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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM  10-K

                    For the Fiscal Year ended March 31, 2001

Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
                                      1934
                         Commission File Number 1-10955
                         ------------------------------

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

           DELAWARE                                     52-1303748
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

               3700 Koppers St., Baltimore, Maryland       21227
             (Address of Principal Executive Offices)   (Zip Code)

                                (410) 368-7000
              Registrant's telephone number, including area code

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
   Common stock, par value $0.01 per share, The American Stock Exchange, LLC

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                     None

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.   Yes [X]  No [ ]

Indicate by check mark if the 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 10K.  [ ]

The aggregate market value of Common Stock held by non-affiliates of the
registrant as of June 1, 2001 was approximately $21.5 million based upon the
closing price of $4.00.  The number of shares outstanding of the registrant's
Common Stock as of June 1, 2001 was 7,180,142.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement relating to registrant's Annual
Meeting of Stockholders to be held August 3, 2001 are incorporated by reference
in Part III of this Form 10-K, with the exception of portions that are not
incorporated by reference by their terms.
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                       ENVIRONMENTAL ELEMENTS CORPORATION
                                   FORM 10-K

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

Item                                                                                                      Page
----                                                                                                      ----
                                                         PART I
<S>               <C>                                                                                    <C>
1                 Business                                                                                 3
2                 Properties                                                                              11
3                 Legal Proceedings                                                                       11
4                 Submission of Matters to a Vote of Security                                             11
                  Holders

                                                         PART II

5                 Market for Registrant's Common Equity and Related Stockholder Matters                   11
6                 Selected Financial Data                                                                 12
7                 Management's Discussion and Analysis of Financial Condition and Results of Operations   13
8                 Financial Statements and Supplementary Data                                             16
9                 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    34

                                                         PART III

10                Directors and Executive Officers of the Registrant                                      34
11                Executive Compensation                                                                  34
12                Security Ownership of Certain Beneficial Owners and Management                          34
13                Certain Relationships and Related Transactions                                          34

                                                         PART IV

14                Exhibits, Financial Statement Schedules, and Reports on Form 8-K                        35

                  Signatures                                                                              38
                  Exhibit Index                                                                           42

</TABLE>

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                    A NOTE ABOUT FORWARD-LOOKING STATEMENTS

       There are forward-looking statements in this filing including, the
     sections entitled "Business" and "Management's Discussion and Analysis of
     Financial Condition and Results of Operations", that are based on
     management's beliefs and assumptions and on information currently available
     to management. Forward-looking statements include the information
     concerning business strategies, financing, competition, potential growth
     opportunities and future operating results. Forward-looking statements
     include all statements that are not historical facts and can be identified
     by the use of forward-looking terminology such as the words "believes",
     "expects", "anticipates", "intends", "plans", "estimates" or similar
     expressions.

       Forward-looking statements involve risks, uncertainties and assumptions
     and actual results may differ materially from those expressed in these
     forward-looking statements.  The reader of this filing should not put undue
     reliance on any forward-looking statements and understand that many factors
     could cause results to differ materially from those expressed in these
     forward-looking statements.  These factors include-

      .  The loss of bookings

      .  Increased competition

      .  Changes in environmental regulations

      .  Ability of the Company to protect its intellectual property rights

      .  Unanticipated increases in project costs

                                     PART I

ITEM 1.  BUSINESS

General

  Environmental Elements Corporation (the "Company") designs, supplies, services
and maintains proprietary, large-scale, custom-engineered air pollution control
systems which enable customers to operate their facilities in compliance with
regulatory standards limiting particulate and gaseous emissions.  The Company's
business strategy is to sell and service a broad array of proprietary state-of-
the-art technologies to traditionally intensive users of air pollution control
systems, including two primary customer groups -- electric utilities and private
power generators and pulp and paper producers.  During fiscal year 2000, the
Company expanded the scope of its business to include the identification of new
technologies that it could acquire and market to its existing customer base as
well as to expand its market share.  The Company is focusing its efforts on the
continued growth of its service and maintenance operations and aggressively
pursuing the acquisition and marketing of new air pollution control
technologies.  The Company believes that these efforts, combined with a
selective focus on the large-scale design and construction projects, will result
in a more balanced revenue mix and more consistent operating results.

  The Company's design and maintenance operations have historically concentrated
on systems that reduce particulate emissions from combustion exhaust streams,
specifically electrostatic precipitators and fabric filter systems (also known
as baghouses).  For each of these product lines, the Company has developed
proprietary designs for durable, cost-effective systems.  The Company has
developed, acquired

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distribution rights for, or licensed from others, dry and semi-dry scrubbers for
use in gaseous emissions control.

  The Company enters into contracts for original equipment systems, major
rehabilitation and rebuild services, and ongoing maintenance and repair
services.  The Company offers a range of systems and technologies to address the
air pollution control needs of customers in its selected markets.  While the
Company, in certain instances, may provide a combination of its systems as an
integrated pollution control solution, its customers typically purchase
individual systems which, in certain instances, may operate in conjunction with
systems supplied by others.  The Company's contracts with its customers
generally require it to design and supply an air pollution control device which
removes specified amounts of gaseous or particulate matter from combustion
exhaust gases.  The Company is generally contractually responsible to its
customers for all phases of the design, fabrication, start-up and testing and
(if included in the scope of the Company's contract) field construction of its
systems.  The Company's successful completion of its contractual obligations is
generally determined by a performance test or tests of the Company's systems
which are generally conducted by a customer-selected independent testing agency
which verifies that the system is removing gaseous or particulate emissions in
amounts required by the contract.  In connection with the expansion of the
Company's technological offerings and a shift in the Company's mix of business,
additional measures of performance may be afforded or required. Such measures
may include availability or reliability guarantees and guarantees with respect
to the consumption of power, reagent, water or other components of variable
operating costs.

  The Company generally does not manufacture or fabricate its systems but more
recently has engaged in field construction activities utilizing its own
employees and field supervisory personnel.  The Company fabricates, through its
joint venture production facility in the People's Republic of China,
precipitator components for use by the Company's licensee in China and for the
Company's use in other selected markets.  The Company performs design and
process engineering for its systems that remove gaseous or particulate matter.
The Company determines the size, geometry, mechanical, electrical and structural
characteristics of the device needed to meet its contractual obligations, and
creates the detail design and develops specifications for all structural,
electrical, mechanical, piping, and chemical components necessary to make the
system.  In performing its contracts the Company purchases various components
(either standard inventory items or items made by vendors to the Company's
design and specifications), enters into and supervises subcontracts for field
construction (if included in the scope of the Company's contract), and manages
all technical and commercial aspects of the performance of its contracts,
including the start-up of its systems.

  In general, the Company's original equipment contracts vary in length from 12
to 36 months and require performance of a particular project within a specified
time frame.   Many of these contracts are undertaken on a fixed-price basis
which require the Company to bear certain risks of cost overruns, and from time
to time the Company experiences a loss in connection with a contract.  Its
service and maintenance business operates primarily on a time and material basis
and these projects generally require only 1 to 3 months to complete.

  The Company and its predecessor have been engaged in the air pollution control
business since 1946.

Product Lines and Services

  The Company supplies electrostatic precipitators primarily to power generation
and pulp and paper customers.  An electrostatic precipitator removes particulate
matter from combustion exhaust streams.  The particulate in the gases is
electrically charged as it passes positively charged high-voltage electrodes and
is then attracted to oppositely charged collecting plates.  The collected
material is periodically removed from the plates by rapping or vibration.  The
Company's precipitators include computerized power control systems that allow
the precipitators to respond automatically to changing operating conditions.
The Company's installed base of electrostatic precipitators is one of the
largest in North America.

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  The Company supplies a wide range of fabric filter systems to control and
recover dust and other particulates in a variety of utility and industrial
applications for power-generation, pulp and paper, incineration, and other
industrial customers.

  The Company offers state-of-the-art semi-dry scrubbing systems for the
reduction of acid gases such as sulfur oxides and hydrogen chloride emissions.
A semi-dry scrubbing system removes objectionable gaseous pollutants and certain
heavy metals from exhaust emissions by causing a chemical reaction, typically
using lime as a reagent, which transforms the pollutants into a readily
collectible particulate.  The Company offers its semi-dry scrubbers primarily
for municipal solid waste incineration facilities.

  The Company offers a fluidized bed flue gas desulfurization dry reactor,
(known as a circulating dry scrubber or CDS/R/) which has special application to
both the power generation and municipal solid waste incineration acid rain
retrofit markets. The CDS/R/ technology is licensed from Lurgi GmbH.

  The Company offers Ammonia on Demand (AOD/tm/) systems, a patented technology
that facilitates the control of nitrogen oxide emissions in coal-fired and
natural gas-fired power generation. The AOD/tm/ system enables the immediate
conversion of non-toxic urea, which is a chemical commonly used in fertilizer,
into ammonia, a necessary component to facilitate nitrogen oxide (NOx) emissions
control. The system eliminates significant storage safety problems and much of
the attendant expense associated with the storage of ammonia. EEC completed its
first AOD/tm/ project in 2000, began its second such project in fiscal 2001 and
expects to install several more systems in 2002. The AOD/tm/ technology is
licensed from Hera, LLC and Siirtec Nigi, S.p.A.

  The Company supplies original equipment systems, the majority of which are
replacements of aged existing air pollution control systems.  In addition,
because of the extreme conditions under which air pollution control systems
operate, maintenance, repair, and rebuilding of these systems is an ongoing
requirement and creates additional aftermarket demand for the Company's services
and products.  The Company engages in complete and partial rehabilitation and
rebuilding of air pollution control systems, often involving design and
installation work, and also provides ongoing maintenance services and spare
parts on a routine or emergency-response basis.  Such services may include the
provision of rebuild project materials, construction services, and field
engineering services including inspection, testing, rebuild supervision, and
equipment performance evaluation services.  The Company provides such products
and services from its headquarters and from regional maintenance centers located
near its customers.  The Company believes that its strategy related to
aftermarket products and services represents a significant long-term
opportunity. Accordingly, over the last few years, the Company established four
regional maintenance centers that are located in Wisconsin, Florida, Virginia
and Texas.  These centers are helping to leverage the Company's local presence
into a variety of new business relationships with clients that depend on in-
market expertise and rapid response.

Alliance  Agreements

  In fiscal 1997, the Company announced the first of its major alliances, a
wide-ranging relationship with Wisconsin Electric Power Company, the principal
subsidiary of Wisconsin Energy Corp., under which the Company will service,
repair and replace as required Wisconsin Electric's primary and secondary air
pollution equipment inventory system-wide. The Company has dedicated certain
professional personnel to Wisconsin Electric and launched a program designed to
reduce the life cycle cost, including operating and maintenance costs, of
Wisconsin Electric's air pollution control equipment.

  In early fiscal 2001, the Company and Peerless Mfg. Co. (PMFG) announced a
substantial new cooperative marketing alliance. PMFG is a provider of Selective
Catalytic Reduction (SCR) and ammonia delivery systems with over 140
installations. The principal purpose of the alliance is to jointly market SCR,
AOD/tm/, and other more traditional ammonia storage and delivery systems. Both
companies believe the

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underlying strengths of the alliance are the unique technology, strong
competitive positions and leading reputations that each company currently enjoys
in its respective core markets. The Company has a leading position with its
current air pollution control technologies in the fossil fuel based power
generation market, while PMFG is recognized for its NOx related technologies for
the rapidly expanding gas turbine market and ammonia supply systems in the
fossil fuel based power generation market. The overall market for the collective
product lines to be offered under the EEC/PMFG alliance is expected to grow
substantially over the near term, possibly exceeding $100 million per year for
these combined technologies.

  In December of 2000, the Company signed a Memorandum of Understanding with
American Electric Power Company (AEP) designed to provide additional support for
the commercialization of EEC's Ammonia on Demand (AOD/tm/) technology in the
power generation market. AEP employed the AOD/tm/ technology as part of a
program designed to achieve federally mandated reductions in nitrogen oxide
(NOx) emissions at AEP's Gen. James M. Gavin power plant at Cheshire, Ohio. This
plant consists of two 1300-megawatt coal-fired generating units.

  The mutually beneficial agreement would establish the Company as the
exclusive supplier of urea-to-ammonia systems for AEP's generating fleet should
AEP decide to proceed with additional installations of the technology.  The
agreement would also grant AEP an exclusive sub-license to market and sell urea-
to-ammonia systems in competitive markets for turnkey engineering, procurement
and construction projects, and in the build, operate and maintain marketplace.
The proposed licensing agreement would apply throughout North America, including
Mexico.  Further, in an expanded component of the alliance between the two
companies, AEP will serve as the Company's preferred supplier of engineering,
design, project management, and construction management services for third-party
turnkey air emission control projects and the Company will serve as a preferred
supplier to AEP of a wide variety of air pollution control related products and
services.

Industry Demand Factors

  The market for air pollution control systems and technologies is directly
dependent upon governmental regulation and enforcement of air quality standards.
During the past two decades, federal, state, and municipal governments have
recognized that contamination of the air poses significant threats to public
health and safety, and, in response, have enacted legislation designed to reduce
or eliminate a variety of air pollutants.  The Company believes that
governmental regulation of air pollution and its sources will continue to
increase and that it is well positioned to assist customers in its targeted
markets to solve their air pollution control problems.

  Given the existence of stringent domestic air emissions standards, domestic
demand for the Company's systems and technologies generally arises from the
following principal sources:  the need for replacement, rehabilitation and
rebuilding of air pollution control systems on aging electric utilities and on
pulp and paper manufacturing facilities;  construction of new electricity-
generating facilities, particularly those operated under cogeneration and
"private power" arrangements; and continued expansion of pulp and paper
manufacturing capacity.  Demand from any one of these sources may vary
significantly from year to year depending on economic, regulatory, and other
factors including industry cycles.

  Emerging international demand for the Company's products is driven primarily
by a combination of electric generation and other infrastructure improvement and
the passage or enforcement of existing regulations limiting gaseous and
particulate emissions in developing countries.

Markets Served

  The Company has historically followed a strategy of limiting its business to
systems and technologies for air pollution control and focusing within that
business on selected markets in which the Company believes it can build upon its
reputation for expertise and reliability.  The Company's current targeted
markets are electric utilities and private power generators, pulp and paper
producers and certain other

                                       6
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process industries throughout the United States, Canada, and selected areas of
central Europe, Asia and the Pacific Rim.

  Currently, the Company offers a select line of systems and technologies to
meet the various needs of electric utilities and other electric power generators
for control of air emissions at new and existing facilities.  The Company's
principal product sold to the electric-generating market is its Rigitrode/R/
electrostatic precipitator.  The Company is bidding, and will continue to bid, a
number of large contract opportunities in the utility market.

  The Company also offers to the utility industry a range of fabric filter
systems to control particulate emissions. In recent years, the Company has been
successful in marketing its fabric filter systems to private power projects that
either cogenerate electricity and thermal energy or generate electricity alone
for sale to utilities. In addition, in response to anticipated substantial
demand for solutions to the requirements of acid rain legislation, the Company,
under license from Lurgi GmbH, has introduced a state-of-the-art CDS/R/ system
for the control of sulfur oxide emissions.

  The Company has installed over 500 electrostatic precipitators at pulp and
paper plants in the United States and Canada.  The Company attributes its
success in this market to the competitive advantages of its Rigitrode
precipitator and to its reputation for reliability and service.  The Company has
established long-standing relationships, in many cases covering more than 40
years, with leading firms in the industry.

  In addition to serving the principal markets described above, the Company
sells its systems to customers in the generation of energy from waste, the
petroleum refining and certain materials processing industries, including
mining, metals conversion, cement production and steel manufacturing.  The
Company's sales in these markets consist primarily of dry scrubbers, fabric
filters and electrostatic precipitators.  The Company believes that it is
competitive in these other markets.

  The Company's markets its maintenance and repair services to both existing and
new customers in the utility industry, the pulp and paper companies and to other
industrial companies.  These services include ongoing scheduled maintenance
operations as well as repairs, retrofits and rebuilds to existing air pollution
control systems.  In addition, the Company sells spare parts to a wide range of
customers in these industries.

  In addition, the Company's AOD/tm/ technology is being aggressively marketed
to the power generation industry as a reliable, safer alternative than other
ammonia delivery system. The AOD/tm/ technology is a component of a program to
achieve mandated reductions in nitrogen oxide. This technology is primarily
being marketed to the utility companies, but the Company is evaluating its
capability to serve other industries affected by air pollution regulations.

Bookings and Backlog Information

  The information required by this item is contained under the caption "Bookings
and Backlog" in Item 7- Management's Discussion and Analysis of Financial
Condition and Results of Operations.

Research and Development

  The Company has an ongoing program for development and commercialization of
new air pollution control technologies and for enhancement of existing
technologies.  The Company spent approximately $277,000 in fiscal 2001 compared
with $346,000, $475,000 and $317,000 on product development during fiscal 2000,
1999 and 1998, respectively.  Among other important activities, the Company has
developed an advanced technology for the control of sub-micron sized particulate
(the Fine Particulate Agglomerator, or FPA/tm/) and has acquired both domestic
and international patent protection. The FPA is particularly suited to utility
and industrial boilers as these plants are subject to increasingly stringent
fine particulate emission regulations. The FPA technology has undergone full-
scale commercialization and is being marketed throughout the world. The Company
continues to invest in the development of this technology and in its
characterization so it can be applied in a cost-effective manner to the widest
possible range of

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customers.

  During fiscal 2001, the Company reduced its spending on research and has
instead concentrated on development programs focused on the improvement of
existing technologies and the identification of  commercial technologies that
could be readily added to its product line.  An example of the former would be
work on the Company's tubular, wet electrostatic precipitator and its
application to the cleanup of wet Flue Gas Desulfurization acid mist.  An
example of the latter would be the ongoing development of the recently licensed
AOD/tm/ technology.

Patents

  The Company owns or has the rights to a number of patents, patent
applications, and other proprietary technologies that are important to various
aspects of its business.  While many individual patents are not considered
material to the conduct of the Company's business as a whole, the Company views
its newly acquired patent protection with respect to its Fine Particulate
Agglomerator/TM/ technology as potentially providing the Company with a
significant advantage in the marketing of its precipitators.  It also views the
patent protection for its Ammonia on Demand (AOD/tm/) technology, for which the
Company acquired an exclusive license during fiscal 2000, as potentially
providing the Company with a significant advantage in the marketing of systems
for the control of nitrogen oxide emissions. Generally, however, the Company
believes that its ability to compete in the air pollution control industry
depends primarily on its engineering and technological expertise, rather than on
patent protection.

Sales and Marketing

  The Company's sales and marketing efforts are organized to provide emphasis
and focus by both geographic region and market area. Market areas include the
power industry, the industrial market, and aftermarket products and services.
The Company has integrated its maintenance and field service resources with a
regional sales network, linked to its regional service centers, allowing it to
build long-term customer relationships and provide solutions to customers' needs
in a highly responsive manner.  The sales efforts are technical in nature and
involve its sales and marketing professionals, supported by the Company's senior
technical and management professionals, who provide product-based expertise to
all regional and market areas.  The Company's sales and marketing group consists
of industry and regional sales managers and sales representatives.

  Although the Company seeks to obtain repeat business from its customers, it
does not depend on any single customer to maintain its level of activity from
year to year.  Two customers accounted for 31% of the company's sales in 2001,
one customer accounted for more than 10% of the Company's sales in fiscal 2000,
and three customers accounted for 56% of the Company's sales in fiscal 1999.  At
fiscal year end 2001, approximately 66% of the Company's accounts and retainages
receivable were due from companies within the power industry and approximately
20% were due from companies within the pulp and paper industry.

  The Company's overseas foreign sales are generated through royalties from
international licensees and direct sales efforts and were 21% of total sales in
fiscal 2001, 17% of sales in fiscal 2000, and less than 10% of sales in fiscal
year 1999.  In order to take advantage of certain overseas market opportunities,
the Company has established licensing agreements with companies in the People's
Republic of China, India, Russia, South Korea, and Brazil under which the
Company is entitled to royalties based upon sales in the licensed territory.
These agreements do not currently represent a material source of income.  In
addition to the licenses, the Company has established, with its Chinese
licensee, a joint venture in China, which commenced production in fiscal 1998,
of certain precipitator components for use by the Company and its licensee.
With its Indian licensee, during fiscal 1999, the Company trained certain of the
licensee's engineers to perform engineering activities for global applications,
including both international projects and projects delivered in North America.

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Suppliers and Subcontractors

  Like other companies in its industry, the Company relies on outside suppliers,
manufacturers and fabricators to supply parts and components in accordance with
the Company's specifications.  In addition, in cases in which the Company's
scope of work includes installation of equipment, the Company selects and
supervises subcontractors for this work.  To date, the Company has not
experienced difficulties either in obtaining fabricated components incorporated
in its systems or in obtaining qualified subcontractors.  It has been the
Company's recent experience, however, that in times of recession or other
industry downturns, the Company is more likely to be faced with subcontractor
performance problems and construction claims asserted by certain of its
subcontractors.  In response, the Company is required to more aggressively
manage its construction activities and contracts, and, in some cases, be subject
to unanticipated costs.

  The Company's vendor sources for various components, materials and parts used
in its systems, including certain electrodes, collecting plates, control
switches, electrical components, and other components, include a substantial
number of firms.  The Company does not depend on any one of these vendors to a
material extent, and in any event the Company believes that alternative vendors
would be available if needed.  With respect to fabricators, the Company has
satisfactory relationships with fabricators throughout the United States and
Canada.  Similarly, with respect to installation subcontractors, the Company has
satisfactory relations with firms throughout the United States and
internationally.  Based on the number of vendors, fabricators, and
subcontractors and the availability of alternative sources, the Company does not
believe that the loss of its relationship with any one firm would have a
material adverse effect on its business.

Competition

  The Company faces substantial competition in each of its principal markets.
Some of the Company's competitors are larger and have greater financial and
other resources than the Company.  The Company competes on the basis of price,
its engineering and technological expertise and the quality of equipment and
service provided.   The Company believes that the cost of entry into most of its
markets, its experience and reputation for reliability and service, and its
knowledge of the plants and operations of its customers are principal factors
that enhance its ability to provide high quality services and to compete
effectively for repair and rebuild contracts as well as new installations.
Additionally, the Company believes that the successful performance of its
installed systems is a key factor in dealing with its customers, which typically
prefer to make significant purchases from a company with a solid performance
history.

  Virtually all contracts for the Company's systems and technologies are
obtained through competitive bidding.  Customers typically purchase these
systems and technologies after a thorough evaluation of price, technical
content, service, experience, and quality.  Although price is an important
factor and may in some cases be the governing factor, it is not always
determinative, and contracts are often awarded on the basis of life cycle costs
and/or product reliability.

Regulation

  Significant environmental laws have been enacted in response to public concern
about the environment.  These laws and the implementing regulations affect
nearly every industrial activity.  The need to comply with these laws creates
demand for the Company's services.  The principal federal legislation that has
created a substantial and growing demand for the Company's systems and
technologies, and therefore has the most significant effect on the company's
business, is the Clean Air Act of 1970, as amended (the Clean Air Act).  This
legislation requires compliance with ambient air quality standards and empowers
the Environmental Protection Agency (EPA) to establish and enforce limits on the
emission of various pollutants from specific types of facilities.  The states
have primary responsibility for implementing these standards and, in some cases,
have adopted standards more stringent than those established by the EPA.

                                       9
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  In 1990, amendments to the Clean Air Act were adopted which address, among
other things, the country's acid rain problem by imposing strict controls on the
emissions of sulfur oxides caused by the combustion of coal and other solid
fuels.  The power generation market is the first to face the compliance
standards set by the amendments.  Under the legislation, coal-burning power
plants are required to comply with new emissions standards in two phases.  The
first phase, beginning with enactment of the amendments and generally ending in
1995 or 1996, required reduced emissions levels leading to full compliance, with
limited exceptions, by the end of the second phase in the year 2000.  During
1997, the EPA approved regulations that are expected to significantly increase
the number of companies subject to regulation for ozone related emissions, and
for emissions of particles at a much smaller size than previously regulated.
During 1998, the EPA issued regulations requiring utilities in 22 states to
significantly reduce emissions of nitrogen oxides (NOx) by the year 2003, in
order to control smog creation.

  In its operations, the Company is subject to federal, state and local laws and
regulations concerning environmental, safety, occupational and health standards.
Expenditures required by such laws were not material to the Company's business
and the Company is not at a competitive disadvantage by reason of compliance
with such laws.

Market Risks

  As a global concern, the Company faces exposure to adverse movements in
foreign currency exchange rates. These exposures may change over time as
business practices evolve and could have a material adverse impact on the
Company's financial results. Historically the Company's primary exposures have
been related to nondollar-denominated operating expenses in Canada, Europe and
Asia where the Company sells primarily in U.S. dollars.  The Company is prepared
to hedge against fluctuations in these foreign currencies if this exposure
becomes material but does not use derivative financial instruments for
speculative or trading purposes. As of March 31, 2001 the assets and liabilities
of the Company related to non-dollar denominated currencies was not material.
Therefore an increase or decrease of 10 percent in the foreign exchange rate
would not have a material impact on the Company's financial position.

Bonding and Insurance

  The Company is from time to time required to provide bonds guaranteeing that
it will enter into contracts as bid, guaranteeing performance of its contract
obligations, and/or guaranteeing prompt payment of its suppliers and
subcontractors.  The Company's current surety arrangements are, in management's
opinion, sufficient to support the Company's current levels of bonded business.
In addition, the Company has a bank revolving credit and letter of credit
agreement that provides for issuance of letters of credit for various purposes,
including as substitutes for performance or payment bonds.

  The Company currently maintains different types of insurance, including
comprehensive liability and property coverage.  The Company does not carry a
separate errors and omissions policy, but limited errors and omissions coverage
is provided under its comprehensive liability policy.  While a successful claim
in an amount in excess of the Company's insurance coverage, or for which there
is no coverage,  (including claims arising out of the provision by the Company
of engineering services without a product) could have a material adverse effect
on the Company, the Company believes that it presently maintains adequate
insurance coverage for its business.  To the extent that the Company performs or
will perform engineering only services for customers, the Company will, to the
extent practicable, obtain the benefit of contractual terms that limit or
eliminate the exposure that would otherwise be insured by an errors and
omissions policy.

Employees

  As of March 31, 2001, the Company had 87 full-time employees, of whom more
than 87% were engineers and other professionals and technical employees.  The
Company also hires contract and other temporary personnel to meet the
requirements of particular contracts, as well as contract personnel to

                                       10
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carry out maintenance activities and construction supervisory functions. The
Company's professional staff includes chemical engineers, electrical engineers,
mechanical engineers, civil engineers, and computer scientists. Although the
Company depends on professional employees for performance of its services, it
has not experienced any difficulty in employing such personnel to satisfy its
requirements. None of the Company's employees is represented by a union. The
Company considers its relations with its employees to be good.

  Prior to the end of fiscal 2000, the Company announced a restructuring plan to
shift the focus of its operations to a leaner services and technology-driven
business model.  The plan was implemented during the early months of fiscal 2001
and reduced the Company's employment level.

ITEM 2.  PROPERTIES

  Substantially all of the Company's operations, including administration,
engineering, design, and sales operations are conducted from its Baltimore
headquarters, located in a modern office building with approximately 100,000
square feet of leased space.  The Company occupies approximately 30,000 square
feet of this space and subleases substantially all of the remaining space.  See
Note 6 of the "Notes to Consolidated Financial Statements", under Item 8 -
Financial Statements and Supplementary Data, for a description of the rent and
other lease terms.

  In addition, the Company leases approximately 28,000 square feet of office and
warehouse space in Baltimore, Maryland for its inventory and spare parts
operation.

  The Company is a party to a joint venture that operates a factory in Bengbu,
Anhui Province, China, which fabricates precipitator components.

  The Company believes that its existing facilities are adequate to meet its
current needs and that suitable additional or substitute space will be available
as needed to accommodate any expansion of operations.

ITEM 3.  LEGAL PROCEEDINGS

  The Company is from time to time a party to various legal actions arising in
the ordinary course of its business, some of which may involve claims for
substantial sums.  Management considers that any liability from pending lawsuits
and claims will not have any material effect on the financial position or
results of operations of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal year 2001.

                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

  Prior to November 1, 1999 the Company's Common Stock was traded on the New
York Stock Exchange under the symbol "EEC."  Beginning on, and since November 1,
1999, the Company's Common Stock has traded on the American Stock Exchange under
the symbol "EEC."

  As of June 1, 2001, there were 1,449 record holders of the Company's Common
Stock.  The closing price of the Common Stock on June 1, 2001 was $4.00.

  The additional information required by this item is contained under "Investor
Information" on the inside back cover of the Company's Annual Report to
Shareholders and in Note 10 of the "Notes to Consolidated Financial Statements",
under Item 8 - Financial Statements and Supplementary Data.  Such information is
incorporated herein by reference.

                                       11
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
For the years ended March 31,                          2001             2000            1999             1998            1997
                                                                  (In thousands, except for per share amounts)
                                               ---------------------------------------------------------------------------------
<S>                                            <C>              <C>              <C>             <C>              <C>
Consolidated statements of operations data

Sales                                                 $60,821          $55,593         $68,029          $52,612         $47,654
Cost of sales                                          60,528           51,178          58,960           45,528          41,023
                                               ---------------  ---------------  --------------  ---------------  --------------
        Gross profit                                      293            4,415           9,069            7,084           6,631
                                               ---------------  ---------------  --------------  ---------------  --------------

Selling, general & administrative expense               5,288            6,638           7,183            6,373           7,807
Restructuring charge                                        -            1,185               -                -           2,215
                                               ---------------  ---------------  --------------  ---------------  --------------
                                                        5,288            7,823           7,183            6,373          10,022
                                               ---------------  ---------------  --------------  ---------------  --------------
        Operating (loss) income                        (4,995)          (3,408)          1,886              711          (3,391)

Interest and other expense, net                        (1,265)          (1,088)           (572)            (661)           (624)
                                               ---------------  ---------------  --------------  ---------------  --------------
        (Loss) Income before income taxes              (6,260)          (4,496)          1,314               50          (4,015)
 Provision for income tax                                   -                -              39                -               -
                                               ---------------  ---------------  --------------  ---------------  --------------

        Net (loss) income                             $(6,260)         $(4,496)        $ 1,275             $ 50         $(4,015)
                                               ---------------  ---------------  --------------  ---------------  --------------


Diluted earnings (loss) per share                     $ (0.88)         $ (0.63)         $ 0.18           $ 0.01         $ (0.58)

Weighted average common shares outstanding
        Basic                                           7,129            7,099           7,053            6,990           6,924
        Diluted                                         7,129            7,099           7,192            7,098           6,924



Consolidated balance sheet data

Working capital                                       $ 1,119          $ 5,825         $ 9,562          $ 7,050         $ 1,559
Total assets                                           29,689           32,395          33,180           34,362          25,407
Short-term debt                                             -                -               -                -           2,798
Long-term debt                                          8,986            8,187           8,063            7,417           2,449
Stockholders' (deficit) investment                    $(3,032)         $ 3,227         $ 7,608          $ 6,265         $ 6,038
</TABLE>

                                       12
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

General

The Company designs, supplies and services systems and equipment and provides
aftermarket products that enable its customers to comply with regulations
limiting particulate and gaseous emissions. The Company generally is
contractually responsible for all phases of design, fabrication and, if included
in the scope of the Company's contract, field construction of its equipment and
systems. The Company faces substantial competition in each of its principal
markets. Many contracts for the Company's large-scale systems design and
construction projects are awarded through competitive bidding and are undertaken
on a fixed-price basis. Like others in its industry, the Company relies on
outside suppliers, manufacturers and fabricators to supply parts and components
in accordance with the Company's designs and specifications. When the Company's
scope of work includes installation of equipment, the Company selects and
supervises subcontractors for this work. The Company's successful completion of
its contractual obligations is usually determined by performance testing of its
systems.  The Company's services and maintenance work is done primarily on a
time and material basis and also relies on outside subcontractors and suppliers.
This type of work generally is of a shorter duration (1 to 3 months) and does
not include performance testing of the service or repairs.

Bookings and Backlog

Bookings represent work for which the Company has entered into a signed
agreement or has received a notice to proceed. Bookings during fiscal 2001 were
$67.1 million, a 108% increase from fiscal 2000 bookings. The backlog as of
March 31, 2001 is $37.2 million compared with $28.9 in backlog as of March 31,
2000.

The Company expects that about 94%, or $35 million of the $37.2 million, March
31, 2001 backlog will be executed during its next fiscal year. Due to timing
effects of bookings, differences in project gross margins and varying lengths of
time required to perform contracts, annual bookings activity and backlog levels
at period end are not necessarily predictive of future operating results.

Table 1

<TABLE>
<CAPTION>
      For the years ended March 31,                      2001     2000     1999          2001      2000      1999
-----------------------------------------------------------------------------------------------------------------
                                                             (in millions)            (percentage of net sales)
                                                     ------------------------------------------------------------
<S>                                                     <C>      <C>      <C>           <C>        <C>       <C>
Sales                                                   $60.8    $55.6    $68.0         100.0     100.0     100.0
Cost of sales                                            60.5     51.2     58.9          99.5      92.1      86.7
Gross profit                                              0.3      4.4      9.1           0.5       7.9      13.3
Selling, general and administrative expenses              5.3      6.6      7.2           8.7      11.9      10.6
Restructuring charge                                        -      1.2        -             -       2.1         -
Operating (loss) income                                  (5.0)    (3.4)     1.9          (8.2)     (6.1)      2.7
Interest and other expense, net                          (1.3)    (1.1)    (0.6)         (2.1)     (2.0)     (0.8)
(Loss) income before provision for income taxes         $(6.3)   $(4.5)   $ 1.3         (10.3)     (8.1)      1.9
</TABLE>

                                       13
<PAGE>

Sales and Income

Table 1 sets forth the amounts and percentage relationships to sales of selected
items in the Company's consolidated statements of operations for the periods
indicated.

Fiscal 2001 Compared to Fiscal 2000

Fiscal 2001 sales increased 9.4% or $5.2 million to $60.8 million from $55.6
million the year before. This increase is the result of a significant project
within its AOD/tm/ business unit and continued growth in products and services
to its maintenance and field service customers.

Cost of sales increased 18.3% or $9.3 million to $60.5 million from $51.2
million and increased as a percentage of sales to 99.5% from 92.1%.  This
increase  in the percentage of sales was due to the recognition of costs
identified as a result of a detailed review and revision of the estimated costs
to complete and the probability of collection of previously billed and unbilled
receivables of projects that existed at the beginning of the fiscal year.  The
effect of these revisions was to increase cost of sales by approximately $4.5
million for fiscal 2001.

Selling, general and administrative expenses decreased 20.3% or $1.3 million to
$5.3 million from $6.6 million.  The decrease is a result of the Company's
organizational restructuring and cost reduction efforts including a significant
reduction-in-force that was substantially completed during the first quarter of
fiscal 2001.  The Company's selling, general and administrative expenses, as a
percentage of sales, decreased to 8.7% from 11.9%.

Interest and other expense, net, increased 16.3%, or $177,000, to $1.3 million.
The increase is primarily the result of increases in the average interest rate
on the Company's line of credit due to increases in the bank's prime lending
rate.

There was no provision for income taxes for fiscal 2001 because the Company
incurred a pre-tax loss for the fiscal year.  Information relating to income
taxes is discussed in Note 4 of "Notes to Consolidated Financial Statements"
under Item 8- Financial Statements and Supplementary Data.

For the fiscal year ended March 31, 2001, the Company incurred a net loss of
$6.3 million compared with a net loss of $4.5 million for the year ended March
31, 2000.

Fiscal 2000 Compared to Fiscal 1999

Fiscal 2000 sales decreased 18.3% or $12.4 million to $55.6 million from $68.0
million the year before. This change reflected decreases in sales to the
Company's power industry and repair and rebuild customers, offset in part by
increases in sales to its industrial, maintenance and field service, and
international customers.

Cost of sales decreased 13.2% or $7.8 million to $51.2 million from $59.0
million. Cost of sales increased as a percentage of sales to 92.1% from 86.7%.
The increase in cost of sales as a percentage of sales was primarily due to
increased costs incurred during the year for contract claims, increased warranty
provisions and reduced profit expectations on existing projects.

Selling, general and administrative expenses decreased 7.6% or $0.6 million to
$6.6 million from $7.2 million. The decrease was due primarily to reduced sales
volume. Because the decrease in sales volume was significantly higher than the
decrease in expenses in dollar terms, the Company's selling, general and
administrative expenses, as a percentage of sales, increased to 11.9% from
10.6%.

During the quarter ended March 31, 2000, the Company recorded a one-time
restructuring charge of $1.2 million primarily for severance and early
retirement costs, reflecting the elimination of approximately 40 staff
positions.  This staff reduction was as a part of the efforts to shift the focus
of operations to a leaner services and technology-driven business model,
continuing its emphasis on a solutions-oriented approach in the air pollution
control marketplace. The restructuring plan, adopted and communicated to
employees

                                       14
<PAGE>

prior to March 31, 2000, was implemented during the early months of fiscal 2001.

For the reasons set forth above, the Company incurred an operating loss of $3.4
million, or 6.1% of sales, for fiscal 2000, compared to operating income of $1.9
million, or 2.7% of sales, for fiscal 1999.

Interest and other expense, net, increased 90.2%, or $516,000, to $1.1 million.
The increase is primarily a result of increased interest expense due to
increased borrowings on the Company's line of credit during most of the fiscal
year.

Because of the above mentioned decreased sales volume and changes in expenses,
the Company incurred a pre-tax loss of $4.5 million, or 8.1% of sales, for
fiscal 2000, compared to pre-tax income of $1.3 million, or 1.9% of sales, for
fiscal 1999.

There was no provision for income taxes for fiscal 2000 because the Company
incurred a pre-tax loss for the fiscal year.  Provision for income taxes was
$39,000 for fiscal 1999.  The provision was for state taxes that were not offset
by net operating loss carryforwards.  Information relating to income taxes is
discussed in Note 4 of "Notes to Consolidated Financial Statements" under Item
8- Financial Statements and Supplementary Data.

Liquidity and Capital Resources

During fiscal 2001, cash and cash equivalents decreased by $0.4 million and
borrowings under the Company's line of credit increased by $0.9 million.
Historically, the Company has required minimal investment in net working capital
in contracts, but it does experience fluctuations in these amounts depending
upon the stage of completion of its various contracts and upon the payment terms
negotiated as a part of the overall original contract terms and conditions.
("Net working capital invested in contracts" consists of accounts and retainages
receivable plus unbilled contract costs and fees, minus accounts payable and
minus billings in excess of contract costs and fees. These net amounts were $2.9
million and $7.0 million at March 31, 2001 and 2000, respectively.) The Company
seeks to manage project cash flows through its payment terms with customers and
suppliers and in adherence to project budgets and schedules.

During fiscal year 2000, the Company's bank agreed to increase its secured open
line of credit up to $15 million, subject to a borrowing base calculation.  The
line of credit has been extended until April 2002 and contains certain financial
covenants relating to the Company's operations.  Under the terms of the credit
facility, the Company must comply with certain financial and other covenants.
At March 31, 2001, the Company was in compliance with, or had obtained
applicable waivers for such covenants through April 1, 2002.  In addition to the
covenants discussed above, the Company is restricted from incurring a cumulative
loss before income taxes of $500,000 for the first half of the fiscal year and
have net income before income taxes of at least $250,000 for the year ending
March 31, 2002.  Management believes that its borrowing capacity under the line
will be sufficient to meet its operating needs and that it will comply with all
of the terms of the covenants contained within the agreement.

Occasionally a customer will require that the Company obtain a surety bond in
order to bid for a particular project, to ensure that particular performance
standards are met, or to ensure prompt payment to its vendors and subcontractors
on a project.  In order to meet these requirements, the Company has arrangements
with several sources to provide these bonds.  Management believes that its
bonding sources are adequate to meet its operating needs for the coming year.

Information relating to the Company's credit facility and bonding line is
discussed in Note 3 of "Notes to Consolidated Financial Statements" under Item
8- Financial Statements and Supplementary Data.

The Company believes that there has been evidence of long term improvement over
the past three years in the market for its products, technologies and services.
In the short term, the market is exceptionally

                                       15
<PAGE>

difficult to predict accurately due to regulatory and other domestic and
international factors. The Company has attempted to adjust its organization so
that it can operate and be profitable on highly variable business levels at or
above those experienced in the current and prior fiscal year. However, there can
be no assurance that such business levels will occur, that the Company's actions
will be successful, or that future losses would not adversely affect the
Company's liquidity and capital resource position. The Company believes it has
liquidity and capital resources sufficient to maintain its business at its
current level of activity due to the following: no significant capital
expenditures are expected; historically the Company has required little
investment in operating working capital; and its banking arrangements, i.e.
those currently available and those which could be obtained, would be adequate
to fund its operations at its current level of activity for the coming year.

Dividends

The Board of Directors did not declare a dividend during fiscal 2001. Any future
determination as to the payment of dividends on common stock will depend on
future profitability and capital requirements of the Company and/or on such
other factors as the Board of Directors may consider. The Company intends to
retain most of its future earnings to finance growth and development of its
business.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements

  Consolidated Balance Sheets as of
   March 31, 2001 and March 31, 2000..................................     17

  Consolidated Statements of Operations for
   the years ended March 31, 2001, 2000 and 1999......................     18

  Consolidated Statements of Cash Flows for
   the years ended March 31, 2001, 2000 and 1999......................     19

  Consolidated Statements of Stockholders' (Deficit) Investment for
   the years ended March 31, 2001, 2000 and 1999......................     20

  Notes to Consolidated Financial Statements..........................     21

  Management's Responsibility for Financial Statements................     32

  Report of Independent Public Accountants............................     33

All other schedules are omitted because they are not applicable or not required
or because the required information is included in the Consolidated Financial
Statements or the Notes thereto.

                                       16
<PAGE>

<TABLE>
<CAPTION>

Consolidated Balance Sheets
-----------------------------------------------------------------------------------------------------------------------------------
As of March 31,                                                                                      2001                    2000
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>                     <C>
ASSETS
Current assets:
    Cash and cash equivalents                                                                   $    366,000           $    736,000
    Accounts and retainage receivable, net of allowance for doubtful
        accounts of $1,159,000 and $329,000 in 2001 and 2000, respectively                         8,013,000              8,876,000
    Unbilled contract costs and fees                                                              13,658,000             13,938,000
    Inventories                                                                                    1,076,000              1,214,000
    Prepaid expenses and other current assets                                                      1,077,000              1,542,000
                                                                                           ------------------  ---------------------
        Total current assets                                                                      24,190,000             26,306,000
                                                                                           ------------------  ---------------------

Property and equipment:
    Capital lease, building and improvements                                                       7,303,000              7,291,000
    Machinery, equipment, furniture and fixtures                                                   2,978,000              2,935,000
                                                                                           ------------------  ---------------------
        Total property and equipment at cost                                                      10,281,000             10,226,000
    Less - Accumulated depreciation and amortization                                               5,786,000              5,141,000
                                                                                           ------------------  ---------------------
        Property and equipment, net                                                                4,495,000              5,085,000
                                                                                           ------------------  ---------------------

Other assets, net                                                                                  1,004,000              1,004,000
                                                                                           ------------------  ---------------------
        Total assets                                                                            $ 29,689,000           $ 32,395,000
                                                                                           ------------------  ---------------------

LIABILITIES AND STOCKHOLDERS' (DEFICIT) INVESTMENT
Current liabilities:
    Accounts payable                                                                            $ 17,522,000           $ 14,996,000
    Billings in excess of contract costs and fees                                                  1,203,000                823,000
    Accrued payroll and related expenses                                                             638,000                980,000
    Accrued and other current liabilities                                                          3,708,000              3,682,000
                                                                                           ------------------  ---------------------
        Total current liabilities                                                                 23,071,000             20,481,000

Long-term liabilities:
      Long-term capital lease obligation                                                           1,552,000              1,687,000
      Long-term line of credit                                                                     7,434,000              6,500,000
      Other non-current liabilities                                                                  664,000                500,000
                                                                                           ------------------  ---------------------
        Total liabilities                                                                         32,721,000             29,168,000
                                                                                           ------------------  ---------------------
Commitments and contingencies
Stockholders' (deficit) investment:
    Common stock, par value $.01 per share; 20,000,000 shares authorized,
      7,171,142 and 7,118,595 shares issued and outstanding  in 2001 and 2000, respectively           72,000                 71,000
    Paid-in capital                                                                               28,392,000             28,311,000
    Cumulative translation adjustment                                                               (251,000)              (170,000)
    Retained deficit                                                                             (31,245,000)           (24,985,000)
                                                                                           ------------------  ---------------------
        Total stockholders' (deficit) investment                                                  (3,032,000)             3,227,000
                                                                                           ------------------  ---------------------

        Total liabilities and stockholders' (deficit) investment                                $ 29,689,000           $ 32,395,000
                                                                                           ==================  =====================
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       17
<PAGE>

<TABLE>
<CAPTION>

Consolidated Statements of Operations
-----------------------------------------------------------------------------------------------------------------------------------
For the years ended March 31,                             2001                          2000                         1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                         <C>                            <C>
Sales                                                     $ 60,821,000                   $ 55,593,000               $ 68,029,000
Cost of sales                                               60,528,000                     51,178,000                 58,960,000
                                                 ----------------------      -------------------------      ---------------------
        Gross Profit                                           293,000                      4,415,000                  9,069,000
                                                 ----------------------      -------------------------      ---------------------

Selling, general and administrative expenses                 5,288,000                      6,638,000                  7,183,000
Restructuring charge                                                 -                      1,185,000                          -
                                                 ----------------------      -------------------------      ---------------------
                                                             5,288,000                      7,823,000                  7,183,000
                                                 ----------------------      -------------------------      ---------------------
        Operating  (Loss) Income                            (4,995,000)                    (3,408,000)                 1,886,000

Interest and other expense, net                             (1,265,000)                    (1,088,000)                  (572,000)
                                                 ----------------------      -------------------------      ---------------------
        (Loss) Income before provision
          for Income Taxes                                  (6,260,000)                    (4,496,000)                 1,314,000
Provision for income taxes                                           -                              -                     39,000
                                                 ----------------------      -------------------------      ---------------------

        Net (Loss) Income                                 $ (6,260,000)                  $ (4,496,000)               $ 1,275,000
                                                 ----------------------      -------------------------      ---------------------

Net (Loss) Income per Share:
      Basic                                                    $ (0.88)                       $ (0.63)                    $ 0.18
                                                 ----------------------      -------------------------      ---------------------
      Diluted                                                  $ (0.88)                       $ (0.63)                    $ 0.18
                                                 ----------------------      -------------------------      ---------------------


Weighted average common shares outstanding:
      Basic                                                  7,129,000                      7,099,000                  7,053,000
                                                 ----------------------      -------------------------      ---------------------
      Diluted                                                7,129,000                      7,099,000                  7,192,000
                                                 ----------------------      -------------------------      ---------------------
</TABLE>

The accompanying notes are an integral part of these statements.

                                       18
<PAGE>

<TABLE>
<CAPTION>

Consolidated Statements of Cash Flows
-----------------------------------------------------------------------------------------------------------------------------------
For the years ended March 31,                                                       2001              2000             1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>              <C>               <C>
Cash flows from operating activities:
    Net (loss) income                                                           $ (6,260,000)    $ (4,496,000)     $ 1,275,000
    Non-cash items:
        Depreciation and amortization                                                830,000          867,000          826,000
        Stock contributions to savings plan                                                -                -           98,000
        Stock-based compensation                                                      82,000           89,000           77,000
Effect of changes in operating assets and liabilities:
        Accounts and retainages receivable, net                                      863,000          842,000           (9,000)
        Unbilled contract costs and fees                                             280,000       (1,623,000)       1,562,000
        Inventories                                                                  138,000          193,000         (647,000)
        Prepaid expenses and other current assets                                    465,000          272,000          156,000
        Accounts payable                                                           2,526,000        1,886,000       (3,268,000)
        Billings in excess of contract costs and fees                                380,000           (1,000)        (638,000)
        Accrued payroll and related expenses                                        (342,000)         (64,000)         535,000
        Accrued and other current liabilities                                         26,000        1,626,000          181,000
        Other non-current liabilities                                                164,000           25,000           19,000
                                                                            ----------------- ----------------  ---------------
          Net cash flows from operating activities                                  (848,000)        (384,000)         167,000
                                                                            ----------------- ----------------  ---------------

Cash flows from investing activities:
    Purchases of property and equipment                                              (55,000)        (245,000)        (181,000)
    Effect of changes in other assets                                               (185,000)        (404,000)         136,000
                                                                            ----------------- ----------------  ---------------
          Net cash flows from investing activities                                  (240,000)        (649,000)         (45,000)
                                                                            ----------------- ----------------  ---------------

Cash flows from financing activities:
    Net borrowings under line of credit                                              934,000          400,000          900,000
    Payments under capital lease obligation                                         (135,000)        (276,000)        (254,000)
    Change in cumulative translation adjustment                                      (81,000)          26,000         (107,000)
                                                                            ----------------- ----------------  ---------------
          Net cash flows from financing activities                                   718,000          150,000          539,000
                                                                            ----------------- ----------------  ---------------

          Net (decrease) increase in cash and cash equivalents                      (370,000)        (883,000)         661,000

Cash and cash equivalents, beginning of year                                         736,000        1,619,000          958,000
                                                                            ----------------- ----------------  ---------------
Cash and cash equivalents, end of year                                          $    366,000     $    736,000      $ 1,619,000
                                                                            ================= ================  ===============
</TABLE>

The accompanying notes are an integral part of these statements.

                                       19
<PAGE>

<TABLE>
<CAPTION>

Consolidated Statements of Stockholders' (Deficit) Investment

For the years ended March 31, 2001, 2000 and 1999
------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Cumulative
Changes in Amounts                               Common              Paid-in         Translation           Retained
                                                 Stock               Capital          Adjustment           Deficit         Total
                                          ------------------------------------------------------------------------------------------
<S>                                             <C>               <C>                 <C>               <C>             <C>
Balance, March 31, 1998                         $71,000           $ 28,047,000        $ (89,000)        $(21,764,000)   $ 6,265,000
Net income                                            -                      -                -            1,275,000      1,275,000
Translation adjustment                                -                      -         (107,000)                   -       (107,000)
  Comprehensive income                                -                      -                -                    -      1,168,000
Issuance of common stock                              -                175,000                -                    -        175,000
------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1999                          71,000             28,222,000         (196,000)         (20,489,000)     7,608,000
Net loss                                              -                      -                -           (4,496,000)    (4,496,000)
Translation adjustment                                -                      -           26,000                    -         26,000
  Comprehensive loss                                  -                      -                -                    -     (4,470,000)
Issuance of common stock                              -                 89,000                -                    -         89,000
------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2000                          71,000             28,311,000         (170,000)         (24,985,000)     3,227,000
Net loss                                              -                      -                -           (6,260,000)    (6,260,000)
Translation adjustment                                -                      -          (81,000)                   -        (81,000)
  Comprehensive loss                                  -                      -                -                    -     (6,341,000)
Issuance of common stock                          1,000                 81,000                -                    -         82,000
------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2001                         $72,000           $ 28,392,000        $(251,000)        $(31,245,000)   $(3,032,000)
                                                =======           ============        =========         ============    ===========
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------
Changes in Common Shares
-------------------------------------------------------------
<S>                                                <C>
Balance, March 31, 1998                            7,034,759
Issuance of common stock
  under employee savings plan                         27,671
Issuance of common stock                              28,275
                                                   ---------

Balance, March 31, 1999                            7,090,705
Issuance of common stock                              27,890
                                                   ---------

Balance, March 31, 2000                            7,118,595
Issuance of common stock                              52,547
                                                   ---------

Balance, March 31, 2001                            7,171,142
                                                   =========
</TABLE>

The accompanying notes are an integral part of these statements.

                                       20
<PAGE>

Notes to Consolidated Financial Statements

  Note 1
  ------

  Organization and Summary of Significant Accounting Policies
  -----------------------------------------------------------

  Organization and Business

  The Company (incorporated in Delaware on March 15, 1983) designs and supplies
proprietary, large-scale, custom-engineered air pollution control systems that
enable customers to operate their facilities in compliance with regulatory
standards limiting particulate and gaseous emissions.  In addition, the Company
provides maintenance, service and replacement parts for the air pollution
control systems.

  The Company's operations depend, among other things, upon the Company's
ability to generate sufficient revenues and gross margins in a competitive
market from a limited number of clients in specific industries.  Future
operations may be affected by the level of orders available in the market and
obtained by the Company and its ability to generate sufficient gross margins.

  Consolidation

  The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries.  All significant intercompany balances and
transactions have been eliminated in consolidation.  Preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses as well as
the disclosures of contingent assets and liabilities at the date of the
financial statements.  Actual results could differ from those estimates.

  Cash and Cash Equivalents

  Cash equivalents consist primarily of investments in short-term, highly liquid
securities having an original maturity of three months or less at the time of
acquisition.  Cash and cash equivalents are stated at cost plus accrued
interest, which approximates market value.  As of March 31, 2001 and 2000,
$58,000 and $122,000, respectively, of repurchase agreements were included in
this caption.

  Accounts and Retainages Receivable

  As of March 31, 2001 and 2000, accounts and retainages receivable, net of
allowance for doubtful accounts, include accounts receivable of $6,836,000 and
$7,521,000, respectively, and current retainages of $1,177,000 and $1,355,000,
respectively.  All retainage amounts as of March 31, 2001 become due during
fiscal 2002, based on applicable contract terms and are thus classified as
current.

                                       21
<PAGE>

  Long-Term Contracts

  The Company records sales from long-term contracts using the percentage-of-
completion method.  Under this method, the Company recognizes as sales that
portion of the total contract price which the cost of work completed bears to
the estimated total cost of the work covered by the contract.  Because contracts
may extend over more than one fiscal period, revisions of cost and profit
estimates are made periodically and are reflected in the accounting period in
which they are determined.  If the estimate of total costs on a contract
indicates a loss, the total anticipated loss is recognized immediately.
Revenues for spare parts are recognized when those parts are shipped to the
customer.

  Unbilled contract costs and fees represent revenues recognized in excess of
amounts billed.  All unbilled contract costs and fees are expected to be
collected within the next fiscal year.  Billings in excess of contract costs and
fees represent billings in excess of revenues recognized.

  The Company provides for warranty expenses on contracts based on estimates
that take into account historical experience.  Warranty expenses and related
accruals are included in cost of sales and in accrued and other current
liabilities, respectively, in the accompanying consolidated financial
statements.

  Inventories

  Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories consist principally of purchased and fabricated parts held for use
in contracts and as spare parts.

  Other Assets

  In December 1995, the Company made a strategic investment in an international
joint venture.  Certain costs incurred to acquire plant equipment and other
assets have been recorded as other assets and are being amortized over the life
of the related equipment and agreements of 5 to 12 years.  As of March 31, 2001
and 2000, the unamortized costs related to the joint venture included in other
assets totaled approximately $424,000 and $548,000, respectively.  In April
2001, the Company made an additional net investment of $277,000 in the joint
venture increasing its ownership in the joint venture to 25% of the total.  The
Company will therefore account for the investment under the equity method of
accounting for investments in future years.

  During June 1999, the Company acquired a license to market Ammonia on Demand
(AODtm) technology in North America. The costs to acquire the licensed
technology have been recorded as other assets in the accompanying consolidated
balance sheets, and are being amortized over the expected period of benefit as
additional costs of contracts utilizing the technology. As of March 31, 2001 and
2000 the unamortized costs related to the AODtm technology in other assets
totaled approximately $243,000 and $344,000, respectively.

  Property and Equipment

  Major improvements are capitalized at cost, while replacements and maintenance
and repairs that do not improve or extend the life of the affected assets are
charged to expense as incurred.  Depreciation and amortization of property and
equipment is computed on the straight-line method over estimated useful lives,
or with respect to leasehold improvements, over the term of the lease if
shorter. Useful lives range from 3 to 40 years by major asset class.

                                       22
<PAGE>

  Income Taxes

  The Company provides for income taxes using the liability method pursuant to
Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for
Income Taxes."  Deferred income taxes are provided for temporary differences
arising between the tax basis of assets and liabilities and their respective
book basis as reported in the financial statements.  Because the Company
operated at a loss in the current and prior year, and has significant net
operating loss carryforwards, current year income taxes are not material.

  Fair Value of Financial Instruments

  The Company determines fair value of their financial instruments held based on
quoted market values, where applicable, or discounted cash flow analysis.  As of
March 31, 2001 and 2000, the carrying value of its financial instruments
approximates fair value.

  New Accounting Standards

  In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and for Hedging Activities".  This
statement, as subsequently amended, establishes accounting and reporting
standards for derivative investments to be recorded in the balance sheet at
their fair value.  The Company was required to implement SFAS No. 133 effective
April 1, 2001.  The adoption of this pronouncement did not have a material
effect on operations.

  Note 2
  ------

  Earnings Per Share
  ------------------

  The following illustrates the calculation of weighted average number of common
equivalent shares outstanding for the years ended March 31, 2001, 2000, and
1999:


<TABLE>
                                                                 2001                  2000                  1999
                                                            ---------             ---------             ---------
<S>                                                        <C>                   <C>                   <C>
Weighted-average number of common shares                    7,129,000             7,099,000             7,053,000
Dilutive effect of outstanding stock options                        -                     -               139,000
                                                            ---------             ---------             ---------
Weighted-average number of common
 equivalent shares outstanding                              7,129,000             7,099,000             7,192,000
                                                            =========             =========             =========
</TABLE>


  The dilutive effects of stock options were not provided for 2001 and 2000, as
these options would have an anti-dilutive effect due to the losses of the
Company.

                                       23
<PAGE>

  Note 3
  ------

  Credit Facility
  ---------------

       The Company has a bank credit facility, amended during fiscal 2001,
providing for revolving line of credit borrowings and letters of credit
issuances of up to $15,000,000, subject to a borrowing base calculation, and is
secured by substantially all of assets of the Company.  Under the credit
facility, interest accrues at the bank's prime rate plus 1/2%. As of March 31,
2001 and 2000, the rate in effect was 8.5% and 9.0%, respectively. At March 31,
2001 and 2000 borrowings of $7,434,000 and $6,500,000 were outstanding,
respectively. Additionally, $1,158,000 and $2,858,000 of letters of credit were
also outstanding at March 31, 2001 and 2000, respectively.

       During fiscal years 2001, 2000, and 1999, the maximum borrowings under
the line of credit facility totaled $9,500,000, $11,100,000, and $6,100,000,
respectively.  Average borrowings during such years were $8,710,000, $9,021,000,
and $3,010,000, and the weighted average interest rates on such borrowings were
9.70%, 8.51%, and 8.82%, in fiscal years 2001, 2000, and 1999, respectively.
Interest expense for fiscal years 2001, 2000, and 1999, was $845,000, $768,000,
and $265,000, respectively.

       The line of credit has been extended until April 1, 2002 and contains
certain financial and other covenants relating to the Company's operations.  In
addition to these covenants, the Company is restricted from incurring a
cumulative loss before income taxes of $500,000 for the first half of the fiscal
year and must earn net income before income taxes of at least $250,000 for the
year ending March 31, 2002.  At March 31, 2001, the Company was in compliance
with, or had obtained applicable waivers for such covenants through April 1,
2002.  Management believes that its borrowing capacity under the line will be
sufficient to meet its operating needs and that it will comply with all of the
terms of the covenants contained within the agreement.

  Bonding
  -------
       The Company has arrangements with several sources to provide surety
bonds, including bid bonds and performance bonds, when a customer requires them.
Management believes that its bonding sources are adequate to meet its operating
needs for the coming year.

  Note 4
  ------

  Income Taxes
  ------------

       As of March 31, 2001, the Company had available, for federal tax
purposes, an estimated federal income tax net operating loss carryforward of
approximately $27,730,000 to offset future taxable income. These carryforwards
will expire between 2008 and 2021. As of March 31, 2001, the Company also had an
alternative minimum tax credit carryforward of approximately $536,000 that has
no expiration date. As of March 31, 2001, the Company had an alternative minimum
tax net operating loss carryforward of approximately $28,263,000.

       The reconciliation of the provision for income taxes computed at
statutory rates to the provision for income taxes provided on pretax (loss)
income is not material. Federal taxes at the statutory rate were offset by equal
reductions/increases to the valuation reserve. The Company has maintained a

                                       24
<PAGE>

valuation reserve for the tax loss carryforwards since their recovery is
dependent on profitable future operations.

        The significant components of the deferred tax liability stated by
source of the difference between financial accounting and tax basis as of March
31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                       2001                      2000
                                                                 ------------              ------------
<S>                                                             <C>                       <C>
Operating loss carryforward and tax credits                      $ 11,148,000              $  9,140,000
Reserves, accrued liabilities and other                             1,398,000                 1,413,000
Property, plant, equipment and other                                  118,000                   (83,000)
Valuation allowance                                               (12,864,000)              (10,670,000)
                                                                 ------------              ------------
Net deferred income tax liability                                $   (200,000)             $   (200,000)
                                                                 ============              ============
</TABLE>


        The deferred income tax liability is included in other current
liabilities and other noncurrent liabilities in the accompanying consolidated
financial statements.

  Note 5
  ------

  Employee Benefit Plans
  ----------------------

  Pension Plan

        The Company maintains a defined benefit pension plan covering the
majority of its employees.  Contributions to the plan are based on the
actuarially determined costs thereof, and the Company's funding policy has been
to contribute an amount at least sufficient to meet the funding standards under
the Employee Retirement Income Security Act of 1974.  Contributions are intended
to provide not only for benefits attributed to service to date, but also for
those expected to be earned in the future.


<TABLE>
<CAPTION>
                                                                 2001                     2000                     1999
                                                            ---------              -----------              -----------
<S>                                                         <C>                      <C>                      <C>
Service Cost                                                $ 419,000              $   463,000              $   369,000
Net amortization and deferral                                (636,000)                 602,000                  793,000
Interest cost                                                 869,000                  797,000                  738,000
Return on assets                                             (275,000)              (1,313,000)              (1,454,000)
                                                            ---------              -----------              -----------
Net pension expense                                         $ 377,000              $   549,000              $   446,000
                                                            =========              ===========              ===========
</TABLE>


                                       25
<PAGE>

The funded status of the Plan as of the most recent actuarial valuations was:

<TABLE>
<CAPTION>
                                                                        12/31/2000            12/31/99
                                                                        ----------            --------
<S>                                                                    <C>                  <C>
Actuarial present value of benefit obligations:
  Accumulated benefit obligation, including vested
  benefits of $11,788,077 and $10,451,000 in 2001
  and 2000, respectively                                               $ 11,889,000         $ 10,855,000
Projected benefit obligation for services rendered to date               12,682,000           11,874,000
Plan assets, consisting primarily of fixed income
  investments, at fair value                                             12,321,000           12,314,000

Plan assets in excess of (or less than) the projected
  benefit obligation                                                   $   (361,000)        $    440,000
Unrecognized net loss from past experience different
  from that assumed and changes in assumptions                              967,000              374,000
Prior service cost not yet recognized in net periodic cost                  119,000              166,000
                                                                  ------------------    -----------------

Prepaid pension cost                                                   $    725,000         $    980,000
                                                                  ==================    =================
</TABLE>

        For purposes of determining the actuarial present value of the projected
benefit obligation, a weighted average discount rate of 7.50% was used in 2001
and 2000.  Rates of increase in future compensation levels between 3.5% and
6.5%, and an 8% expected long-term rate of return on plan assets were assumed.

Post-Employment Benefits

        The Company provides limited health care and life insurance benefits for
certain employees upon retirement. In addition, employees terminated in
connection with the elimination of manufacturing operations in prior years were
eligible to receive certain health care and life insurance benefits upon
termination. These benefit plans are not funded.

        The accrual is determined by application of the terms of the current
benefit plans, effects of Medicare for eligible employees, relevant actuarial
assumptions and health care cost trend rates projected at an annual rate of 3%.

        The obligation for Post-Employment benefits as of March 31, 2001 was:

        Obligation as of March 31, 2000       $333,000
        Service Cost                           270,000
        Paid during current year               (72,000)
        Interest Cost                           29,000
                                              --------
        Obligation as of March 31, 2001       $560,000
                                              ========

                                       26
<PAGE>

Savings Plan

        The Company's Retirement Savings Plan (the "Savings Plan") is qualified
under sections 401(a) and 401(k) of the Internal Revenue Code.  All employees of
the Company are eligible to participate in the Savings Plan upon completion of
six months of employment.  Under the Savings Plan's salary deferral provisions,
participating employees may elect to defer specified portions of their
compensation.  Elective contributions made by employees are fully vested at all
times. Through March 31, 1999, the Company made matching contributions in the
form of shares of common stock at the rate of 50% of the first 3% of each
participant's compensation that is deferred for each calendar year.  Beginning
April 1, 1999, the Company made matching contributions by purchasing company
stock on the open market at the rate of 50% of the first 3% of each
participant's compensation. Employees fully vest in Company contributions after
the completion of five years of service.  Contributions by the Company were
$76,000, $115,000, and $98,000, in 2001, 2000, and 1999, respectively.

  Stock Option Plan

        During fiscal year 1999, the Company adopted a new stock option plan,
"1998 Stock Option Plan", which authorizes the granting of options to purchase
up to an aggregate of 300,000 shares of common stock at prices not less than
fair market value at the date of grant.  Under the terms of this Plan, 20% of
the options granted are exercisable immediately along with 20% on each of the
next four anniversaries.  Options granted expire five years from the date of
grant.  As of March 31, 2001, the weighted average exercise price for
outstanding options was $2.49 per share and expiration dates ranged from August
1, 2001 to January 18, 2006.  The options price range per share is $1.50 to
$4.31.

        The Company applies APB Opinion 25 and related interpretations in
accounting for its plan. Accordingly, no compensation expense has been
recognized for its stock option plan. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under that plan consistent with the method of SFAS No.
123 "Stock Based Compensation", the Company's net (loss) income and earnings per
share would have been reduced to the pro forma amounts indicated below:

<TABLE>
  Years ended March 31,                                  2001                 2000               1999
                                                  -----------          -----------         ----------
<S>                                              <C>                  <C>                  <C>
Net (loss) income:
As reported                                       $(6,260,000)         $(4,496,000)        $1,275,000
Pro forma                                         $(6,319,000)         $(4,710,000)        $1,126,000
Basic earnings per share:
As reported                                       $     (0.88)         $     (0.63)        $     0.18
Pro forma                                         $     (0.89)         $     (0.66)        $     0.16
Diluted earnings per share:
As reported                                       $     (0.88)         $     (0.63)        $     0.18
Pro forma                                         $     (0.89)         $     (0.66)        $     0.16
</TABLE>

                                       27
<PAGE>

        Options were assumed to be exercised upon vesting for the purposes of
this valuation. Adjustments are made for options forfeited prior to vesting.

        Changes in outstanding stock options during the year were as follows:


<TABLE>
<CAPTION>
Years ended March 31,                                    2001                 2000               1999
                                                     ------------------------------------------------
<S>                                                  <C>                   <C>                <C>
Outstanding, beginning of year                        827,000              794,000            571,000
Granted                                               143,000               75,000            271,000
Exercised                                              (2,000)              (8,000)            (1,000)
Forfeited                                            (600,000)             (34,000)           (47,000)
                                                     ------------------------------------------------
Outstanding, end of year                              368,000              827,000            794,000
                                                     ================================================
</TABLE>

There were options for a total of 172,000 shares exercisable as of March 31,
2001 at a weighted average price of $2.66 per share.

        The weighted average fair value of each stock option is estimated on the
date of grant using the Black-Scholes option-pricing model. The following key
assumptions were used in the Black-Scholes option pricing model:

<TABLE>
<CAPTION>

Year Ended March 31,
                                     2001      2000      1999
                                     ----      ----      ----
<S>                                  <C>       <C>       <C>
        Risk-Free Interest Rate       5.8%      5.6%      4.5%
        Expected Life                 5 years   5 years   5 years
        Volatility                    73%       46%       41%
        Dividends                     ---       ---       ---
</TABLE>

  Note 6
  ------

  Commitments and Contingencies
  -----------------------------

  Commitments

        The principal office facilities of the Company and its subsidiaries are
occupied under a lease expiring in January 2002, with bargain renewal periods
extending to January 2037.  The lease has been capitalized using an 8.9%
interest rate.  Principal and interest on this lease commitment are being
amortized using the effective-interest method.

                                       28
<PAGE>

        Future payments under the office building lease are $301,300 in 2002,
$157,500 per year through 2036, $78,800 in 2037, and total, with bargain renewal
options, $5,735,000.  Of this amount, $4,040,000 represents imputed interest and
the balance of $1,695,000 as of March 31, 2001 is included in the consolidated
financial statements as a current liability ($143,000) and a long-term capital
lease obligation ($1,552,000).

        The Company subleases a portion of building office space to tenants.
The rental income and related costs are included in operating (loss) income in
the accompanying financial statements.  For the years ended March 31, 2001,
2000, and 1999, rental income totaled $525,000, $635,000, and $585,000,
respectively, and building related costs totaled $662,000, $772,000, and
$747,000, respectively.  The future rentals on the subleases are $400,000,
$228,000, $140,000 and $94,000 for fiscal 2002, 2003, 2004 and 2005,
respectively.

        The Company and certain subsidiaries use office facilities and equipment
under operating leases.  Rent expense for the years ended March 31, 2001, 2000
and 1999 totaled $359,000, $287,000 and $231,000, respectively.

  Litigation

        The Company is, from time to time, a party to various legal actions
arising in the ordinary course of its business, some of which may involve claims
for substantial sums.  In management's opinion, the resolution of these matters
will not have a material adverse effect on the Company's financial position or
results of its operations.


  Note 7
  ------


  Restructuring Charges
  ---------------------

        During the fourth quarter of fiscal year 2000, the Company took action
to shift the focus of its operations to a services and technology-driven
business model. The actions included a business reorganization and a reduction
in workforce, resulting in a restructuring charge of $1,185,000, primarily
representing severance and related costs of these terminations.

  Note 8
  ------

  Supplemental Cash Flow Information
  ----------------------------------

        In non-cash financing transactions, the Company issued 27,671 shares in
fiscal 1999 as matching contributions under its Savings Plan.  In addition, the
Company issued 50,547, and 19,890 shares of its common stock in fiscal 2001 and
2000, respectively, as compensation to its outside directors.

        Amounts paid for interest during the years ended March 31, 2001, 2000,
and 1999, were $1,122,000, $1,033,000, and $623,000, respectively.  Amounts paid
for income taxes in fiscal year 2001, 2000, and 1999, were $5,000, $78,000, and
$16,000, respectively.

                                       29
<PAGE>

  Note 9
  ------

  Segment Reporting
  -----------------

       During fiscal year 2001, the Company was restructured and now has three
reportable operating segments: the Systems Business Unit, the Services Business
Unit, and the AOD Business Unit.  The Systems Business Unit provides custom-
engineered, original equipment systems to traditionally intensive users of air
pollution control (APC) systems.  The Services Business Unit provides
maintenance, repair, and spare parts products and services to customers with
particulate abatement installed APC equipment.  The AOD Business Unit is
dedicated to finding additional technologies and alliances, and currently
includes Ammonia-on-Demand (AODtm) technology and international ventures.

      The segments reported below are the segments of the Company for which
separate financial information is available and for which sales and operating
income amounts are evaluated by executive management in deciding how to allocate
resources and for assessing performance.  Due to the fact that no segments
existed prior to the restructuring, comparative information is not reported
because it can not be practicably determined.  The Company does not allocate
assets to the individual operating segments and there are no intercompany sales
transactions among the three operating segments.

      Information about reported segment sales and operating income (loss) for
the year ended March 31, 2001 is as follows:


Business Unit                             Sales                 Operating Income
                                                                      (Loss)
-------------------------------------------------------------------------------
Systems                                   $34,564,000               $(5,259,000)
Services                                   19,647,000                   991,000
AOD                                         6,610,000                  (727,000)
                                          -------------------------------------
Total                                     $60,821,000               $(4,995,000)
                                          -------------------------------------

       The Company attributes revenues to individual geographic areas based upon
the country where services are provided or products are delivered.  Sales by
geographic area for the years ended March 31, 2001, 2000 and 1999 were as
follows:


<TABLE>
<CAPTION>
                                                           2001                 2000                 1999
                                                      ------------------------------------------------------
<S>                                                    <C>                  <C>                  <C>
United States                                          $42,878,000          $37,374,000          $61,125,000
Canada                                                   5,107,000            8,617,000            4,011,000
Other International                                     12,836,000            9,602,000            2,893,000
                                                      ------------------------------------------------------
Total                                                  $60,821,000          $55,593,000          $68,029,000
                                                      ------------------------------------------------------
</TABLE>


        As of March 31, 2001, approximately 66% of the Company's accounts and
retainages receivable were due from companies in the power industry and 20% were
due from companies in the pulp and paper industry. Two customers accounted for
more than 31% of the Company's sales in 2001; one
                                       30
<PAGE>

customer accounted for more than 10% of the Company's sales in fiscal 2000;
three customers accounted for more than 56% of the Company's sales in fiscal
1999.


  Note 10
  -------

<TABLE>
<CAPTION>

  Quarterly and Selected Financial Data [Unaudited]
  fiscal year 2001 quarters ended                    3/31/01        12/31/00         9/30/00        6/30/00
                                                     -------        --------         -------        -------
  <S>                                            <C>             <C>             <C>            <C>
  Sales                                          $17,345,000     $14,799,000     $12,218,000    $16,459,000
  Gross profit                                     1,630,000       1,388,000      (4,022,000)     1,297,000
  Net (Loss) Income                                  161,000          17,000      (5,970,000)      (468,000)
  Diluted Net Income (Loss) per share (1)              $0.02           $0.00          ($0.84)        ($0.07)
  Stock price
      High                                            $2.310          $2.375          $2.375         $2.375
      Low                                             $1.250          $1.125          $1.125         $1.125

  <CAPTION>
  fiscal year 2001 quarters ended                    3/31/00        12/31/99         9/30/99        6/30/99
                                                     -------        --------         -------        -------
  <S>                                            <C>             <C>             <C>            <C>
  Sales                                          $16,306,000     $13,924,000     $13,557,000    $11,806,000
  Gross profit                                      (339,000)      1,610,000         922,000      2,222,000
  Net (Loss) Income                               (3,508,000)         85,000      (1,294,000)       221,000
  Diluted Net (Loss )Income per share (1)             ($0.49)          $0.01          ($0.18)         $0.03
  Stock price
      High                                            $3.125          $2.875          $3.688         $3.750
      Low                                             $2.063          $1.797          $2.875         $2.938
</TABLE>

(1) Due to rounding, the accumulation of the quarterly results may not equal
    year end totals.

                                       31
<PAGE>

              MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS


The consolidated financial statements of Environmental Elements Corporation and
subsidiaries have been prepared by the Company in accordance with accounting
principles generally accepted in the United States.  The financial information
presented is the responsibility of management and accordingly includes amounts
upon which judgment has been applied, or estimates made, based on the best
information available.


The financial statements have been audited by Arthur Andersen LLP, independent
public accountants, for each of the three years in the period ended March 31,
2001.

The consolidated financial statements, in the opinion of management, present
fairly the financial position, results of operations and cash flows of the
Company as of the stated dates and for the stated periods in conformity with
accounting principles generally accepted in the United States.  The Company
believes that its accounting systems and related internal controls used to
record and report financial information provide reasonable assurance that
financial records are reliable and that transactions are recorded in accordance
with established policies and procedures.


/s/ John L. Sams                         /s/ Lawrence Rychlak
--------------------------               -------------------------
John L. Sams                             Lawrence Rychlak

President and Chief Executive Officer    Senior Vice President and Chief
                                         Financial Officer





                                       32
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


  To the Board of Directors and Stockholders of Environmental Elements
Corporation:


We have audited the accompanying consolidated balance sheets of Environmental
Elements Corporation (a Delaware corporation) and subsidiaries as of March 31,
2001 and 2000, and the related consolidated statements of operations,
stockholders' investment and cash flows for the years in the period ended March
31, 2001, 2000, and 1999.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.


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


In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Environmental Elements
Corporation and subsidiaries as of March 31, 2001 and 2000, and the results of
their operations and their cash flows for of the years in the period ended March
31, 2001, 2000, and 1999 in conformity with accounting principles generally
accepted in the United States.


                                                   /s/ Arthur Andersen LLP

  Baltimore, Maryland

  May 10, 2001

                                       33
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

  None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)  Directors - The information with respect to Directors required by this
     ---------
item is incorporated by reference to the Registrant's 2001 Proxy Statement to be
filed with the Securities and Exchange Commission, under the headings "Election
of Directors," "Directors Continuing in Office," and "Certain Information
Regarding the Board of Directors and Committees of the Board."
(b)  Executive Officers - Information regarding certain executive officers of
     ------------------
the Company appears in the Company's definitive proxy statement for the 2001
Annual Meeting of Stockholders.
(c)  In addition, the following information is being provided in response to the
requirements of Item 405 of Regulation S-K. To the Registrant's knowledge,
during the fiscal year ended March 31, 2001, all filing requirements applicable
to officers, directors, and greater than 10% beneficial owners of the common
shares of the Registrant under Section 16(a) of the Securities Exchange Act of
1934, as amended, were complied with.

ITEM 11.  EXECUTIVE COMPENSATION

  The information required by this item is incorporated herein by reference to
the Registrant's 2001 Proxy Statement to be filed with the Securities and
Exchange Commission, under the headings "Executive Compensation and Related
Information."

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  The information required by this item is incorporated herein by reference to
the Registrant's 2001 Proxy Statement to be filed with the Securities and
Exchange Commission, under the heading "Security Ownership."

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  The information required by this item is incorporated herein by reference to
the Registrant's 2001 Proxy Statement to be filed with the Securities and
Exchange Commission, under the heading "Certain Relationships and Related
Transactions" and under the heading "Employment and Non-Competition Agreements."

                                       34
<PAGE>

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements - see Index to Financial Statements on page 16 of
       this Form 10K.

                                                                   Page Number
                                                                     in 10-K
    2. Financial Statement Schedules:
       Report of Independent Public Accountants on Schedules          40
       Valuation and Qualifying Accounts for the years ended
       March 31, 2001, 2000, and 1999 (Schedule II)                   41

    3. Exhibits - The following Exhibits are filed herewith unless otherwise
indicated:

    3.1 -     Restated Certificate of Incorporation of the Registrant
              (incorporated by reference to Form S-1 Registration Statement
              (File No. 33-35802) filed with the Commission on May 25, 1990).
    3.2 -     Certificate of Amendment of the Registrant (incorporated by
              reference to Form 10-K filed with the Commission on June 24,
              1991).
    3.3 -     Bylaws of the Registrant (incorporated by reference to Form S-1
              Registration Statement (File No. 33-35802) filed with the
              Commission on May 25, 1990).
    4.1 -     Articles IV, V, VI, VIII, IX, X and XI of the Registrant's
              Restated Certificate of Incorporation, as amended (included in
              Exhibit 3.1 and Exhibit 3.2).
    4.2 -     Articles I, II, V and VII of the Registrant's Bylaws (included in
              Exhibit 3.3).
    10.1 -    Articles of Lease dated April 15, 1975 between Balkop Properties
              Corp., as landlord, and Koppers Company, Inc., and Assignment of
              Lease dated June 20, 1989 to Registrant, as assignee, and Beazer
              Materials and Services, Inc., as assignor (incorporated by
              reference to Form S-1 Registration Statement (File No. 33-35802)
              filed with the Commission on May 25, 1990).
    10.2 -    The Registrant's Retirement Plan, as amended (incorporated by
              reference to Form 10-K filed with the Commission on June 28,
              1995).
    10.2(a) - First Amendment, dated December 28, 1995, to the Registrant's
              Retirement Plan, as amended (incorporated by reference to Form
              10-K filed with the Commission on June 26, 1996).
    10.2(b) - Second Amendment, dated December 28, 1995, to the Registrant's
              Retirement Plan, as amended (incorporated by reference to Form
              10-K filed with the Commission on June 26, 1996).
    10.3(b) - The Registrant's Replacement 401(k) Retirement Savings Plan, dated
              July 1, 1997 (incorporated by reference to the Registrant's Form
              10-K filed with the Commission on June 25, 1998).

                                       35
<PAGE>

  10.4 -    The Registrant's Employee Stock Option Plan, as amended,
            (incorporated by reference to Form S-8 Registration Statement (File
            No. 33-38400) filed with the Commission on December 21, 1990).
  10.5 -    Environmental Elements Corporation Supplemental Pension Agreement
            dated March 1, 1995, between Registrant and Richard E. Hug
            (incorporated by reference to Form 10-K filed with the Commission on
            June 26, 1996).
  10.5(a) - Environmental Elements Corporation Supplemental Pension Agreement
            dated July 1, 1996 between Registrant and John C. Nichols,
            (incorporated by reference to Form 10-K filed with the Commission on
            June 23, 1997).
  10.6 -    Revolving Credit and Letter of Credit Agreement dated November 24,
            1993 between the  Registrant and Mercantile-Safe Deposit and Trust
            Company (incorporated by reference to Form 10-Q filed with the
            Commission on February 14, 1994).
  10.6(a) - Waiver and Amendment dated May 26, 1994, to the Revolving Credit
            and Letter of Credit Agreement dated November 24, 1993 between the
            Registrant and Mercantile-Safe Deposit and Trust Company
            (incorporated by reference to Form 10-K filed with the Commission on
            June 29, 1994).
  10.6(b) - Extension Agreement dated November 18, 1994 to the Revolving
            Credit and Letter of Credit Agreement dated November 23, 1993
            between the Registrant and Mercantile-Safe Deposit and Trust Company
            (incorporated by reference to Form 10-K filed with the Commission on
            June 28, 1995).
  10.6(c) - Second Amendment to Revolving Credit and Letter of Credit
            Agreement, First Amendment to Line of Credit Promissory Note and
            Security Agreement, dated October 25, 1995 between the Registrant
            and Mercantile-Safe Deposit and Trust Co (incorporated by reference
            to Form 10-Q filed with the Commission on February 14, 1996).
  10.6(d) - Amendment to Revolving Credit and Letter of Credit Agreement dated
            May 10, 1996 between the Registrant and Mercantile-Safe Deposit and
            Trust Company (incorporated by referenced to Form 10-K filed with
            the Commission on June 26, 1996).
  10.6(e) - Letter Amendment dated May 5, 1997 to Revolving Credit and
            Letter of Credit Agreement between the Registrant and Mercantile-
            Safe Deposit and Trust Company dated November 23, 1993,
            (incorporated by reference to Form 10-K filed with the Commission on
            June 23, 1997).
  10.6(f) - First Amendment to Security Agreement, Second Amendment to Line of
            Credit Promissory Note, and Third Amendment to Revolving Credit and
            Letter of Credit Agreement dated June 12, 1998, between Registrant
            and Mercantile-Safe Deposit and Trust Company (incorporated by
            reference to the Registrant's Form 10-K filed with the Commission on
            June 25, 1998).
  10.6(g) - Second Amendment to Security Agreement,Third Amendment to Line of
            Credit Promissory Note, Fourth Amendment to Revolving Credit and
            Letter of Credit Agreement dated August 31, 1999 between Registrant
            and Mercantile Safe Deposit and Trust Company (incorporated by
            reference to the Registrant's Form 10-Q filed with the Commission on
            November 12, 1999.)

                                       36
<PAGE>

  10.6(h) - Fourth Amendment to Line of Credit Promissory Note and Fifth
            Amendment to Revolving Credit and Letter of Credit Agreement dated
            May 18, 2000 and Patent Security Agreement and Trademark Security
            Agreement dated June 30, 2000 between the Registrant and Mercantile
            Safe Deposit and Trust Company (incorporated by reference to the
            Registrant's Form 10-Q filed with the Commission on August 14,
            2000).
  10.6(i) - Notices of modification to the Fourth Amendment to the Revolving
            Credit and Letter of Credit Agreement dated August 31, 1999 and the
            Fifth Amendment to the Revolving Credit and Letter of Credit
            Agreement dated May 18, 2000 between the Registrant and Mercantile
            Safe Deposit and Trust Company (incorporated by reference to the
            Registrant's Form 1-Q filed with the Commission on November 20,
            2000).
  10.6(j) - Letter Amendment dated May 31, 2001 to Revolving Credit and
            Letter of Credit Agreement between the Registrant and Mercantile
            Safe Deposit and Trust Company dated November 24, 1993.
  10.8 -    The Registrant's 1998 Stock Option Plan (incorporated by reference
            to Form 10-K filed with the Commission on June 25, 1999).
  10.9 -    Shareholders' Agreement dated February 2, 1990 by and among the
            Registrant and certain shareholders of the Registrant (incorporated
            by reference to Amendment No. 1 to Form S-1 Registration Statement
            (File No. 33-35802) filed with the Commission on July 5, 1990).
  10.10 -   Employment Agreement dated March 29, 1996 between Registrant and E.
            H. Verdery (incorporated by reference to Form 10-K filed with the
            Commission on June 26, 1996).
  10.11-    Employment Agreement dated February 25, 2000 between Registrant and
            J. L. Sams, filed herewith.
  10.12 -   Separation and Non-Competition Agreement dated February 25, 2000
            between Registrant and E. H. Verdery, (incorporated by reference to
            Form 10-K filed with the Commission on June 28, 2000.)
  10.13 -   Separation, Release, and Non-Competition Agreement dated April 17,
            2000 between Registrant and S. M. Dunseith, (incorporated by
            reference to Form 10-K filed with the Commission on June 28, 2000.)
  11    -   Statement re: Computation of Earnings per Share, filed herewith.
            is furnished for the information of the Commission and is not deemed
            "filed."
  21    -   Subsidiaries of the Registrant (incorporated by reference to
            Form 10-K filed with the Commission on June 26, 1996.)

                                       37
<PAGE>

b) Reports on Form 8-K - No Reports on Form 8-K were filed for the quarter ended
   March 31, 2001.

All other schedules have been omitted, since the required information is
included in the consolidated financial statements, including the notes thereto,
or the circumstances requiring inclusion of such schedules are not present.

                                   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.

Environmental Elements Corporation
(Registrant)


/s/ Lawrence Rychlak
--------------------------------------------
Lawrence Rychlak
Senior Vice President and Chief Financial Officer

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.

/s/ John L. Sams                                          June 25, 2001
--------------------------------------------              -------------
John L. Sams                                              Date
President and Chief Executive Officer

/s/ Samuel T. Woodside                                    June 25, 2001
--------------------------------------------              -------------
Samuel T. Woodside                                        Date
Chairman of the Board of Directors

/s/ Joseph J. Duffy                                       June 25, 2001
--------------------------------------------              -------------
Joseph J. Duffy                                           Date
Director

/s/ Richard E. Hug                                        June 25, 2001
--------------------------------------------              -------------
Richard E. Hug                                            Date
Director

/s/ Barry Koh                                             June 25, 2001
--------------------------------------------              -------------
Barry Koh                                                 Date
Director

/s/ John C. Nichols                                       June 25, 2001
--------------------------------------------              -------------
John C. Nichols                                           Date

Director and Secretary

                                       38
<PAGE>

/s/ James S. Potts                                        June 25, 2001
--------------------------------------------              -------------
James S. Potts                                            Date
Director

/s/ F. Bradford Smith                                     June 25, 2001
--------------------------------------------              -------------
F. Bradford Smith                                         Date
Director

                                       39
<PAGE>

                                                                      Schedule I

             Report of Independent Public Accountants on Schedules


To the Board of Directors and Stockholders of Environmental Elements
Corporation:


We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of Environmental Elements
Corporation and subsidiaries in this Form 10-K, and have issued our report
thereon dated May 10, 2001.  Our audits were made for the purpose of forming an
opinion on the consolidated financial statements taken as a whole.  Schedule II-
Valuation and Qualifying Accounts is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



                                                         /s/ Arthur Andersen LLP



Baltimore, Maryland

May 10, 2001

                                       40
<PAGE>

                                                                     Schedule II


                        Valution and Qualifying Accounts

               For the Years Ended March 31, 2001, 2000 and 1999


                                                Allowance for      Reserve for
                                              Doubtful Accounts   Restructuring
                                              -----------------   -------------
Balance, March 31, 1998                           $ 218,000         $     -
Charged (credited) to profit and loss               (58,000)              -
   (Deductions) additions                            61,000               -
                                                 ----------         -----------


Balance, March 31, 1999                             221,000               -
Charged (credited) to profit and loss               112,000           1,185,000
   (Deductions) additions                            (4,000)              -
                                                 ----------         -----------


Balance, March 31, 2000                             329,000           1,185,000
Charged (credited) to profit and loss               847,000               -
   (Deductions) additions                           (17,000)         (1,185,000)
                                                 ----------         -----------


Balance, March 31, 2001                          $1,159,000         $     -
                                                 ==========         ===========

                                       41
<PAGE>

                                 EXHIBIT INDEX


3.1 -     Restated Certificate of Incorporation of the Registrant (incorporated
          by reference to Form S-1 Registration Statement (File No. 33-35802)
          filed with the Commission on May 25, 1990).
3.2 -     Certificate of Amendment of the Registrant (incorporated by reference
          to Form 10-K filed with the Commission on June 24, 1991).
3.3 -     Bylaws of the Registrant (incorporated by reference to Form S-1
          Registration Statement (File No. 33-35802) filed with the Commission
          on May 25, 1990).
4.1 -     Articles IV, V, VI, VIII, IX, X and XI of the Registrant's Restated
          Certificate of Incorporation, as amended (included in Exhibit 3.1 and
          Exhibit 3.2).
4.2 -     Articles I, II, V and VII of the Registrant's Bylaws (included in
          Exhibit 3.3).
10.1 -    Articles of Lease dated April 15, 1975 between Balkop Properties
          Corp., as landlord, and Koppers Company, Inc., and Assignment of Lease
          dated June 20, 1989 to Registrant, as assignee, and Beazer Materials
          and Services, Inc., as assignor (incorporated by reference to Form S-1
          Registration Statement (File No. 33-35802) filed with the Commission
          on May 25, 1990).
10.2 -    The Registrant's Retirement Plan, as amended (incorporated by
          reference to Form
          10-K filed with the Commission on June 28, 1995).
10.2(a) - First Amendment, dated December 28, 1995, to the Registrant's
          Retirement Plan, as amended (incorporated by reference to Form 10-K
          filed with the Commission on June 26, 1996).
10.2(b) - Second Amendment, dated December 28, 1995, to the Registrant's
          Retirement Plan, as amended (incorporated by reference to Form 10-K
          filed with the Commission on June 26, 1996).
10.3(b) - The Registrant's Replacement 401(k) Retirement Savings Plan, dated
          July 1, 1997 (incorporated by reference to the Registrant's Form 10-K
          filed with the Commission on June 25, 1998).
10.4 -    The Registrant's Employee Stock Option Plan, as amended,
          (incorporated by reference to Form S-8 Registration Statement (File
          No. 33-38400) filed with the Commission on December 21, 1990).
10.5 -    Environmental Elements Corporation Supplemental Pension Agreement
          dated March 1, 1995, between Registrant and Richard E. Hug
          (incorporated by reference to Form 10-K filed with the Commission on
          June 26, 1996).
10.5(a)-  Environmental Elements Corporation Supplemental Pension Agreement
          dated July 1, 1996 between Registrant and John C. Nichols,
          (incorporated by reference to Form 10-K filed with the Commission on
          June 23, 1997).
10.6 -    Revolving Credit and Letter of Credit Agreement dated November 24,
          1993 between the  Registrant and Mercantile-Safe Deposit and Trust
          Company (incorporated by reference to Form 10-Q filed with the
          Commission on February 14, 1994).

                                       42
<PAGE>

10.6(a) - Waiver and Amendment dated May 26, 1994, to the Revolving Credit
          and Letter of Credit Agreement dated November 24, 1993 between the
          Registrant and Mercantile-Safe Deposit and Trust Company (incorporated
          by reference to Form 10-K filed with the Commission on June 29, 1994).
10.6(b) - Extension Agreement dated November 18, 1994 to the Revolving
          Credit and Letter of Credit Agreement dated November 23, 1993 between
          the Registrant and Mercantile-Safe Deposit and Trust Company
          (incorporated by reference to Form 10-K filed with the Commission on
          June 28, 1995).
10.6(c) - Second Amendment to Revolving Credit and Letter of Credit
          Agreement, First Amendment to Line of Credit Promissory Note and
          Security Agreement, dated October 25, 1995 between the Registrant and
          Mercantile-Safe Deposit and Trust Co (incorporated by reference to
          Form 10-Q filed with the Commission on February 14, 1996).
10.6(d) - Amendment to Revolving Credit and Letter of Credit Agreement dated
          May 10, 1996 between the Registrant and Mercantile-Safe Deposit and
          Trust Company (incorporated by referenced to Form 10-K filed with the
          Commission on June 26, 1996).
10.6(e) - Letter Amendment dated May 5, 1997 to Revolving Credit and
          Letter of Credit Agreement between the Registrant and Mercantile-Safe
          Deposit and Trust Company dated November 23, 1993, (incorporated by
          reference to Form 10-K filed with the Commission on June 23, 1997).
10.6(f) - First  Amendment to Security Agreement, Second Amendment to Line
          of Credit Promissory Note, and Third Amendment to Revolving Credit and
          Letter of Credit Agreement dated June 12, 1998, between Registrant and
          Mercantile-Safe Deposit and Trust Company (incorporated by reference
          to the Registrant's Form 10-K filed with the Commission on June 25,
          1998).
10.6(g) - Second Amendment to Security Agreement,Third Amendment to Line of
          Credit Promissory Note, Fourth Amendment to Revolving Credit and
          Letter of Credit Agreement dated August 31, 1999 between Registrant
          and Mercantile Safe Deposit and Trust Company (incorporated by
          reference to the Registrant's Form 10-Q filed with the Commission on
          November 12, 1999.)
10.6(h) - Fourth Amendment to Line of Credit Promissory Note and Fifth
          Amendment to Revolving Credit and Letter of Credit Agreement dated May
          18, 2000 and Patent Security Agreement and Trademark Security
          Agreement dated June 30, 2000 between the Registrant and Mercantile
          Safe Deposit and Trust Company (incorporated by reference to the
          Registrant's Form 10-Q filed with the Commission on August 14, 2000).
10.6(i) - Notices of modification to the Fourth Amendment to the Revolving
          Credit and Letter of Credit Agreement dated August 31, 1999 and the
          Fifth Amendment to the Revolving Credit and Letter of Credit Agreement
          dated May 18, 2000 between the Registrant and Mercantile Safe Deposit
          and Trust Company (incorporated by reference to the Registrant's Form
          1-Q filed with the Commission on November 20, 2000).
10.6(j) - Letter Amendment dated May 31, 2001 to Revolving Credit and Letter of
          Credit Agreement between the Registrant and Mercantile Safe Deposit
          and Trust Company dated November 24, 1993.
10.8 -    The Registrant's 1998 Stock Option Plan (incorporated by reference to
          Form 10-K filed with the Commission on June 25,1999.)

                                       43
<PAGE>

10.9 -    Shareholders' Agreement dated February 2, 1990 by and among the
          Registrant and certain shareholders of the Registrant (incorporated by
          reference to Amendment No. 1 to Form S-1 Registration Statement (File
          No. 33-35802) filed with the Commission on July 5, 1990).
10.10-    Employment Agreement dated March 29, 1996 between Registrant and E. H.
          Verdery (incorporated by reference to Form 10-K filed with the
          Commission on June 26, 1996).
10.11-    Employment Agreement dated February 25, 2000 between Registrant and J.
          L. Sams, filed herewith.
10.12-    Separation and Non-Competition Agreement dated February 25, 2000
          between Registrant and E. H. Verdery, (incorporated by reference to
          Form 10-K filed with the Commission on June 28, 2000.)
10.13 -   Separation, Release, and Non-Competition Agreement dated April 17,
          2000 between Registrant and S. M. Dunseith, (incorporated by reference
          to Form 10-K filed with the Commission on June 28, 2000.)
11 -      Statement re: Computation of Earnings per Share, filed herewith.
21 -      Subsidiaries of the Registrant (incorporated by reference to Form 10-K
          filed with the Commission on June 26, 1996.)

                                       44