Form S-18 (No. 33-7107-NY), 
           which Exhibits are incorporated herein by reference.  

10(c)	     Stock Purchase Agreement among Craig E. Bowman, Victor L. Kearns, 
           B.V. Corwin, Charles L. Bowman, Jan T. Kouri, Darryl F. Kouri, 
           G. L. Walker and Robert W. Dobbs, as Sellers, and Advanced Energy 
           Corporation ("AEC"), as Buyer, dated August 16, 1988, filed as an 
           Exhibit to the Company's Registration Statement on Form S-18 
           (No. 33-7107-NY), which Exhibit is incorporated herein by 
           reference.  

10(f)	     Stock Option Plan of the Company, filed as an Exhibit to the 
           Company's Registration Statement on Form S-18 (No. 33-7107-NY), 
           which Exhibit is incorporated herein by reference.  

10(g)(i)	    Plan of Reorganization and Agreement of Merger among the Company, 
           NWP Acquisition Corporation ("NWP") and AEC filed as an Exhibit to 
           the Company's Report on Form 10-Q for the quarter ended July 31, 
           1988, which Exhibit is incorporated herein by reference. 

10(g)(ii)	    Amendment to Plan of Reorganization and Agreement of Merger 
           among Northwest, NWP and AEC filed as part of the Report on 
           Form 8-K of the Company for an event occurring December 30, 1988, 
           which Exhibit is incorporated herein by reference.
 
10(i)          Loan and Security Agreement between FINOVA Capital Corporation
          f/k/a Greyhound  Financial Corporation ("Greyhound")and AEC dated 
          August 16, 1988, filed as an Exhibit to the Company's Registration 
          Statement on Form S-18 (No. 33-7107-NY), which Exhibit is 
          incorporated herein by reference.

10(j)          Corporate Guarantee and Subordination Agreement between Incat 
          and Greyhound dated August 16, 1988, filed as an Exhibit to the 
          Company's Registration Statement on Form S-18 (No. 33-7107-NY), 
          which Exhibit is incorporated herein by reference.  

10(k)          Security Agreement between Incat and Greyhound dated 
          August 16, 1988, filed as an Exhibit to the Company's Registration 
          Statement on Form S-18 (No. 33-7107-NY), which Exhibit is 
          incorporated herein by reference.

10(l)           Guarantee and Subordination Agreement between the Company 
           and Greyhound, filed as an Exhibit to the Company's Registration 
           Statement on Form S-18 (No. 33-7107-NY), which Exhibit is 
           incorporated herein by reference.

10(p)	     Stock Purchase Agreement among AEC, Teton Leasing, Inc., 
           Craig Bowman, Victor L. Kearns and B.V. Corwin, filed as Exhibit 
           to the Company's Registration Statement on Form S-18 
           (No. 33-7107-NY), which Exhibit is incorporated herein by 
           reference.  

10(r)	     First Amended Loan and Security Agreement between Greyhound 
           and AEC dated March 30, 1989, filed as an Exhibit to the Company's 
           Registration Statement on Form S-18 (No. 33-7107-NY), which 
           Exhibit is incorporated herein by reference.  

10(s)	     First Amendment to Corporate Guarantee and Subordination 
           Agreement between Incat and Greyhound dated March 31, 1989, 
           filed as an Exhibit to the Company's Registration Statement on 
           Form S-18 (No.  33-7107-NY), which Exhibit is incorporated 
           herein by  reference.  

10(t)	     First Amendment to Security Agreement between Greyhound 
           and Incat dated March 31, 1989, filed as an Exhibit to the Company's 
           Registration Statement on Form S-18 (No.  33-7107-NY), which 
           Exhibit is incorporated herein by reference.  

10(u)	     First Amendment to Corporate Guarantee and Subordination 
           Agreement between the Company and Greyhound dated March 30, 1989, 
           filed as an Exhibit to the Company's Registration Statement on 
           Form S-18 (No.  33-7107-NY), which Exhibit is incorporated herein 
           by  reference.  

10(a)(a)	  Convertible Note for $500,000 of the Company payable to Industrial 
           Services Technologies, Inc. filed as an Exhibit to the Company's 
           Annual Report on Form 10-K for the year ended March 31, 1990 which 
           Exhibit is incorporated herein by reference.  

10(b)(b)	  AEC Assignment of Incat Security Interest to Greyhound dated 
           April 23, 1990 filed as an Exhibit to the Company's Annual Report 
           on Form 10-K for the year ended March 31, 1990 which Exhibit is 
           incorporated herein by reference.  

10(d)(d)	  Security Agreement between AEC and Incat dated April 23, 1990 
           filed as an Exhibit to the Company's Annual Report on Form 10-K 
           for the year ended March 31, 1990, which Exhibit is incorporated 
           herein by reference.

10(e)(e)	  Convertible Note for $100,000 of the Company payable to Industrial 
           Services Technologies, Inc., IST filed as an Exhibit to the 
           Company's Annual Report on Form 10-K for the year ended March 3, 
           1991, which Exhibit is incorporated herein by reference.

10(i)(i)	  Amendment to Loan and Loan Documents between AEC and 
           Greyhound dated December 23, 1992 filed as an Exhibit to the 
           Company's Annual Report on Form 10-K for the year ended 
           March 31, 1993, which Exhibit is incorporated herein by reference.

10(j)(j)	  Note of AEC payable to Greyhound in the principal amount of 
           $2,100,000, dated December 23, 1992 filed as an Exhibit to the 
           Company's Annual Report on Form 10-K for the year ended March 31, 
           1993, which Exhibit is incorporated herein by reference.

10(k)(k)	  Amendment to Security Agreement between Incat and 
           Greyhound dated December 23, 1992 filed as an Exhibit to the 
           Company's Annual Report on Form 10-K for the year ended 
           March 31, 1993, which Exhibit is incorporated herein by reference.

10(l)(l)	  Amendment to Guarantee between Incat and Greyhound and 
           Amendment to Guarantee between AES and Greyhound, both 
           dated December 23, 1992 filed as an Exhibit to the Company's 
           Annual Report on Form 10-K for the year ended March 31, 1993, 
           which Exhibit is incorporated herein by reference.

10(m)(m)    Amendment to Instruments among IST, AEC, Incat and Greyhound 
           dated as of March 31, 1993, with form of Promissory Note of Incat 
           to AEC dated as of March 31, 1993, which replaced Exhibit 10(c)(c) 
           filed as an Exhibit to the Company's Annual Report on Form 10-K 
           for the year ended March 31, 1993, which Exhibit is incorporated 
           herein by reference.

10(o)(o)	  Agreement between IST, The Argentum Group and various Purchasers 
           dated January 11, 1991 and April 8, 1991 filed as an Exhibit to 
           the Company's Annual Report on Form 10-K for the nine months 
           ended December 31, 1993 which Exhibit is incorporated herein by 
           reference.

10(p)(p)(i)  Loan Agreement and Promissory Note dated July 31, 1995 between 
          Incat and First Interstate Bank of Texas filed as an Exhibit to the 
          Company's Annual Report on Form 10-K for the year ended December 31, 
          1995, which Exhibit is incorporated herein by reference.


10(p)(p)(ii)  Commitment Letter dated April 1, 1997 between Incat and Wells 
          Fargo filed as an Exhibit to the Company's Annual Report on 
          Form 10-K for the year ended December 31, 1996. 
          
10(q)(q)	  Lease dated January 1, 1996 between Incat and Allen & Cameron filed
          as an Exhibit to the Company's Annual Report on Form 10-K for the 
          year ended December 31, 1995, which Exhibit is incorporated herein 
          by reference.

10(r)(r)   Lease dated January 1996 between Larry W. Eubanks and Incat filed 
          as an Exhibit to the Company's Annual Report on Form 10-K for the 
          year ended December 31, 1995, which Exhibit is incorporated herein 
          by reference.

10(s)(s)  Asset Sale Agreement between Incat and 
         Federal Container Corporation filed as an Exhibit to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1996.
         
10(t)(t)(i)  Fourth Amendment to Loan and Loan Document between AEC
         and FINOVA filed as an Exhibit to the Company's Annual Report
         on Form 10-K for the year ended December 31, 1996.
        
10(t)(t)(ii) Note between AEC and FINOVA filed as an Exhibit to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1996.
         
10(t)(t)(iii)  Second Amendment to Guarantees between Incat and FINOVA
         filed as an Exhibit to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1996.

10(t)(t)(iv)  Second Amendment to Guarantees between AES and FINOVA
         filed as an Exhibit to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1996.

10(u)(u)(i)   Loan Agreement dated November 25, 1996 by and between
        Advanced Environmental Systems, Inc. and Carylyn K. Bell filed
        as an Exhibit to the Company's Current Report on Form 8-K
        dated December 11, 1996, which Exhibit is incorporated
         herein by reference.

10(u)(u)(ii)  Promissory Note dated November 25, 1996 in the 
        amount of $425,000 from Advanced Environmental Systems, 
        Inc. to Carylyn K. Bell filed as an Exhibit to the Company's
        Current Report on Form 8-K dated December 11, 1996,
        which is incorporated herein by reference.

10(u)(u)(iii)  Security Agreement dated November 25, 1996 by 
       and between  Advanced Environmental Systems, Inc. and 
       Carylyn K. Bell filed as an Exhibit to the Company's
       Current Report on Form 8-K dated December 11, 1996,
       which is incorporated herein by reference.

10(u)(u)(iv)  Guaranty dated November 25, 1996 by Industrial 
       Services Technologies, Inc. and for the benefit of 
      Carylyn K. Bell filed as an Exhibit to the Company's
      Current Report on Form 8-K dated December 11, 1996,
      which is incorporated herein by reference.


22	        Subsidiaries of the registrant.



   
DESCRIPTION:  EXHIBIT 22

                   	Advanced Environmental Systems, Inc.
                            	Exhibit 22 to
                       	Annual Report on Form 10K

                       	Subsidiaries of Registrant




                            			  	State of  
Corporation          			          Incorporation              Percent Owned

Advanced Energy Corporation		       	Delaware                     100%
International Catalyst, Inc.	       		Nevada 	          	         100%



EXHIBT 10(p)(p)(ii)


WELLS FARGO BANK (TEXAS), N.A.
Commercial Banking
P.O. Box 3326
Houston, TX  77253-3326
(713) 250-4826


COMMITMENT LETTER


April 1, 1997

Mr. Gary L. Schmitt, V. P., Finance
International Catalyst, Inc.
370 17th Street, Suite 2300
Denver, CO 80202-4614


Dear Gary:

As you are aware, the current Forbearance Agreement between 
International Catalyst, Inc. (the "Borrower") and Wells Fargo Bank 
(Texas), N.A. (the "Lender") expired 3/31/97, placing International 
Catalyst in immediate violation of several financial covenants in the 
current Loan Agreement for the Revolving Line of Credit which expires 
4/30/97. Wells Fargo has chosen not to pursue the remedies available to it 
under the Loan Agreement in anticipation of the early renewal and 
restructure of the Revolving Line of Credit according to the terms and 
provisions described in the attached Summary of Principal Terms and 
Conditions.

Pursuant to our standard lending policy, the following matters are 
applicable to this commitment and will be applicable to the proposed credit 
facility:

AGREEMENT FOR BINDING ARBITRATION. The parties agree to 
be bound by the terms and provisions of the Arbitration Program which is 
incorporated by reference herein and is acknowledged as received by the 
parties pursuant to which any and all disputes shall be resolved by 
mandatory binding arbitration upon the request of any party.

NO ORAL AGREEMENTS. To the extent allowed by law, the parties 
hereto agree to be bound by the terms of the following notice:  NOTICE:  

THIS PROPOSED WRITTEN COMMITMENT REPRESENTS THE 
FINAL AGREEMENT BETWEEN THE PARTIES REGARDING THE

COMMITMENT  AND  MAY  NOT  BE  CONTRADICTED  BY  
EVIDENCE  OF  PRIOR CONTEMPORANEOUS, OR SUBSEQUENT 
ORAL AGREEMENTS OF THE PARTIES.  THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES 
RELATING TO THIS PROPOSED LOAN.

We at Wells Fargo Bank appreciate the opportunity to provide this 
proposal to you and look forward to continuing our relationship. Please 
contact me with any questions you may have concerning this proposal.



Very truly yours,

Wells Fargo Bank (Texas), N.A.


By: /s/ Tom Caver
Name:  Thomas F. Caver, III
Title:	Assistant Vice President

ACCEPTED AND AGREED TO THIS ____ DAY OF APRIL, 1997

International Catalyst, Inc.


By:
Name:  Gary L. Schmitt


ACCEPTANCE RECEIVED AND COMMITMENT EFFECTIVE ON 
THIS _____ DAY OF APRIL, 1997.

WELLS, FARGO BANK(TEXAS), N.A.


By:
Name:  Thomas F. Caver, III
Title:  Assistant Vice President



SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
Attachment to April 1, 1997 letter from
Wells Fargo Bank (Texas), N.A. to
International Catalyst, Inc.


This credit facility will be subject to a comprehensive loan agreement that 
will include, but shall not be limited to, the following terms and 
conditions:

1.	Lender(s): Wells Fargo Bank (Texas), N.A.

2.	Borrower(s): International Catalyst, Inc.

3.Amount and Term:
Revolving Line of Credit with a maximum commitment amount of 
$1,600,000.00 to June, 30, 1997.  The maximum commitment amount will 
decrease to $1,400,000.00 effective July 1, 1997 through expiration of the 
commitment on September 30, 1997.

4.Interest Rate and Fees:Interest will accrue on the outstanding principal
 balance at Lender's Prime Rate + 21/2 %, floating. An Unused Portion Fee 
of 1/2 % per annum will accrue daily on that portion of the commitment 
amount less the outstanding principal balance.


5.  Repayment:  Monthly payments to consist of accrued interest and 
unused portion fees will be automatically debited from the Borrower's 
operating account.

6.Events of Default: Those customarily in Lender's documents and others 
appropriate to the specific transaction, including failure to pay, breach of 
representations or warranties, default in covenant performance, default by 
guarantors under guaranties, default in other debt, final judgments that are 
not stayed, bankruptcy, insolvency, reorganization, appointment of trustees 
or receivers, writs of attachment and the like material adverse changes.

7.  Guarantors: This credit facility will have the continuing and unlimited 
guaranty of Advanced Energy Corporation ("AEC").

8.  Security: The subject credit facility will be secured by a first security 
interest in all of Borrower's existing and future accounts receivable.

9.  Collateral Inspections: The proposed revolving credit facility will be 
subject to the satisfactory review by Lender or Lender's representatives of 
the Borrower's accounting systems and books and records no more than 
two times in a twelve month period during the term of the revolving line.

10.  Borrowing Formula:  Advances will be restricted by a Borrowing Base 
that will allow principal advances of up to 80% against eligible accounts 
receivable acceptable to the Lender, at the Lender's sole discretion, up to 
the maximum commitment amount.  Eligible accounts receivable will 
generally include receivables due to the Borrower aged less than 90 days 
from invoice, less standard excluded accounts as defined by Lender. Lender 
may, at Lender's sole discretion, allow certain otherwise ineligible accounts 
to be included in the Borrowing Base upon written request of the Borrower, 
such exceptions to be evidenced in writing by Lender.

11.  Credit Purposes: Advances under the Revolving Line will only be used 
for legitimate business activities of the Borrower.

12.  Financial and Other Material Covenants: Usual and customary for 
financing of this type, including, but not limited to:

	Borrower will provide to Lender annual audited financial statements of the 
Borrower within 120 days of each fiscal year end. Audited financial 
statements of the Borrowers parent, Advanced Environmental Systems, can 
be provided as a substitute.

	Borrower will provide to Lender monthly financial statements, accounts 
receivable and payable agings, Certificate of No Default and Borrowing 
base Certificate of Borrower, within 30 days of each month end.

Borrower will provide to Lender monthly consolidated financial statements 
of Advanced Energy Corp. and Advanced Environmental Systems, Inc. 
within 30 days of month end.

	Capital expenditures limited to no more than $350,000 per fiscal year 
without the Bank's written consent.

	Two consecutive fiscal quarter net losses constitutes an event of default.

	No dividends unless Borrower is in compliance with loan agreement.

	Quarterly dividend distributions will be limited to the lesser of $125,000 or 
the amount necessary to meet AEC's fixed debt service obligations to 
FINOVA.

	Borrower will maintain a minimum ratio of current assets to current 
liabilities of 1.00 to 0.75 as of each fiscal month end	through April 30, 
1997.  From May 31, 1997, through September 30, 1997, the ratio will 
1998.  be 1.00 to 1.00.
 
	Borrower will maintain a maximum ratio of total liabilities to tangible net 
worth of 4.75 to 1.00 as of 4/30/97, 4.50 to	1.00 as of 5/31/97, 4.25 to 
1.0 as of 6/30/97, 4.00 to 1.00 as of 7/31/97, 3.75 to 1.00 as of 8/31/97, 
and 3.50 to 1.00 as of 9/30/97.

	Borrower will maintain a tangible net worth of at least $1,000,000 as of 
4/30/97 through 5/31/97, and $1,100,000 as of 6/30/97 through 9/30/97.

	Borrower will be required to maintain a lockbox with cash collateral 
account.

13.  Documentation: The obligations of the parties are subject in all 
respects to the preparation and execution of documents acceptable to and 
satisfactory in form and substance to Lender in its sole discretion, which 
documents will supersede this commitment letter. Additionally, Borrower 
agrees to bear the cost of any and all legal fees and other expenses incurred 
by Lender in connection with this transaction. These fees will be payable at 
Lender's request and in any event no later than the date of execution and 
delivery of loan documents.

14.  Additional Terms and Conditions: This proposal is subject to the
 satisfactory closing, in Lender's sole judgment, of certain commitments 
made by Borrower to Lender to sell certain assets described as catalyst flow 
bins for the purpose of raising additional liquid working capital for the 
Borrower.

15.  Representations and Warranties: Those usually in Lender's credit 
facilities of this type and others appropriate to the specific transaction, 
including representations related to due organization, financial statement 
accuracy, enforceability of obligations, authorization and power, litigation, 
other debt, title to properties, purpose of credit, solvency, ownership and 
existence of subsidiaries, judgments and governmental consents and 
approvals.

16.  Conditions of Funding: Obligations to fund are subject to, in 
Lender's sole judgment, no material adverse change having occurred in the 
financial condition, business or operations of the Borrower or any Guarantor,
or in the assets, liabilities and properties thereof, or no material 
threatened or pending litigation adversely affecting them or their property.

This proposal and any subsequent obligation to fund is voidable at Lender's 
option if the Borrower or any Guarantor is insolvent or is voluntarily or 
involuntarily involved in bankruptcy or similar proceedings as debtor, if a 
trustee or receiver is appointed for any of its or his property, if a judgment 
is entered that it or he is bankrupt, or if an assignment is made for the 
benefit of creditors.

17.  Expiration: This proposal is not assignable and will expire if not 
accepted by April 15, 1997.

18.  Closing Date: This proposal will expire by its terms on April 30, 
1997, unless closing of the subject facility(s) has sooner occurred.

19.  Governing Law: This proposal will be governed by and construed 
in accordance with the laws of the State of Texas and Federal laws of the 
United States of America.





EXHIBIT 10 (s)(s)


	ASSET SALE AGREEMENT
	BETWEEN
	FEDERAL CONTAINER CORPORATION, AS BUYER
	AND
	INTERNATIONAL CATALYST, INC., AS SELLER


	This Asset Sale Agreement (the "Agreement") is made the 11th day 
of April, 1997, by and between Federal Container Corporation, a 
Delaware corporation ("Buyer"), and International Catalyst, Inc., a Nevada 
corporation ("Seller").  Seller and Buyer are sometimes referred to 
collectively herein as the "Parties".


	Recitals
	
1.  Seller desires to withdraw from the direct leasing of 
 carbon steel, intermediate bulk containers, used for the
 transportation of catalysts ("Flo Bins"), and accordingly, 
 seeks to sell its entire fleet of Flo Bins on the terms and 
 conditions hereinafter set forth; and

2.  Buyer, whose primary business is the direct leasing of Flo Bins, 
 desires to purchase Seller's entire fleet of Flo Bins with the 
 understanding that it will enter into a long-term agreement 
 with Seller to provide Flo Bins to meet Seller's reasonable needs.

	NOW, THEREFORE, in consideration of the Recitals and the mutual 
promises of the Parties and in reliance on the representations, warranties and 
covenants hereinafter set forth, the Parties agree as follows:


	Section 1.  Sale and Transfer of Assets

1.1  Assets to be Sold.  On April 22, 1997 (the "Closing Date"), and 
subject to the terms and conditions of this Agreement, Buyer shall purchase 
from Seller, and Seller shall sell, transfer, convey and deliver to Buyer, 
all its right, title and interest in and to the Flo Bins listed on Schedules 
1.1(a) and 1.1(b),subject to the right of Seller to collect and retain all 
rental income earned by or accrued to and including May 30, 1997 from the 
Flo Bins listed on Schedule 1.1(b), free and clear of all liabilities, 
obligations, liens and encumbrances, except as expressly provided otherwise 
to the contrary herein.  

1.2  Purchase Price; Transfer Taxes.  As consideration for the 
Flo Bins to be purchased by Buyer pursuant to this Agreement, Buyer shall pay 
to Seller a total of $500,000 (the "Purchase Price") payable as follows:

(a)  $350,000 by wire transfer to the account of Seller 
on the Closing Date (the "First Cash Payment").

(b)  $150,000 by wire transfer to the account of Seller on 
May 30, 1997 (the "Second Cash Payment").  

	Any use, sale or other transfer taxes payable in respect of the 
transactions contemplated by this Agreement shall be paid by Buyer.

	This Agreement and any other documents executed by Buyer and 
Seller in connection with the transactions contemplated by this Agreement, 
are referred to sometimes herein collectively as the "Purchase Documents".


	Section 2.  Representations and Warranties of Buyer

	For purposes of this Section 3, any reference to the "the best knowledge of 
Buyer" shall mean the best of Buyer's knowledge only after diligent inquiry by 
Buyer with respect to the matter referenced.  Buyer represents and warrants to 
Seller as follows: 

2.1  Status.  Buyer is a Delaware corporation duly organized, validly 
existing, and in good standing under the laws of Delaware and is qualified to
do business in Texas.  

2.2  Authority.  Buyer has full power and authority to enter into this
Agreement and to perform all obligations to be performed by it pursuant to 
the Purchase Documents (the "Buyer Obligations"). The execution and delivery 
of this Agreement and performance by Buyer of the Buyer Obligations have been 
duly authorized by all requisite corporate action.  Each of the Purchase 
Documents has been duly executed and delivered by Buyer and constitutes the 
valid and binding obligations of Buyer enforceable against Buyer in 
accordance with its terms.

2.3  Consents.  No consent, approval, qualification, order or authorization 
of, or filing with, any governmental authority, including any court, or of any 
other third party, is required in connection with the valid execution, delivery 
or performance of the Purchase Documents by Buyer or the consummation by 
Buyer of the transactions contemplated hereby.

2.4  No Conflict.  The execution, delivery and performance of the 
Purchase Documents and the consummation of the transactions therein 
contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, or result in the creation of or
imposition of any lien, 
charge or encumbrance upon any property or assets of Buyer pursuant to any 
indenture, mortgage, deed of trust, lease or other agreement or instrument to 
which Buyer is a party or by which Buyer is bound or to any of Buyer's 
property, or any applicable law, rule, regulation, judgment, order or decree 
of any court or governmental agency, authority or body having jurisdiction 
over Buyer or any of Buyer's properties.

2.5  Condition of Flo Bins.  Buyer acknowledges that (a) it has 
previously leased the Flo Bins and it is fully familiar with their condition,
and (b) it shall receive the Flo Bins with all faults in an "AS IS, WHERE IS"
condition, with no warranties, either express or implied (except for 
warranties of title) including but not limited to warranties of 
merchantability or fitness for a particular purpose.  Without limiting the 
foregoing, Buyer acknowledges that the Flo Bins are used, may require 
refurbishment and may not meet any manufacturer or governmental standards or 
certification requirements.  Buyer further acknowledges that the Flo Bins 
have been used for the containment and transportation of catalysts and other 
materials (the "Prior Contents") which may be subject to regulation by 
"Environmental Laws" as hereinafter defined, and some residual amounts of the 
Prior Contents may remain in the Flo Bins.  Buyer acknowledges and agrees that 
it shall, if necessary, store, handle, transport and dispose of such the Prior 
Contents in accordance with applicable Environmental Laws, if any,  and save, 
defend, indemnify and hold harmless Seller from and against any violations 
thereof or any costs, expenses, fines, penalties, remediation costs, 
liabilities or claims of any nature whatsoever arising in connection 
therewith.  Buyer represents and warrants that (a) it has had an opportunity 
to inspect the Flo Bins and to consult with such experts, legal advisors 
and other consultants as it has deemed necessary or desirable, (b) Seller has
made no representations as to the condition of the Flo Bins and (c) the Buyer
has relied solely on its own investigation and experts.  For purposes of this
Agreement, "Environmental Laws" means any and all federal, state and local 
laws that relate to or impose liability or standards of conduct concerning 
public or occupational health and safety or the environment, as now or 
hereafter in effect and as have been or hereafter may be amended or 
reauthorized, including, without limitation, the Comprehensive Response, 
Compensation and Liability Act (42 U.S.C.  9601 et seq.), the Hazardous 
Materials Transportation Act (42 U.S.C.  1802 et seq.), the Resource 
Conservation and Recovery Act (42 U.S.C.  6901 et seq.), the Federal Water 
Pollution Control Act (33 U.S.C.  1251 et seq.), the Toxic Substances 
Control Act (14 U.S.C.  2061 et seq.), the Clean Air Act (42 U.S.C.  7901 et 
seq.), the Refuse Act (33 U.S.C.  407 et seq.), the Safe Drinking Water Act 
(42 U.S.C.  300 (f) et seq.), the Occupational Safety 
and Health Act (29 U.S.C.  651 et seq.), and all rules, regulations, codes, 
ordinances and guidance documents promulgated or published thereunder, and 
the provisions of any licenses, permits, orders and decrees issued pursuant 
to any of the foregoing.  

2.6  Lease Agreement Between Seller and Buyer.  Buyer represents 
and warrants that concurrently with the Closing, it shall enter into a Flo 
Bin lease agreement (the "Master Lease") pursuant to which it shall agree to 
lease Flo Bins to Seller for Seller's use in conjunction with its business, 
said Master Lease to encompass automatically renewable successive one-year 
terms on prices and other terms and conditions (exclusive of freight) which 
are at least as favorable as Buyer's large, multiple location U.S. customers,
and pursuant to which Master Lease, Seller shall obtain all its requirements 
for Flo Bins.
	
	Section 3.  Representations and Warranties of Seller

	For purposes of this Section 3, any reference to the "the best knowledge of 
Seller" shall mean the best of Seller's knowledge only after diligent inquiry by
Seller with respect to the matter referenced.  Seller represents and warrants
to Buyer as follows: 

3.1  Status.  Seller is a Nevada Corporation, duly organized, validly existing 
and in good standing under the laws of Nevada and is qualified to do business
in Texas.

3.2  Authority.  Seller has full power and authority to enter into the 
Purchase Documents and to carry out its obligations hereunder.  The Purchase 
Documents have been duly executed and delivered by Seller and constitute the 
valid and binding obligation of Seller enforceable against Seller in 
accordance with its terms.  

3.3  Consents.  No consent, approval, qualification, order or authorization 
of, or filing with, any governmental authority, including any court or other 
third party which has not been obtained, is required in connection with the 
valid execution, delivery or performance of this Agreement by Seller or the 
consummation by Seller of the transactions contemplated hereby.

3.4  No Conflict.  The execution, delivery and performance of the Purchase 
Documents and the consummation of the transactions therein contemplated will 
not result in a breach or violation of any of the terms and provisions of, or
constitute a default under, or result in the creation of or imposition of any
lien, charge or encumbrance upon any property or assets of Seller pursuant to
any indenture, mortgage, deed of trust, lease or other agreement or 
instrument to which Seller is a party or by which Seller is bound or to any 
of Seller's property, or any applicable law, rule, regulation, judgment, 
order or decree of any court or governmental agency, authority or body having
jurisdiction over Seller or any of Seller's properties.

3.5  No Disputes.  Seller is the sole owner of the Flo Bins and there is no 
litigation pending or, to the best of Seller's knowledge, threatened regarding 
Seller which affects Seller's title to the Flo Bins or which would otherwise 
affect Seller's consummation of the transactions contemplated by this 
Agreement.  No security interests have been granted by Seller in the Flo Bins
other than the security interests in favor of FINOVA Capital Corporation, 
f/k/a Greyhound Financial Corporation and which security interests Seller 
will cause to be released on or before the Closing Date.


	Section 4.  Covenants of Seller and of Buyer

4.1  Credits for Rentals.  In the event Buyer receives on or after the 
Closing Date any rental payments earned for any period on or before (i) the 
Closing Date for any of the Flo Bins listed on Schedule 1.1(a), or (ii) 
May 30, 1997 for any of the Flo Bins listed on Schedule 1.1(b), Buyer shall 
promptly deliver such rental payments to Seller.  In the event Seller 
receives in respect of any of the Flo Bins (i) listed on Schedule 1.1(a) 
after the Closing Date or (ii) listed on Schedule 1.1(b) after May 30, 1997, 
rental payments for such Flo Bins earned for any periods after such dates, 
Seller shall promptly deliver such rental payments to Buyer.

4.2  No Changes to Leases.  From and after the date of this Agreement, 
Seller shall take no action with respect to any leases for any of the Flo 
Bins listed in Schedule 1.1(b) which would accelerate any lease payments, 
amend any provisions or extend the terms thereof without the advance written 
consent of Buyers, which Buyer may withhold in its sole discretion.

4.3  Risk of Loss.  From and after the Closing Date, Buyer shall have the 
risk of loss of the Flo Bins and Seller shall have no liability therefor.

	Section 5.  Closing and Fund Cash payment

5.1  Closing.  The Closing of the sale and purchase of Flo Bins (the "Closing") 
shall be held at the offices of Seller, 4313 FM 2351, Friendswood, TX  77546,
or at such other location in the Houston metropolitan area as Seller may 
designate, at 9:00 a.m. On the Closing Date:

(a)  Seller shall (i) transfer to Buyer title of the Flo Bins 
listed on Schedules 1.1(a) and 1.1(b) by a duly executed Bill 
of Sale in the form attached on Exhibit A, (ii) deliver the 
Uniform Commercial Code Financing Statements on 
Form UCC-3 evidencing FINOVA Capital Corporation's 
release of its security interest in the Flo Bins, (iii) make 
available to Buyer for transport to its facilities the Flo 
Bins on Schedule 1.1(a) which are not then in the 
possession or control of Buyer and, (w) with respect to 
the Flo Bins listed on Schedule 1.1(b), provide (x) a 
Schedule which shall describe the location of, and the 
identity of any leases for such Flo Bins, (y) copies of 
any written leases for such Flo Bins, (y) or purchase 
orders and Seller's most recent invoice for such Flo 
Bins, and (z) an assignment of all leases or purchase 
orders for such Flo Bins to Buyer, 
		
(b)  Buyer shall deliver the First Cash Payment to Seller, 
and

(c)  Seller and Buyer shall execute and deliver to each 
other duplicate originals of the Master Lease.

	5.2	Second Cash Payment.  On May 30, 1997, 

(a)  Seller shall (i) make available to Buyer for transport to 
its facilities any Flo Bins which have been returned to Seller's 
facilities, (ii) deliver to Buyer its signed letters of direction 
to each remaining lessee of the Flo Bins listed on Schedule 
1.1(b) that all future rental payments shall be made to Buyer, 
and

		(b)   Buyer shall deliver the Second Cash Payment to Seller.


	Section 6.  Indemnification

6.1  Indemnification by Buyer.  Buyer hereby agrees to indemnify, defend 
and hold harmless Seller and its direct and indirect parents and affiliates 
and their officers, directors, shareholders, employees, attorneys and agents, 
against any and all losses, claims, damages, liabilities, costs and expenses 
(including but not limited to, attorneys' fees and other expenses of 
investigation and defense of any claims or actions), remediation costs, 
penalties or fines incurred by Seller due to, or which result from or 
arise out of or are in any way connected with any of the following:

(a)  Any misrepresentation, breach of warranty or 
nonfulfillment of any of the covenants or agreements 
of Buyer in any of the Purchase Documents, including but 
not limited to the obligations of Buyer to save, defend, 
indemnify and hold harmless Seller as set forth in Section 
2.5 hereof.

(b)  The omission to state any fact necessary to make the 
statements contained in any of the Purchase Documents, 
not misleading, but only if the omission relates to 
information concerning Buyer and its operations.  

6.2  Indemnification by Seller.  Seller hereby agrees to indemnify, 
defend and hold harmless Buyer and the officers, directors, employees and 
agents of Buyer, against any and all losses, claims, damages, liabilities, 
costs and expenses (including but not limited to, attorneys' fees and 
other expenses of investigation and defense of any claims or actions) 
incurred by them or by any of them due to, or which result from 
or arise out of or are in any way connected with, any of the following:

(a)  Any misrepresentation, breach of warranty or 
nonfulfillment of any of the covenants or agreements 
of Seller in any of the Purchase Documents.

(b)  The omission to state any fact necessary to make 
the statements contained in any of the Purchase Documents, 
not misleading, but only if the omission relates to 
information concerning Seller and its operations.

6.3  Nature and Survival of Representations.  All statements 
contained in the Purchase Documents shall be deemed representations 
and warranties by the applicable Party thereunder.  Each representation, 
warranty, indemnity and agreement made by the Parties in the Purchase 
Documents shall be true and accurate as of each of the Closing Dates and 
shall survive the Closings.  


	Section 7.  General Provisions

7.1  Disclosure.  No representation or warranty by either Party to 
the other contained in any of the Purchase Documents or in connection 
with the transactions contemplated hereby, contains or will contain an 
untrue statement of a material fact or omits or will omit to state a material 
fact required to be stated or necessary to make the statements and facts 
contained herein or therein, in light of the circumstances in which 
they were or are made, not false or misleading. 

7.2  Further Assurances.  At any time, and from time to time, 
after the Closing, each Party will execute such additional instruments and 
take such action as may reasonably be required to evidence or effectuate 
the transactions contemplated by this Agreement or for the performance 
by any Party of any of their other respective obligations under the Purchase 
Documents. 


7.3  Amendment; Waiver.  Except as otherwise expressly provided 
herein, this Agreement may be amended, modified, superseded, or cancelled, 
and any of the terms, representations, warranties, covenants or conditions 
hereto may be waived, only by a written instrument executed by the Parties 
or, in the case of a waiver, by the Party waiving compliance. 

7.4  Brokers.  Each of the Parties represents and warrants that there 
are no claims for brokerage commissions or finders' fees in connection 
with the transactions contemplated by this Agreement, arising from any actions 
taken by it.  Each of the Parties will pay or discharge, and will indemnify 
and hold harmless the other from and against, any and all claims for 
brokerage commissions or finders' fees incurred by reason of any action 
taken by such indemnifying party.

7.5  Notices.  All notices and other communications hereunder 
shall be in writing and shall be deemed to have been given when delivered 
personally or three business days after when sent by registered or certified 
mail, return receipt requested, postage prepaid, as follows: 

		(a)	if to Buyer to: 			

			Mr. Edward R. Hostetter
			Federal Container Corporation
			7509 Avenue N
			Houston, Texas  77012
			Facsimile:  (713) 926-0879

		(b)	if to Seller:

			Mr. Buster Austin, Vice President
			International Catalyst, Inc.
			4313 FM 2351
			Friendswood, TX  77546
			Facsimile:  (713) 482-2103

or to such other person or address as any Party shall have specified by 
notice in writing to the other Parties. 

7.6  Entire Agreement.  All Exhibits and Schedules are a part of 
the document to which they are attached. This Agreement and the other 
Purchase Documents, constitute the entire agreement between the Parties 
and supersede and cancel any other agreement, representation, or 
communication, whether oral or written, between the Parties hereto relating 
to the transactions contemplated herein or the subject matter hereof.  No 
representation, promise, or statement of intention has been made by 
any Party hereto which is not embodied in this Agreement or the other 
Purchase Documents, and no Party hereto shall be bound by or liable for 
any alleged representation, promise, or statement of intention not set forth 
herein or therein. 

7.7  Construction.  Each of the Parties has participated in the 
negotiation and review of this Agreement and no uncertainty or ambiguity 
shall be construed strictly against Seller under any rule of construction or 
otherwise.  The section and subsection headings in this Agreement are 
inserted for convenience only and shall not affect in any way the meaning 
or interpretation of this Agreement. 

7.8.  Governing Law; Arbitration.  The Purchase Agreement 
and all acts and transactions hereunder shall be governed by the laws of the 
State of Texas.  As a material part of the consideration to each Party to 
enter this Agreement, each Party agrees that all disputes relating directly or 
indirectly to this Agreement shall be resolved by binding arbitration before 
a single arbitrator.  Arbitration proceedings shall be administered by the 
American Arbitration Association ("AAA") or such other administrator 
as the Parties may mutually agree upon in accordance with the AAA 
Commercial Arbitration Rules.  The arbitration shall be conducted at a 
location in Harris County, Texas selected by the AAA or other administrator.  
All discovery activity shall be expressly limited to matters directly 
relevant to the dispute being arbitrated.  To the maximum extent 
practicable, the Parties shall take all actions required to conclude any 
arbitration proceeding within 180 days of the filing of any dispute with the
AAA.  No arbitrator or Party to an arbitration proceeding may disclose the 
existence, content or results thereof except for disclosures of information 
by a party required in the ordinary course of its business or by applicable 
law.  This arbitration provision shall survive termination, amendment or 
expiration of any of the Purchase Documents or any relationship between 
Parties.

7.9  Expenses; Attorneys Fees.  Each of the Parties shall be 
responsible for the fees and expenses of its counsel and other experts and 
all other expenses incurred by it in connection with the preparation 
for, entering into, and consummation of the transactions contemplated by 
this Agreement.  If either Party files any lawsuit against the other 
predicated on a breach of this Agreement, the party prevailing in such 
action shall be entitled to reasonable attorneys' fees and costs incurred 
in the enforcement of, execution upon or defense of any order, degree or 
award of judgment.

7.10  Severability.  The invalidity or unenforcability of any
provision hereof shall not affect the validity or enforceability of any other 
provision contained herein. 

7.11  Assignment.  This Agreement shall inure to the benefit 
of, and be binding upon, the Parties and their successors and assigns; 
provided, however, that any assignment by any Party of its rights under this 
Agreement without the written consent of the other Parties shall be void. 

7.12  Counterparts.  Any of the Purchase Documents may be 
executed, including by facsimile signature, in counterparts, each of which 
shall be deemed an original, but all of which together shall constitute one 
and the same instrument. 

	IN WITNESS WHEREOF, the Parties have duly executed this 
Agreement effective as of the date first above written. 


				FEDERAL CONTAINER CORPORATION, a Delaware corporation


				By:/s/ Edward R. Hostetter
       Edward R. Hostetter, President



				INTERNATIONAL CATALYST, INC., a Nevada 
				Corporation


				By:/s/ Buster Austin
				   George "Buster" Austin, Executive Vice President

	EXHIBIT A



	Bill of Sale

	SCHEDULE 1.1(a)
	TO ASSET SALE AGREEMENT BETWEEN 
	FEDERAL CONTAINER CORPORATION, AS BUYER, AND
	INTERNATIONAL CATALYST, INC., AS SELLER 


	Number of Flo Bins 	        Location of Flo Bins
	368                 In the possession and/or control of Buyer
	128                 At Seller's facility at 4313 FM 2351, Friendswood, 
                         Texas  77546
	 57                 At Seller's facility at 1044 Del Amo Blvd., Carson, 
                         California


	SCHEDULE 1.1(b)
	TO ASSET SALE AGREEMENT BETWEEN 
	FEDERAL CONTAINER CORPORATION, AS BUYER, AND
	INTERNATIONAL CATALYST, INC., AS SELLER 


	Number of Flo Bins 	Seller's Job No. 	Rent Date  	Client
	24                      	215          	7/5/96     La Roache, AL
	 9                      	226          	3/6/97     Total, Ardmore OK
	21                      	209         	4/15/96     Fina, Port Arthur, TX
	8                       	227         	3/26/97     Terra, Iowa
	1                       	214          	6/5/97     Exxon BTCP, TX
	3                       	205          	2/8/96     Exxon BTCP, TX
	5                       	210         	4/17/96     Exxon BTCP, TX
	20                      	225          	3/7/97     Exxon BOP, TX
	128                                               Houston Shop
	8                        	61          	3/3/97     Arco, Carson, CA
	12                       	63          	4/1/97     Arco, Carson, CA
	24                       	60        	12/12/96     Unocal, Wilmington, CA
	17                       	62         	3/27/97     Unocal, Wilmington, CA
	58                                               	In Plant
                                                   Tosco Avon, CA
	57                                                Carson Shop



	BILL OF SALE

	INTERNATIONAL CATALYST, INC. ("Grantor"), for five hundred 
thousand dollars ($500,000) and the other good and valuable consideration set 
forth in the Asset Sale Agreement dated April 11, 1997, between Grantor 
as Seller and Federal Container Corporation ("Grantee") as Buyer, has 
bargained, sold and delivered, and by these presents does bargain, sell and 
deliver, unto Grantee, carbon steel intermediate bulk containers (the 
"Property") described on Schedules 1.1(a) and 1.1(b) attached to and made a 
part of this Bill of Sale.  Grantor warrants to Grantee, that the title to 
the Property is, on the date of delivery hereof, owned by Grantor and free 
and clear of liens, charges, claims or other encumbrances of any kind 
whatsoever other than for personal property taxes not yet due or payable.

	EXCEPT FOR THE ABOVE WARRANTIES OF TITLE, GRANTOR 
EXPRESSLY DISCLAIMS ANY WARRANTIES, WHETHER EXPRESS, 
IMPLIED OR STATUTORY, OF ANY KIND OR NATURE WITH RESPECT 
TO THE PROPERTY TO BE SOLD OR OTHERWISE TRANSFERRED 
PURSUANT TO THIS BILL OF SALE, INCLUDING WITHOUT LIMITATION 
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR 
A PARTICULAR PURPOSE.  GRANTEE ACKNOWLEDGES THAT ITS 
REPRESENTATIVES HAVE INSPECTED THE PROPERTY, AND 
AGREES THAT ALL PROPERTY SOLD OR OTHERWISE 
TRANSFERRED, IS HEREBY TRANSFERRED "AS IS, WHERE IS" 
AND WITH ALL FAULTS.  GRANTEE AGREES THAT NO WARRANTY 
HAS ARISEN THROUGH TRADE, CUSTOM OR COURSE OF DEALING, 
AND AGREES THAT ALL DISCLAIMERS OF WARRANTY SHALL BE 
CONSTRUED LIBERALLY IN FAVOR OF GRANTOR.

	This Bill of Sale is delivered pursuant to an Asset Sale Agreement between 
Grantor and Grantee and is subject to the terms and conditions contained 
therein, all of which are incorporated herein by this reference.

							GRANTOR:

							INTERNATIONAL CATALYST, INC.


Dated:  April   , 1997				By:	______________________
                   							   	George "Buster" Austin, 
                              Executive Vice President
Accepted and Agreed:

GRANTEE:

FEDERAL CONTAINER CORPORATION


By:_______________________________      Dated: April   , 1997
    	Edward R. Hostetter, President



EXHIBIT 10 (t)(t)(i)

 

FOURTH AMENDMENT TO LOAN AND LOAN DOCUMENTS


	This Fourth Amendment to Loan and Loan Documents 
(this "Fourth Amendment"), dated as of March 31, 1997, is among 
ADVANCED ENERGY CORPORATION, a Delaware corporation 
("Borrower"), Advanced Environmental Systems, Inc., a New York corporation 
("AES"), International Catalyst, Inc., a Nevada corporation ("Incat") 
(AES and Incat hereinafter are referred to individually as a "Guarantor" 
and collectively as the "Guarantors"), and FINOVA CAPITAL CORPORATION, 
a Delaware corporation formerly known as Greyhound Financial Corporation 
("Lender").

RECITALS

A.  Lender and Borrower are parties to that certain First Amended Loan and 
Security Agreement, dated March 30, 1989 (the "Original Loan Agreement"), 
which Original Loan Agreement was amended by (i) that certain Amendment to 
Loan and Loan Documents (the "First Amendment") executed by and between 
Borrower and Lender and dated as of December 23, 1992, (ii) that certain 
Second Amendment to Loan and Loan Documents dated as of December 31, 1993 
(the "Second Amendment"), (iii) that certain Third Amendment to Loan and Loan
Documents dated as of June 30, 1994 (the "Third Amendment") and (iv) that 
certain letter dated April 15, 1996 from Lender to Mr. Gary L. Schmitt (the 
"Letter") (the Original Loan Agreement, as amended by the First Amendment, 
the Second Amendment, the Third Amendment and the Letter hereinafter is 
referred to as the "Loan Agreement").

B.  Payment and performance of Borrower's Obligations has been guaranteed 
by the Guarantors.

C.  Borrower has requested that Lender make certain revisions to the Loan 
Agreement, and Lender is willing to comply with such request, subject to the 
terms and conditions set forth in this Fourth Amendment.

	NOW THEREFORE, in consideration of the mutual agreements contained herein 
and for other good and valuable consideration, the receipt and sufficiency of 
which hereby are acknowledged, the parties hereto agree as follows:


	1.	Incorporation of Recitals.  The recitals set forth above are incorporated 
into this Fourth Amendment by this reference.

	2.	Definitions.  All capitalized terms not elsewhere defined in this Fourth 
Amendment shall have the respective meanings ascribed thereto in the Loan 
Agreement, as amended by this Fourth Amendment.  

	3.	Outstanding Principal Balance.  Borrower acknowledges and agrees 
that the Principal Balance as of the date hereof is $1,176,425.13.

	4.	Amendments.  The Loan Agreement is amended as follows:
 
		(a)	Amended Definitions.  The following definitions set forth in 
Article I are deleted in their entirety and the applicable definitions set 
forth below are substituted therefor:

		"Interest Rate":  a per annum rate of interest equal to Prime plus 3.0%."

		"Loan":  the loans made and to be made by Lender to Borrower 
   pursuant to this Agreement and any amendment hereto, 
   including, without limitation, the Fourth Amendment."

		"Working Capital Loan":  the revolving working capital line of 
   credit made available to Borrower by Wells Fargo or any 
   replacement working capital lender which is approved by 
   Lender, such approval not to be unreasonably withheld."

		(b)	Additional Definitions.  The following definitions are 
inserted into Article I in appropriate alphabetical order:

		"Fourth Amendment Closing Date":  March 31, 1997."

		"Fourth Amendment":  that certain Fourth Amendment to Loan 
   and Loan Documents dated as of March 31, 1997 among 
   Borrower, AES, Incat and Lender."

		"Replacement Note": that certain Promissory Note dated as of 
   the Fourth Amendment Closing Date in the principal 
   amount of $1,176,425.13 made by Borrower in favor of 
   Lender which amends and restates in its entirety the Note."

		"Wells Fargo":  Wells Fargo Bank (Texas), N.A."

		(c)	General.  (i) Each reference to "First Interstate" shall be a 
reference to "Wells Fargo" and (ii) where the context permits, each 
reference to the "Note" shall be a reference to the "Replacement Note."

		(d)	Section 2.1.  Section 2.1 is deleted in its entirety and the 
following is substituted therefor:

			"2.1	Amount of Loan: Disbursements.

2.1.1  Amount. The Loan shall be a term loan 
in the maximum aggregate amount of $1,176,425.13.

2.1.2  Reborrowing.  Borrower shall not be entitled 
to reborrow any portion of the Loan that is repaid or 
prepaid.

2.1.3  Disbursements of Loan. The undisbursed proceeds 
of the Loan in excess of the Principal Balance 
outstanding on the Fourth Amendment Closing Date 
shall be disbursed by Lender on the Fourth 
Amendment Closing Date; provided, however, that 
the proceeds of such disbursement shall be used by 
Borrower to ensure that AES is able to repay 
certain of its outstanding Indebtedness due and 
owing to Industrial Services Technologies, Inc."

		(e)	Section 2.6.  Section 2.6 is deleted in its entirety and the 
following is substituted therefor:

			"2.6	Payments of Principal and Interest. The Principal 
Balance and accrued and unpaid interest thereon shall be repaid in 35 monthly 
Installments commencing on March 31, 1997 and on the last Business Day of 
each month thereafter through and including January 31, 2000.  The amount of 
each such monthly Installment shall be calculated and applied against 
Borrower's Obligations in accordance with this Section 2.6.  Borrower's 
Obligations, including the entire unpaid Principal Balance and all accrued 
and unpaid interest thereon, shall be due and payable in full on 
February 29, 2000.

2.6.1  Amount of Monthly Installments.  Each 
	Installment shall be in an amount equal to the following:

(a)  through March 31, 1997, 
	the sum of (i) interest calculated at the Interest Rate in effect from time 
 to	time during the period from the last date upon which a payment has been 
	made prior to the Fourth Amendment Closing Date through March 31, 1997, 
	as reflected in an invoice delivered by Lender to Borrower prior to the date 
	any payment is required, plus (ii) a principal component of $19,607.09 
	(which amount assumes a 60 month amortization); and

(b)  thereafter, the sum of (i) interest calculated at the Interest Rate 
 in effect from time to time during the applicable 
	period, as reflected in an invoice delivered by Lender to Borrower prior to 
	the date any payment is required, plus (ii) a principal component of 
	$19,607.09 (which amount assumes a 60 month amortization).

2.6.2  Application of Monthly Installments.  	Each monthly Installment shall 
be applied to Borrower's Obligations as follows: 

(a)  first, to Borrower's Obligations other than the Principal Balance and 
Interest accrued thereon, (b) second, to accrued and unpaid interest on the 
Loan, and (c) third, to the Principal Balance." 	

		(f)	Subsection 5.3(e)  Subsection 5.3(e) is deleted in its entirety 
and the following is substituted therefor:  

			"(e) Intentionally Deleted."

		(g)	Section 5.8.  Section 5.8 is deleted in its entirety and the 
following is substituted therefor:

			"5.8	Location.  Borrower covenants, represents and 
	warrants to Lender that the Collateral other than the Incat Stock will be used 
	in the ordinary course of business of Borrower and Incat at the following 
	locations: (i) 4313 FM 2351, Friendswood, Texas 77546 and (ii) 1044 
	Del Amo Boulevard, Carson, California. Borrower will give to Lender at 
	least 10 days' prior written notice of the removal of any of the Collateral 
	other than the Incat Stock from any of such locations for a purpose other 
	than the temporary removal of any of such Collateral to a customer's 
	location in connection with the ordinary conduct of the business of Incat, 
	which notice shall state the location to which such Collateral will be 
	removed. Borrower shall not permit more than three Units to be located 
	outside the United States at any time without the prior written consent of 
	Lender, unless Borrower has pledged or caused to be pledged to Lender 
	additional Collateral of a value equal to the number of Units in excess 
	of three which are located outside the United States. Within ten (10) days 
	after the end of each calendar quarter, Borrower shall provide to Lender a 
	written report identifying the location of each Unit."
	
		(h)	Subsection 5.12(c).  Subsection 5.12(c) is deleted in its 
entirety and the following is substituted therefor:

			"(c)  The Operating Cash Flow to Annual Debt Service will be no less 
than 1.4 computed as of the end of each fiscal quarter of Borrower on a 
cumulative quarter rolling basis up to 12 months, commencing with the quarter 
ending of March 31, 1997.  After the first 12 months, the Operating Cash Flow
to Annual Debt Service will be determined quarterly on a trailing 12 month 
basis."

	5.	Conditions to Effectiveness.  The effectiveness of this Fourth 
Amendment and Lender's obligation to disburse any additional proceeds of the 
Loan to or for the benefit of Borrower shall be subject to the satisfaction 
of all of the following conditions on or prior to the Fourth Amendment 
Closing Date in a manner, form and substance satisfactory to Lender:

		(a)	Representations and Warranties.  On the Fourth 
	Amendment Closing Date the representations and warranties of 
	Borrower set forth in the Loan Agreement shall be true and 
	correct, except to the extent such representations and warranties 
	expressly relate to an earlier date.

		(b)	Delivery of Documents.  The following (collectively, 
	the "Fourth Amendment Documents") shall have been delivered to 
	Lender, each duly authorized and executed:

			(1)	this Fourth Amendment;

			(2)	the Replacement Note;

			(3)	an amendment to the Incat Agreement;

			(4)	an amendment to the Guarantee-Incat;

			(5)	an amendment to the Guarantee-AES;

			(6)	such UCC financing, continuation and 
				termination statements as Lender reasonably 
				may require; and

			(7) 	such evidence of the authority of Borrower, 
				Incat and AES to execute and deliver the 
				foregoing documents as Lender reasonably 
				may require, including but not limited to:

				(A)  certified copies of the articles of 
				incorporation and by-laws, and all 
				amendments thereto, of each of such 
				Persons;

				(B)  certificates of good standing for (i) 
				Borrower from Delaware and Colorado, 
    (ii)  Incat from Nevada, Texas and 
    California and (iii) AES from New York 
    and Colorado;

				(C)  certificates of incumbency for each 
				of such Persons; and

				(D)  certified copies of resolutions adopted 
				by the board of directors of each of such 
				Persons authorizing the execution and 
				delivery of the foregoing documents to 
				which any such Person is to be a party 
				and the consummation of the transactions 
				contemplated therein.

		(c)	Opinion of Counsel.  An opinion of counsel to Borrower, 
	Incat and AES addressing matters of enforceability, validity, due authority, 
	good standing and such other matters as Lender reasonably may request.

		(d)	Payment of Amendment & Waiver Fee.  Borrower 
	shall pay to Lender a fee of $15,000 for entering into this Fourth Amendment.

		(e)	Performance; No Default.  Borrower, Incat and AES 
	shall have performed and complied with all agreements and conditions 
	contained in the Fourth Amendment Documents and in any other document 
	to be executed pursuant to the terms hereof or thereof on their respective 
	parts to be performed by or complied with prior to or at the Fourth 
	Amendment Closing Date.

		(f)	Approvals.  The approval and/or consent shall have been 
	obtained from all Persons whose approval or consent is necessary or required 
	to enable Borrower, Incat and AES to enter into and perform their respective 
	obligations under the Fourth Amendment Documents and any other document 
	to be executed pursuant to the terms hereof or thereof.

		(g)	Payment of Costs.  Borrower shall pay or cause to be paid 
	to Lender all fees and expenses of Lender relating to the Fourth 
	Amendment Documents and the transactions contemplated therein, 
	including, without limitation, the expenses and reasonable fees of Lender's 
	counsel.

		(h)	Satisfaction of Lender's Counsel.  All legal matters	incident 
 to the transactions contemplated hereby shall be reasonably satisfactory 
	to counsel for Lender.

		(i)	Consent of Wells Fargo.  Borrower shall have delivered 
	to Lender a consent of Wells Fargo, in form and substance reasonably 
	satisfactory to Lender, which permits the consummation of the 
	transactions contemplated by this Fourth Amendment.

The date on which all of the conditions set forth in this Paragraph 5 have 
been satisfied (or waived by Lender) is referred to herein as the "Effective 
Date."

	6.	Conflicts.  From and after the Effective Date, to the extent 
any provision of the Documents conflicts with any provision of this Fourth 
Amendment, the applicable provision of this Fourth Amendment shall be 
deemed to govern and control.

	7.	Representations and Warranties.  Borrower hereby 
confirms to Lender that except as disclosed on Schedule 7 attached hereto, 
the representations and warranties set forth in the Documents are true and 
correct as of the date hereof, and shall be deemed to be remade as of the 
date hereof, except to the extent such representations and warranties 
expressly relate to an earlier date.  Borrower represents and warrants to 
Lender that (i) Borrower, Incat and AES each have full power and authority 
to execute and deliver the Fourth Amendment Documents to which any such 
Person is a party and to perform such Person's respective obligations 
thereunder, (ii) upon the execution and delivery of the Fourth Amendment 
Documents, each such Fourth Amendment Document will be valid, 
binding and enforceable upon Borrower, Incat and AES, to the extent 
any such Person is a party thereto, in accordance with its terms, (iii) the 
execution and delivery of the Fourth Amendment Documents does not 
and will not contravene, conflict with, violate or constitute a default under 
(A)  the articles of incorporation or by-laws of any of Borrower, Incat or 
AES or (B) any applicable law, rule, regulation, judgment, decree or 
order or any agreement, indenture or instrument to which Borrower, 
Incat or AES is a party or is bound or which is binding upon or applicable to 
all or any portion of such Person's property and (iv) there is no condition, 
event or circumstance existing, or any litigation, arbitration, governmental 
or administrative proceeding, action, examination, claim or demand pending 
or threatened affecting Borrower, Incat or AES which could prevent any 
such Person from performing its respective obligations under the Documents, 
as amended by the Fourth Amendment Documents, within the time limits set 
forth herein or therein for such compliance or performance, and no basis for 
any such matter exists.

	8.	Ratification of Liability; Waiver of Prior Defaults.

		(a)	Ratification of Liability.  Except as set forth herein, 
	the liabilities, obligations and agreements of each Obligor under the 
	Documents shall remain in full force and effect in accordance with 
	their respective terms.  Each Obligor hereby ratifies and confirms 
	its liabilities, obligations and agreements under the Documents, 
	all as amended by the Fourth Amendment Documents, and the 
	liens and security interests created thereby, and acknowledges that 
(a)  such Obligor has no defenses, claims or set-offs to the 
enforcement by Lender of such liabilities, obligations and 
agreements, (b) Lender has fully performed all obligations to 
each Obligor which it may have had or has on and as of the 
date hereof and (c) other than as specifically set forth herein, Lender 
does not waive, diminish or limit any term or condition contained in 
any of the Documents.

		(b)	Waiver.  Lender hereby waives (i) Borrower's 
	noncompliance, as of December 31, 1996, with subsections 5.12(a) 
	and 5.12(c) of the Loan Agreement and (ii) any Event of Default 
	arising as a result of Borrower's failure to comply with Subsection 
	7.1(a) at any time prior to the Fourth Amendment Closing Date.

	9.	Costs and Expenses.  Borrower shall reimburse Lender for 
all fees and expenses incurred in the preparation, negotiation and execution 
of this Fourth Amendment and the consummation of the transactions 
contemplated hereby, including, without limitation, the fees and expenses of 
counsel for Lender.

	10.	Delivery to Borrower.  Upon consummation of the transactions 
contemplated by this Fourth Amendment, in addition to Borrower's copies of 
the Fourth Amendment Documents, as applicable, Lender shall deliver to 
Borrower (i) the Note, marked cancelled and (ii) the $500,000 Note.

	11.	No Custom.  Lender's agreements to modify the Loan and the Documents 
as set forth in this Fourth Amendment shall not establish a custom or 
waive, limit or condition the rights and remedies of Lender under any of the 
Documents, all of which rights and remedies expressly are reserved, except as 
expressly provided in this Fourth Amendment.

	12.	Further Assurances.  Borrower covenants and agrees that it will at 
any time and from time to time do, execute, acknowledge and deliver, or will 
cause to be done, executed, acknowledged and delivered, all such further acts, 
documents and instruments as reasonably may be required by Lender or any 
successor in interest thereto in order to effectuate fully the intent of 
this Fourth Amendment.

	13.	Severability.  If any term or provision of this Fourth Amendment or the
application thereof to any party or circumstance shall be held to be invalid, 
illegal or unenforceable in any respect by a court of competent jurisdiction, 
the validity, legality and enforceability of the remaining terms and 
provisions of this Fourth Amendment shall not in any way be affected or 
impaired thereby, and the affected term or provision shall be modified to 
the minimum extent permitted by law so as most fully to achieve the 
intention of this Fourth Amendment.

	14.	Binding Effect; Governing Law.  This Fourth Amendment shall be binding 
upon and shall inure to the benefit of the parties hereto and their respective 
heirs, executors, administrators, legal representatives, successors and 
assigns. This Fourth Amendment shall be construed in accordance with the laws
of the State of Arizona.

	15.	Captions.  The captions in this Fourth Amendment are inserted for 
convenience of reference only and in no way define, describe or limit the 
scope or intent of this Fourth Amendment or any of the provisions hereof.

	16.	Counterparts.  This Fourth Amendment may be executed in one or more 
counterparts, each of which shall be deemed an original, and all of which, 
when taken together shall constitute one and the same instrument.



	[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


	IN WITNESS WHEREOF, the parties hereto have executed and delivered this 
Fourth Amendment as of the day and year first above written.

		
					ADVANCED ENERGY CORPORATION

							By: /s/Gary L. Schmitt
							Title: Vice President-Finance


					ADVANCED ENVIRONMENTAL SYSTEMS, INC.

							By: /s/ Gary L. Schmitt
							Title:  Vice Presidnet


					INTERNATIONAL CATALYST, INC.

							By: /s/ Gary L. Schmitt
							Title: Vice President


FINOVA CAPITAL CORPORATION, formerly known as Greyhound Financial Corporation

							By: /s/ Pete Martinez
							Title: Vice President



	SCHEDULE 7

	"Exceptions to Representations and Warranties"



EXHIBIT 10 (t)(t)(ii)



	NOTE

$1,176,425.13
Phoenix, Arizona                                    March 31, 1997


	FOR VALUE RECEIVED, the undersigned, ADVANCED 
ENERGY CORPORATION, a Delaware corporation ("Maker"), hereby 
promises to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware 
corporation formerly known as Greyhound Financial Corporation ("Lender"), 
the principal sum of ONE MILLION ONE HUNDRED SEVENTY SIX 
THOUSAND FOUR HUNDRED TWENTY FIVE and 13/100 DOLLARS 
($1,176,425.13), or as much as is advanced by Lender hereunder, at the 
office of Lender at 355 S. Grand Avenue, Suite 2400, Los Angeles, California 
90071, or at such other place as the holder hereof may appoint, plus interest 
thereon as set forth below.

	This Note is delivered by Maker to Lender pursuant to and in 
accordance with the applicable provisions of that certain Fourth Amendment to 
Loan and Loan Documents (the "Amendment") of even date herewith executed 
by and among Maker, AES, Incat and Lender which Amendment amends the Loan 
Agreement (these and all other capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Amendment or the Loan 
Agreement, as applicable).

	Borrower's Obligations shall bear interest from and after the Closing 
Date at the per annum rate of interest equal to Prime, plus 3.0%.

	Accrued interest and the Principal Balance shall be paid in the manner 
set forth in Section 2.6.1 of the Loan Agreement.

	Interest shall be:  (i) computed on the basis of a year consisting of 360 
days and (ii) charged for the actual number of days during the period for 
which interest is being charged.

	If any Installment or any other payment due under the Documents 
is not paid when due, an additional fee for late payment, calculated at the 
Overdue Rate, shall be payable thereon, from the due date of such Installment
or payment to and including the date of payment in full, which amount shall 
be paid by Maker to Lender immediately upon demand.

	At the election of the holder hereof, upon the occurrence and during 
the continuation of an Event of Default, and with the notice, if any, required 
under Article VII of the Loan Agreement, the Principal Balance, and all 
accrued and unpaid interest thereon, shall be and become immediately due and 
payable in full.  Failure to exercise this option shall not constitute a 
waiver of the right to exercise the same in the event of any subsequent Event
of Default, and such failure shall not be deemed to establish a custom or 
course of dealing or performance between Maker and Lender.

	This Note shall or may be prepaid, in whole or in part, at the 
times and in accordance with the applicable provisions of the Amendment 
and/or the Loan Agreement.

	All funds received by Lender during the existence of an Event of 
Default shall be applied in the manner set forth in Section 7.3 of the Loan 
Agreement.

	All payments to be made by Maker pursuant to this Note shall 
be made in accordance with the instructions therefor set forth in the Loan 
Agreement.  Payment shall not be deemed to have been received by Lender 
except in accordance with Section 2.7 of the Loan Agreement.

	Notwithstanding any provision to the contrary contained herein or in any 
other Documents, Lender shall not collect a rate of interest, including the 
loan fees provided for in the Loan Agreement, on any obligation or liability 
due and owing by Maker to Lender in excess of the maximum contract rate of 
interest permitted by applicable law ("Excess Interest").  All fees, charges,
goods, things in action or any other sums or things of value (other than 
items (a), (b), (c) and (d) below) paid or payable by Maker (collectively, 
the "Additional Sums"), whether pursuant to this Note, the Loan Agreement, 
the other Documents or any other document or instrument in any way pertaining
to the Loan, that, under the laws of the State of Arizona, may be deemed to 
be interest with respect to the Loan, for the purpose of any laws of the 
State of Arizona that may limit the maximum amount of interest to be charged 
with respect to the Loan shall be payable by Maker and shall be deemed to 
be additional interest, and for such purposes only, the agreed upon and 
"contracted for rate of interest" with respect to the Loan shall be deemed 
to be increased by the rate of interest resulting from the Additional Sums.  
Lender and Maker agree that the interest laws of the State of Arizona shall 
govern the relationship between them and understand and believe that the 
transactions contemplated by the Documents comply with the usury laws of the 
State of Arizona, but in the event of a final adjudication to the contrary, 
Maker shall be obligated to pay, nunc pro tunc, to Lender only such interest 
as then shall be permitted by the laws of the state found to govern the 
contract relationship between Lender and Maker.  For the purpose of any laws 
of the State of Arizona that may limit the maximum amount of interest to be 
charged with respect to a loan, the "contracted for rate of interest" for 
the Loan shall consist of the following:  
(a)  interest calculated in accordance with the provisions of the Loan 
Agreement; (b) the late charges, described and payable in accordance 
with provisions of the Loan Agreement; (c) the fees payable under the 
Loan Agreement; and (d) all Additional Sums, if any.  Maker agrees 
to pay an effective "contracted for rate of interest" which is the sum of 
items (a), (b), (c), and (d) above.  If any Excess Interest is provided 
for or determined by a court of competent jurisdiction to have been 
provided for in this Note, the Loan Agreement or any other Documents, 
then in such event (i) Maker shall not be obligated to pay such Excess 
Interest, (ii) any Excess Interest collected by Lender shall be, at Lender's 
option, (A) applied to the Principal Balance or to accrued and unpaid interest 
not in excess of the maximum rate permitted by applicable law or (B) 
refunded to the payor thereof, (iii) the interest rates provided for 
herein (collectively, including, without limitation, the Fees, the "Stated 
Rate") shall be automatically reduced to the maximum rate allowed from time 
to time under applicable law (the "Maximum Rate") and this Note and 
the other Documents, as applicable, shall be deemed to have been, and 
shall be, modified to reflect such reduction, and (iv) Maker shall not have 
any action against Lender for any damages arising out of the payment or 
collection of such Excess Interest; provided, however, that if at any time 
thereafter the Stated Rate is less than the Maximum Rate, Maker shall, to 
the extent permitted by law, continue to pay interest at the Maximum 
Rate until such time as the total interest received by Lender is equal to 
the total interest which Lender would have received had the Stated 
Rate been (but for the operation of this provision) the interest rate payable.  
Thereafter, the interest rate payable shall be the Stated Rate unless and 
until the Stated Rate again exceeds the Maximum Rate, in which 
event the provisions contained in this paragraph again shall apply.	

	If any suit or action is instituted or attorneys are employed to 
collect this Note or any part thereof, Maker promises and agrees to pay 
all costs of collection, including court costs, expert witness fees and 
reasonable attorneys' fees.

	Except as expressly provided for in the Loan Agreement, Maker 
hereby waives presentment for payment, protest and demand and notice of 
protest, demand, dishonor and nonpayment of this Note, and expressly agrees 
that this Note, or any payment hereunder, may be extended from time to time 
before, at or after maturity, without in any way affecting the liability of 
Maker hereunder or any guarantor hereof.

	All funds disbursed to or for the benefit of Maker will be deemed 
to have been disbursed in Phoenix, Arizona.  This Note is to be governed and 
construed in accordance with the laws and decisions of the State of Arizona.  
This Note may not be changed or amended orally, but only by an instrument 
in writing signed by the party against whom enforcement of the change or 
amendment is sought.

	This Note shall be binding upon Maker, its successors and assigns, 
and shall inure to the benefit of the successors and assigns of Lender.

	In the event that any provision hereof shall be deemed to be invalid by
reason of the operation of any law, or by reason of the interpretation placed 
thereon by any court or any governmental body, this Note shall be construed as 
not containing such provision and the invalidity of such provision shall not 
affect the validity of any other provisions hereof, and any and all other 
provisions hereof which otherwise are lawful and valid shall remain in full 
force and effect.

	Time for the performance of Maker's obligations under this Note is 
of the essence of this Note.

	This Note is entitled to the benefit of certain collateral security and 
certain guaranties, all as more fully set forth in the Documents.

	This Note(i) is issued in substitution for the Note dated December 23, 1992,
made by Maker to Lender in the original principal amount of $2,100,000.00 
(the "Original Note"), (ii) evidences the Loan (as defined in the 
Loan Agreement) and (iii) does not constitute a novation of the Indebtedness 
relating to Borrower's Obligations as evidenced by the Original Note.

	IN WITNESS WHEREOF, Maker has executed this Note as 
of the day and year first written above.

			ADVANCED ENERGY CORPORATION


				By: /s/ Gary L. Schmitt
				Title: Vice President-Finance







EXHIBIT 10(t)(t)(iii)



	SECOND AMENDMENT TO GUARANTEE


	This SECOND AMENDMENT (this "Agreement") is entered 
into as of this 31st day of March, 1997 by and between 
INTERNATIONAL CATALYST, INC., a Nevada corporation 
("Incat") and FINOVA CAPITAL CORPORATION, a Delaware 
corporation formerly known as Greyhound Financial Corporation 
("Lender").


	R E C I T A L S :

A.  Lender and Advanced Energy Corporation, a 
Delaware corporation ("Borrower"), are parties to that certain First 
Amended Loan and Security Agreement, dated as of 
March 30, 1989 (the "Original Agreement"), which Original Loan 
Agreement was amended by (i) that certain Amendment to Loan 
and Loan Documents (the "First Amendment") executed by and 
between Borrower and Lender and dated as of 
December 23, 1992, (ii) that certain Second Amendment to Loan 
and Loan Documents dated as of December 31, 1993 (the 
"Second Amendment"), (iii) that certain Third Amendment to Loan 
and Loan Documents dated a of June 30, 1994 (the "Third 
Amendment") and (iv) that certain letter dated April 15, 1996 from 
Lender to Mr. Gary L. Schmitt (the "Letter") (the Original Loan 
Agreement, as amended by the First Amendment, the Second 
Amendment, the Third Amendment and the Letter 
hereinafter is referred to as the "Loan Agreement").

B.  Pursuant to the Loan Agreement, Lender made 
a loan (the "Original Loan") to Borrower.  Repayment of such Original 
Loan was guaranteed by Incat pursuant to the terms of the Guarantee 
(this and all other capitalized terms used as defined terms herein and 
not otherwise defined herein which are defined in the Loan Agreement 
or in the Fourth Amendment described below shall have the meanings 
ascribed thereto in the Loan Agreement or Fourth Amendment, as 
applicable, except that, with respect to any terms defined in such 
Loan Agreement, such references shall be to any such terms, as so 
amended pursuant to the Fourth Amendment).

C.  Concurrently with the execution and delivery hereof, 
Borrower, AES, Incat and Lender propose to execute that certain 
Fourth Amendment to Loan and Loan Documents (the "Fourth 
Amendment"), pursuant to which, inter alia, Lender shall (i) amend 
the Loan Agreement as set forth therein and (ii) agree to make 
an additional loan (the "Additional Loan") to Borrower so that the 
aggregate amount of the Loan is $1,176,425.13.

D.  One of the conditions precedent to the agreement of 
Lender to make the Additional Loan is the execution and delivery 
by Incat of this Agreement.

	NOW, THEREFORE, the parties hereto hereby agree as follows:

1.  Incorporation of Recitals.  The recitals set forth above 
are incorporated into this Agreement by this reference.

2.  Amendment.  The Guarantee is amended so that any 
reference therein to any term or condition which has been amended 
pursuant to the terms of the Fourth Amendment shall be deemed to be 
amended in the Guarantee, to the same extent as such term or condition 
as amended pursuant to the terms of the Fourth Amendment.

3.  Confirmation.  Incat hereby confirms that (i) except 
as amended hereby, the Guarantee shall remain in full force and effect in 
accordance with the original terms thereof and (ii) Incat shall continue to 
be bound by the terms of the Guarantee.

	IN WITNESS WHEREOF, the parties hereto have executed this 
Agreement as of the date first set forth above.

				INTERNATIONAL CATALYST, INC.


				By: /s/ Gary L. Schmitt
				Title:  Vice President


				FINOVA CAPITAL CORPORATION, formerly
				known as Greyhound Financial Corporation


				By:  /s/ Pete Martinez
				Title:  Vice President



EXHIBIT 10(t)(t)(iv)




	SECOND AMENDMENT TO GUARANTEE


	This SECOND AMENDMENT (this "Amendment") is entered 
into as of this 31st day of March, 1997 by and between ADVANCED 
ENVIRONMENTAL SYSTEMS, INC., a New York corporation 
f/k/a Northwest Passage of North America, Inc. ("AES") and 
FINOVA CAPITAL CORPORATION, a Delaware corporation 
formerly known as Greyhound Financial Corporation ("Lender").


	R E C I T A L S :

A.  Lender and Advanced Energy Corporation, a Delaware 
corporation ("Borrower"), are parties to that certain First Amended 
Loan and Security Agreement, dated as of March 30, 1989 (the 
"Original Agreement") which Original Loan Agreement was amended 
by (i) that certain Amendment to Loan and Loan Documents (the 
"First Amendment") executed by and between Borrower and Lender
and dated as of December 23, 1992, (ii) that certain Second 
Amendment to Loan and Loan Documents dated as of 
December 31, 1993 (the "Second Amendment"), (iii) that certain Third 
Amendment to Loan and Loan Documents dated a of June 30, 1994 
(the "Third Amendment") and (iv) that certain letter dated April 15, 1996 
from Lender to Mr. Gary L. Schmitt (the "Letter") (the Original 
Loan Agreement, as amended by the First Amendment, the 
Second Amendment, the Third Amendment and the Letter 
hereinafter is referred to as the "Loan Agreement").

B.  Pursuant to the Loan Agreement, Lender made a loan 
(the "Original Loan") to Borrower.  Repayment of such Loan was 
guaranteed by AES pursuant to the terms of the Guarantee (this and 
all other capitalized terms used as defined terms herein and not 
otherwise defined herein which are defined in the Loan Agreement 
or in the Fourth Amendment described below shall have the meanings 
ascribed thereto in the Loan Agreement or Fourth Amendment, 
as applicable, except that with respect to any terms defined in such 
Loan Agreement, such references shall be to any such terms, as so 
amended pursuant to the Fourth Amendment).

C.  Concurrently with the execution and delivery hereof, 
Borrower, AES, Incat and Lender propose to execute that certain Fourth 
Amendment to Loan and Loan Documents (the "Fourth Amendment"), 
pursuant to which, inter alia, Lender shall (i) amend the Loan Agreement as 
set forth therein and (ii) agree to make an additional loan (the "Additional 
Loan") to Borrower so that the aggregate amount of the Loan is $1,176,425.13.

D.  One of the conditions precedent to the agreement of Lender 
to make the Additional Loan is the execution and delivery by AES of 
this Agreement.

	NOW, THEREFORE, the parties hereto hereby agree as follows:

1.  Incorporation of Recitals.  The recitals set forth above 
are incorporated into this Agreement by this reference.

2.  Amendment.  The Guarantee is amended so that any 
reference therein to any term or condition which has been amended 
pursuant to the terms of the Fourth Amendment shall be deemed to be 
amended in the Guarantee, to the same extent as such term or condition 
as amended pursuant to the terms of the Fourth Amendment.

3.  Confirmation.  AES hereby confirms that (i) except 
as amended hereby, the Guarantee shall remain in full force and effect in 
accordance with the original terms and (ii) notwithstanding the 
amendments effected hereby, AES shall continue to be bound by the 
terms of the Guarantee.

4.  Additional Loan.  It is a requirement of the Fourth Amendment 
that the proceeds of the Additional Loan be used to ensure that AES is 
able to repay its outstanding Indebtedness due and owing to Industrial 
Services Technologies, Inc. (the "IST Indebtedness").  Therefore, AES hereby 
agrees that, upon receipt, in whatever form or nature, from Borrower 
of the proceeds of the Additional Loan, AES shall repay such IST Indebtedness.

	IN WITNESS WHEREOF, the parties hereto have executed this 
Agreement as of the date first set forth above.

				ADVANCED ENVIRONMENTAL SYSTEMS, INC.


				By:    /s/ Gary L. Schmitt
				Title:   Vice President-Finance


				FINOVA CAPITAL CORPORATION, formerly
				known as Greyhound Financial Corporation


				By:  /s/  Pete Martinez
    Title:  Vice President