<PAGE>   1
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
                                  FORM 10-KSB
(Mark One)

         [X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d)     [No Fee Required]
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended March 29, 1997

         [  ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) [No Fee Required]
                  OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to 
                               -------------    ------------

Commission file number  0-25528

                              ENVIROQ CORPORATION
                 (Name of small business issuer in its charter)

            Delaware                                    59-3290346
 (State or other jurisdiction of                     (I.R.S. Employer
 incorporation or organization)                     Identification No.)

         3918 Montclair Road, Suite 206
               Birmingham, Alabama                        35213
    (Address of principal executive offices)            (Zip Code)

                   Issuer's telephone number: (205) 870-0588

        Securities registered under Section 12(b) of the Exchange Act:

 Title of each class                 Name of each exchange on which registered

         None                                         None
         ----                                         ----

        Securities registered under Section 12(g) of the Exchange Act:

                                  Common Stock
                                  ------------
                                (Title of class)

         Check whether the issuer: (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 
                               ---      ---
         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will 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-KSB or any amendment to this Form 10-KSB. [X]

         As of June 6, 1997, the aggregate market value of the voting stock of
the Registrant held by non-affiliates was approximately $849,000, based on
$2.00 per share being an average of the bid and asked prices listed on the NASD
"Bulletin Board" system.

         State issuer's revenues for its most recent fiscal year: $1,338,807

         As of June 25, 1997, the Registrant had issued 1,009,377 shares of
Common Stock, par value $0.01.

         Transitional Small Business Disclosure Format YES      NO  X
                                                          ----     ----
<PAGE>   2




                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

         BUSINESS DEVELOPMENT: HISTORY.

         Enviroq Corporation, a Delaware corporation (the "Company"), was
incorporated on February 9, 1995. At the time of its incorporation, the Company
was a wholly-owned subsidiary of a Delaware corporation formerly named Enviroq
Corporation ("Old Enviroq"). Prior to April 18, 1995, the Company was named New
Enviroq Corporation ("New Enviroq"). On April 18, 1995, Old Enviroq distributed
all of the issued and outstanding capital stock of New Enviroq to the holders
of the common stock of Old Enviroq (the "Distribution"). Following the
Distribution, the Company changed its name from New Enviroq Corporation to
Enviroq Corporation. Also following the Distribution, Old Enviroq merged (the
"Merger") with a subsidiary of Insituform Mid-America, Inc. ("IMA") and changed
its name to Insituform Southeast, Inc. ("Insituform Southeast"). In a
transaction subsequent to and unrelated to the Merger, IMA was acquired by
Insituform Technologies, Inc.

         The Company's principal executive office is located at 3918 Montclair
Road, Suite 206, Birmingham, Alabama 35213, and its telephone number is (205)
870-0588. The Company's mailing address is P. O. Box 130062, Birmingham,
Alabama 35213.

         BUSINESS AND BUSINESS STRATEGY OF ISSUER.

         The Company is principally engaged in the development,
commercialization, formulation and marketing of spray-applied resinous
products, and in the treatment of municipal wastewater biosolids. The Company's
operations are conducted primarily through Sprayroq(R), Inc., a Florida
corporation of which the Company owns 50% of the outstanding capital stock
("Sprayroq"). The Company also owns 100% of the outstanding capital stock of
Synox(R) Corporation, a Delaware corporation ("Synox"). Sprayroq is engaged in
the development, commercialization, manufacture and marketing of spray-applied
resinous materials. Synox has been engaged in the research, development and
marketing of a process for the treatment of municipal wastewater biosolids.
During the fiscal year ended March 30, 1996, management of the Company elected
to minimize the activities of Synox and to write off substantially all of the
assets of Synox. See "Description of Business -- Background on Operations of
Synox Corporation."

         The strong financial position of the Company, along with its status as
a public company, may offer opportunities for growth or other strategic
alliances.  The management of the Company is therefore searching for
opportunities to leverage the Company's advantages to bring additional value to
its Shareholders.  Such opportunities may or may not involve the Company's
traditional business and markets.  There can be no assurances, however, that
the Company will be successful in locating or capitalizing on any such
opportunities.

         During the fiscal year ended March 29, 1997, most of the income and
gross profit of the Company was attributable to the operations of Sprayroq.

         BACKGROUND ON OPERATIONS OF SPRAYROQ, INC.

         Sprayroq, Inc. was initially organized in January, 1991 as Enviroq
Resin Development, 



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Inc., a Florida corporation, to be a member of a joint venture to develop,
commercialize, manufacture and market technology and know-how relating to the
spray application of chemicals and additives in the rehabilitation, repair and
reconstruction of certain pipes, pipelines, manholes, wetwells, drains and
wastewater treatment facilities. The other member of this joint venture was
Replico Development Company, Inc., a Pennsylvania corporation ("Replico"). In
February, 1992, the name of Enviroq Resin Development, Inc. was changed to
Sprayroq, Inc. In March, 1992, Replico contributed all of its rights and
interests in the joint venture to Sprayroq in exchange for 50% of the
outstanding common stock of Sprayroq, which resulted in the Company and Replico
each owning fifty percent of the outstanding capital stock of Sprayroq.
Pursuant to the Stockholder Agreement dated as of March 25, 1992 between the
Company (as a successor to Old Enviroq), Sprayroq and Replico (the "Stockholder
Agreement"), the parties agreed to vote their respective shares to elect three
directors designated by the Company and two directors designated by Replico. At
this same time, Sprayroq assumed all of the obligations of the joint venture,
including the payment obligations of the joint venture pursuant to a promissory
note dated March 25, 1992 from the joint venture to the Company in the
principal amount of $181,143.29. The Stockholder Agreement also provides that
the stockholders of Sprayroq may make loans to Sprayroq for legitimate business
purposes.

         Since its organization, Sprayroq has engaged in the development,
commercialization, formation and marketing of spray-applied resinous materials.
At the present time, Sprayroq has developed two products; SprayWall(R) and
SprayShield(R). Sprayroq has also developed additional materials utilizing
polyureas, epoxies and other resin technologies which may have future
commercial application. Sprayroq has entered into licensing agreements with
seven installers to provide for the promotion, sale and installation of
SprayWall, and two installers for the promotion, sale and installation of
SprayShield. Both SprayWall and SprayShield have significant corrosion and
abrasion resistance. SprayWall is a spray-applied resinous material that can
achieve structural strength and is relatively rigid. SprayWall was initially
developed to be utilized for the reconstruction of manholes. Other SprayWall
applications include the reconstruction of vaults, underground tanks, as a
corrosion resistant lining for underground pipe, etc. SprayShield is a pliable,
spray-applied elastomeric material for waterproofing use in flumes and tanks,
and has also been installed in truck beds of truck trailers for containment of
potential spillage, during shipment, of hazardous materials. Other uses of
SprayShield include installation inside the bodies of dump trucks to reduce
damage from abrasion and the lining of pipes for corrosion protection.

         Sprayroq was organized with minimum capital, and has obtained
operating funds primarily from the Company. Of the total amount owed to the
Company by Sprayroq, $547,219 was loaned by the Company pursuant to written
promissory notes made by Sprayroq to the Company (collectively, the "Sprayroq
Notes"). The Sprayroq Notes became due on April 1, 1995. On October 15, 1996,
the board of directors of Sprayroq voted to restructure and consolidate this
debt with the Company, and a Consolidated Note evidencing the restructured debt
was executed on October 21, 1996 by Sprayroq. The principal amount of the debt
as of October 21, 1996 was approximately $840,000. The rate of interest on the
debt 




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is 7% per annum, and the debt will be amortized over a 30-year period, with the
balance of the principal due, in the form of a "balloon" payment, on October 1,
2001. As of March 29, 1997, the Company had made loans to Sprayroq in the
aggregate amount of approximately $837,000.

         Under the Stockholder Agreement between the Company and Replico, the
Company is given certain rights of control over Sprayroq, including the right
to designate its executive officers and to elect a majority of the board of
directors. Since the formation of Sprayroq, the chief executive officer of
Sprayroq has also been the chief executive officer of the Company.
Nevertheless, from time to time during fiscal year 1997 and continuing to the
present, one or more of the principals of Replico has, either on their own
behalf or on the behalf of Replico, raised issues or otherwise questioned the
Company's management of and designation of officers of Sprayroq. Among such
issues and questions is the suggestion of a conflict of interest, as yet
undefined, in connection with the election of William J. Long as the chief
executive officer of both Sprayroq and the Company. Another such issue relates
to the assertion that Replico and or certain affiliates of Replico should be
free to engage in certain ventures that may present opportunities for Sprayroq
and/or be competitive with Sprayroq, or that utilize certain technology and/or
technology rights belonging to Sprayroq, and that the corresponding responses
of Sprayroq's management to Replico might somehow be improper. Management of
the Company believes that all actions taken have been entirely within the terms
and the sprit of the Stockholder Agreement with respect to the management of
Sprayroq, and Sprayroq's responses to the questions and issues raised by
Replico and or its principals. However, no assuarances can be given that Replico
or its affiliates will not pursue claims against Sprayroq, the Company, and/or
their respective affiliates, or that the outcome of such matters will be
favorable to the Company.


         BACKGROUND ON OPERATIONS OF SYNOX CORPORATION.

         The focus of the municipal wastewater treatment industry over the past
20 years has been to meet stricter effluent discharge standards by achieving
higher levels of wastewater treatment. One of the primary goals of wastewater
treatment is the removal from the wastewater of suspended solids and nutrients.
Typically, a municipal wastewater treatment plant concentrates the solids
generated by this removal into a slurry or sludge which is still essentially
liquid, but which contains approximately 2%-6% solids by weight (known in the
industry and referred to hereafter as "biosolids").

         Synox was organized as a Delaware corporation on May 23, 1986, and was
acquired by the Company on September 30, 1991. Synox has licensed a process for
the treatment of municipal wastewater biosolids (the "Synox Process(R)"), and
other related processes for producing and managing usable end products from
wastewater biosolids. The intellectual property and know-how underlying the
Synox Process is licensed to Synox by Long Enterprises, Inc., an Alabama
corporation controlled by Charles A. Long, Jr., a Director of the Company and
the father of William J. Long, the President, Chief Executive Officer and a
Director of the Company ("Long Enterprises"). The Synox Process utilizes ozone
along with supplemental physical and chemical treatment steps to disinfect,
deodorize and thicken municipal wastewater biosolids. Dewatering and
pelletizing techniques developed by Synox combine treated biosolids with other
recyclable materials to yield an end-product that has the potential to be used
as a soil amendment or burned as a fuel.

         The research and development activities of Synox have included the
creation of a mobile pilot testing unit, as well as efforts to achieve
processes that meet the highest treatment standards of the U.S. Environmental
Protection Agency (the "EPA"). Such processes are known as Processes that
Further Reduce Pathogens ("PFRP"). Synox also invested approximately $995,000
in the design and construction of a full scale demonstration plant located in
Jacksonville, Florida.

         As a result of the lack of activity in the markets addressed by the
Synox Process, the Company elected, during fiscal year 1996, to reduce
substantially the operations at Synox in order to minimize expense. The two
full-time employees of Synox were terminated and the full scale demonstration
plant of Synox located in Jacksonville, Florida was closed. Substantially all
of the assets of Synox were written off during fiscal year 1996. It is
expected that the demonstration plant will be dismantled during fiscal year
1998. Nevertheless, management of the Company believes that the Synox Process
may become valuable in the future, provided that, among other factors, a full
implementation and vigorous 




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enforcement of the existing EPA Regulations is realized; funding becomes
available to municipalities to enable municipalities to implement processes
such as the Synox Process; the Synox Process, at such time in the future, is
competitive and viable; and, at such time in the future, the beneficial use of
Class A biosolids is generally accepted.

         The Synox Process.

         The Synox Process for treating municipal wastewater biosolids is a
four step process: (1) conditioning, (2) ozonation, (3) thickening, and (4)
nitrite disinfection. Processing begins with raw biosolids pumped into a
conditioning tank. In this tank, sulfuric acid is mixed with the biosolids to
lower the Ph of the biosolids. The conditioning step can also include adjusting
the thickness of the biosolids and heating the biosolids if necessary. The
conditioned biosolids are then pumped into the Synox vessel for ozonation.

         The Synox vessel is designed to facilitate mixing the biosolids with
an ozone rich gas. This is achieved by constantly recirculating and dispersing
the biosolids through the vessel while injecting an ozone rich gas into the
biosolids and operating the system under pressure. The ozone rich gas is
produced by passing oxygen through an ozone generator. The ozonation step takes
about 60 minutes and deodorizes and partially disinfects the biosolids.

         After ozonation, the biosolids are transferred to a separation tank.
In this tank, the biosolids are thickened by flotation as gas dissolved into
the biosolids under pressure is released from solution at atmospheric pressure.
Additional thickening may be required. In the final processing step, further
disinfection is achieved in about 10 hours by adding sodium nitrite to the
thickened biosolids. The Synox Process yields a deodorized, thickened and
disinfected end-product.

         Management believes that the Synox Process has relatively moderate
capital and operating costs; generally higher than alkaline processes and lower
than composing and heat drying processes. The system can be accommodated in a
relatively small space. Proper operation of the Synox Process is relatively
easy to control and document, does not generate odors and yields an end-product
free from putrid odors, which, according to the existing regulations
promulgated by the EPA (the "EPA Regulations"), can be beneficially reused
either agriculturally or as a fuel. The Synox Process does not make biosolids
chemically stable for long-term storage, and the Synox Process must be preceded
or followed by a volatile solids reducing process or followed by a dewatering
process if long-term storage is required.

         The Synox Process is relatively fast, achieving Class-A treatment in
less than a day. Other processes may require from several days to several
weeks. Unlike most other processes, Synox treats biosolids in liquid form and
does not require an odor-causing dewatering step prior to treatment. In
addition, the Synox in-vessel process is designed to provide for pathogen kill
and to control objectionable odors.

         In March of 1993, the Company received notification from the EPA that
a committee 



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of the EPA has recommended PFRP equivalency for the Synox Process, which means
that the Synox Process achieves the EPA's "Class-A" standard of treatment of
municipal wastewater biosolids (sludge). Under the EPA Regulations, the EPA has
reserved the "Class-A" designation for those processes that can achieve the
highest standards of treatment, allowing beneficial re-use of biosolids with
minimal regulation. The Company believes that the patented Synox Process is the
only "Class-A" designated process that treats biosolids in a liquid form, is
non-biological and does not require heat or the addition of alkaline materials
for disinfection, resulting in several important advantages.

         EPA REGULATIONS.

         The treatment and disposal of municipal biosolids are regulated by the
EPA, under authority of Section 405(d) of the Clean Water Act, as amended (the
"CWA"). On February 19, 1993, the EPA published new regulations relating to the
treatment, disposal and usage of biosolids. These new regulations were, the
Company believes, the result of a major effort by the EPA to develop
regulations containing guidelines for the use and disposal of biosolids,
including standards that are intended to adequately protect public health and
the environment from reasonably anticipated adverse effects from the use and
disposal of biosolids. These regulations contain provisions generally to set
standards and/or guidelines for the disinfection and subsequent use or disposal
of municipal wastewater biosolids, and which regulate the treatment, disposal
and utilization of sewage biosolids. These regulations govern three biosolids
use and disposal practices: land application, surface disposal, and
incineration. The regulations are implemented through permits issued by
appropriate state authorities and/or the EPA to each plant or facility treating
or otherwise handling municipal biosolids.

         Current EPA Regulations impose standards for the reduction of
pathogens (disinfection) and attraction of disease vectors (rodents, flies,
etc.). These standards apply to publicly and privately owned treatment works
that generate or treat domestic sewage biosolids, as well as to any person who
uses or disposes of sewage biosolids from such treatment works.

         The EPA has also set performance standards for owners and operators of
sewage treatment works. The pathogen reduction standards set forth in the EPA
Regulations classify three levels of sewage treatment. Class A treatment
reduces the level of pathogenic organisms to below detectable limits. Class B
and C treatment levels require restricted access and restricted use of lands
upon which Class B or C sewage biosolids are applied for specific periods.

         Under the EPA Regulations, the EPA also requires owners and operators
to reduce vector attraction. These standards require the elimination of odors,
moisture, and other characteristics of sewage biosolids that attract disease
vectors, such as rodents, flies and mosquitoes.

         Under existing EPA Regulations, unlike regulations in place prior to
February 19, 1993, a specific level of treatment performance is required.
Specific indicators must be 



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monitored regularly by sewage treatment works and corresponding reports must be
filed, certifying that a particular level of treatment has been achieved. The
Company believes that these performance standards, combined with restrictive
permitting requirements governing the utilization of Class B or C biosolids in
the most populous states, may eventually encourage owners and operators of
sewage biosolids treatment works to favor Class A capable processes. Unlike the
regulations in place prior to February 19, 1993, existing EPA Regulations
measure the effectiveness of the treatment method itself, rather than simply
requiring owners and operators to have in place the necessary process equipment
and procedures to provide a desired level of treatment. In addition, owners and
operators are now subject to fines and other sanctions in the event that a
permitted performance standard is not achieved. Further, owners and operators
must still meet other federal, state, and local regulations for the treatment,
disposal, and utilization of sewage biosolids.

         Management has observed that, to date, the adoption by the EPA of its
new regulations on February 19, 1993 has not resulted in a meaningful increase
in the sales of biosolids equipment. Management believes that this lack of
market activity is primarily the result of a lack of funding for improvements,
required by the new regulations, to municipal treatment works. Management also
believes that full implementation and vigorous enforcement of the new
regulations must be realized before a potential market for the Synox Process
may be developed. There can be no assurance, however, that vigorous regulatory
enforcement will occur or will lead to a developed market for the Synox Process
or otherwise benefit Synox or the Company. Management of the Company has seen a
trend towards a general reduction in emphasis (primarily politically) in these
regulations which could adversely impact any future value of the Synox Process.


         SALES AND MARKETING.

         The Company's organization includes operations for sales and
marketing. At the present time, Synox Corporation relies on the senior officers
of the Company to coordinate sales activities with independent sales
representatives throughout the United States. Sprayroq Corporation employs one
salesperson to coordinate activities among Sprayroq's licensees and to secure
new licensees. From time to time, the Company's senior officers and directors
also participate in sales and marketing of the Company's products and services.

         Both Synox and Sprayroq conduct marketing activities, which typically
include: (i) identifying new markets and market strategies, trade shows,
advertising, direct mail, news releases, and other promotional activities; (ii)
brochures, video, Internet "Web" pages, and slide presentations; and (iii)
other sales aids and investor relations. Sales and marketing activities are
directed to potential licensees, engineers (both in the municipal and
industrial sectors), public works officials, consulting engineers, mayors, and
other public officials to introduce them to, and educate them about, the
products and services offered by the Company.




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         CUSTOMERS.

         Sprayroq's sales are almost exclusively to its licensees. The majority
of Sprayroq's revenues are derived from the sale of resinous materials,
principally SprayWall and SprayShield. Additional revenues are derived from
fees arising out of license agreements, along with related sales of equipment,
spare parts, and technical support. These licensees market, sell and install
Sprayroq products primarily to municipal and industrial customers. An aggregate
of 81% of Sprayroq's sales for fiscal year 1997 were made to two customers
which amounted to sales totalling approximately $694,000 and $391,000 to
Insituform Southeast, Inc. and Southwestern Underground, respectively. Synox
Corporation currently has no customers.

         MARKETS.

         Sprayroq.

         Sprayroq currently intends to continue to market its products though
its licensed installers and to continue to attempt to obtain additional
licensees for the current Sprayroq products. If additional products are
developed by Sprayroq, such products may be marketed through existing or new
licensed installers. Since Sprayroq products may be utilized in various ways by
various industries, existing licensed installers may or may not be appropriate
to market certain new Sprayroq products. Depending upon the background and
expertise of any particular licensed installer, Sprayroq may elect to allow
that licensee to market new products, elect to find another organization which
is more suitable, or pursue the marketing of the product directly.

         The Company believes that the market for spray-applied resinous
materials is large. Any municipality and any larger industrial plant are among
potential customers for Sprayroq products. In addition, the Company has
identified significant potential markets in the lining of truck beds,
containment vessels and/or structures and subterraneous vaults.


         Synox.

         Management believes that there are over 16,000 publicly owned
treatment works ("POTW") in the United States. Over 90% of these plants treat
less than 1 million gallons of wastewater per day ("MGD") and are likely to be
too small to require a biosolids treatment alternative like the Synox Process.
Synox believes its market is primarily the municipalities which operate
approximately 1,000 POTW treating more than 5 MGD. These 1,000 POTW process
about 70% of the 30,000 MGD of wastewater treated each day in the United States
and generate about 70% of the biosolids.

         With these 1,000 POTW, the same distribution pattern in relation to
plant size holds true; that is, there are relatively few very large plants
(less than 100 POTW process more than 50 MGD) and many small and medium-sized
plants. The average size of these 1,000 POTW is about 20 MGD, and the median
size is approximately 10 MGD.




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         The Company believes that, over the next few years, if existing
regulations governing the treatment and disposal of biosolids are vigorously
enforced and if the required capital is located to fund necessary improvements,
increased wastewater flow and more efficient wastewater treatment (which
generates more biosolids) may encourage many of these plants to change or
upgrade their biosolids treatment processes. At the present time, however, such
regulations are not being vigorously enforced and, therefore, are having little
impact on the market. Consequently, no assurance can be given that vigorous
regulatory enforcement will occur or that it will positively effect Synox or
the Company. See "Description of Business -- Background on Operations of Synox
Corporation."

         COMPETITION.

         Sprayroq.

         Sprayroq faces competition, either directly from companies marketing
similar resin products, or indirectly, from other techniques and technologies
which accomplish similar results in a different manner. Other companies provide
resin materials which may be spray-applied, or are similar but which are
applied in a different manner, or are not similar but which provide similar
results.

         The SprayWall product was developed specifically for use in the
reconstruction of manholes and related structures. Management is unaware of any
product that offers a similar combination of spray application of
polyurethanes, long-term structural performance, and high resistance to
corrosion. There are, however, a number of products which are utilized in the
refurbishment or reconstruction of manholes. Many of these products are less
expensive and offer viable competition.

         The Company is also aware of other products which exhibit certain of
the qualities of SprayShield. The Company believes that SprayShield has
significant adhesive qualities combined with corrosion and abrasion resistance.
Various paints and thin coatings are available that are easily spray-applied
and offer corrosion protection. The Company is aware of other products which
offer similar abrasion resistance, but is unaware, however, of any product
which offers all of the qualities of SprayShield.

         The development of products utilizing urethane, polyesters, and
epoxies is growing rapidly, with the announcement of new products occurring
frequently. Sprayroq's products are not patented and are protected only to the
extent offered as know-how and trade secrets. There can be no assurance that
other competitors will not develop products similar or superior to those of
Sprayroq.

         Management is aware of other processes which may become significant
future competitors of the Company's products. Among such processes are those
that involve techniques based on in-pipe curing or spray-applied lining. In
addition, there are other types and methods of applied linings and coatings
which are competitive to the Company's products, 



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particularly in the lining of manholes.


         Synox.

         Synox faces competition from a number of suppliers employing more
traditional, well-known and accepted methods of wastewater biosolids
treatment. All biosolids treatment processes, including the Synox Process, have
strengths and weaknesses and no one process is the best choice in all
situations. Competing biosolids treatment processes include alkaline
stabilization/fixation, heat drying/pelletizing, and composting. For some
potential customers, more conventional treatment methods will be adequate.
There are a number of companies marketing specific technologies that offer many
of the same advantages as the Synox Process over conventional wastewater
biosolids treatment techniques. Many of these companies employ techniques that
may produce soil amendment products or fuel from the treated biosolids. These
companies, which are well established and better financed than Synox,
constitute substantial, direct competition for Synox. See "Description of
Business -- Background on Operations of Synox Corporation."

         PATENTS AND LICENSES.

         Sprayroq.

         Sprayroq currently has not pursued registering any patents with
respect to its products. Management believes that the formulations of the
SprayWall and SprayShield products are proprietary to Sprayroq and are
protected as know-how and trade secrets. Sprayroq has licensed the formulation
of the SprayWall product to Mitsui Chemical and Toa Grout, Inc. of Japan.


         Synox.

         Synox is the exclusive licensee under a license agreement dated May
27, 1986, as amended on May 16, 1991, October 5, 1994, and December 20, 1996,
between Synox and Long Enterprises (the "License Agreement"), pursuant to which
Synox has obtained rights to six U.S. patents relating to the Synox Process.




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         The patents and patent applications covered by the License Agreement,
and their expiration dates are listed below:


<TABLE>
<CAPTION>
         Number            Name          Description                            Expiration
         ------------------------------------------------------------------------------------
         <S>               <C>          <C>                                    <C> 
         4,487,699         Long         Sewage Biosolids Treatment              Dec. 11, 2001
                                        Apparatus and Process

         4,582,612         Long         Improved Sewage Biosolids               Apr. 15, 2003
                                        Treatment Apparatus

         4,659,464         Long         Apparatus for Dispersing                Apr. 21, 2004
                                        Biosolids With Gas Impingement

         4,695,388         Long         Apparatus and Process for              Sept. 22, 2004
                                        Rapid Sewage Biosolids Separation

         4,936,983         Long         Sewage Biosolids Treatment              June 26, 2007
                                        with Gas Injection

         5,147,563         Long         Improved Sewage Sludge Treatment       Sept. 29, 2009
                                        With Gas Injection
</TABLE>


         The License Agreement grants to Synox exclusive rights to license the
Synox Process in the following territory comprising the states of Maryland,
Delaware, Virginia, West Virginia, North Carolina, South Carolina, Florida,
Georgia, Alabama, Kentucky, Tennessee, California, Texas, Arizona, New Mexico
and the District of Columbia. Long Enterprises has also granted Synox an option
to extend the territory under the License Agreement to include the entire
United States, its possessions and Puerto Rico. This option may be exercised in
its entirety by payment by the Company to Long Enterprises of an exercise fee
of $500,000. Alternatively, Synox may exercise the option only with respect to
the Northeast Territory (consisting of the states of New Jersey, New York,
Massachusetts, Connecticut, Rhode Island, Vermont, New Hampshire and Maine) for
an exercise payment of $137,522.72; or with respect to the West Central
Territory (consisting of the states of Washington, Oregon, Nevada, Idaho, Utah,
Montana, Wyoming, Colorado, North Dakota, South Dakota, Nebraska, Kansas,
Oklahoma, Minnesota, Iowa, Missouri, Arkansas, Louisiana, Mississippi,
Wisconsin, Illinois, Michigan, Indiana, Ohio, Pennsylvania, Hawaii, Alaska and
the possessions of the United States) for an exercise payment of $362,477.28.

         This option will expire on December 31, 1997. Long Enterprises has
agreed to allow Synox to market the Synox Process in the extended territory
without exercising its option with the understanding that, upon any sale
pursuant to the License Agreement, Synox would 





                                      11
<PAGE>   12

exercise its option on the extended territory. As amended, the License
Agreement expires on September 28, 2010, or the later date of termination of
the last to expire of any patent issued pursuant to the patent applications and
continuations in part relating to the subject matter of the License Agreement
in existence on May 16, 1991, and thereafter prosecuted by the licensor or its
assignor, Charles A. Long, Jr. (the "Long License Expiration").

         Under the License Agreement, Synox will pay royalties of 4% of the
total contract value of each Synox Process installation (which begins with a
storage unit for thickened biosolids and ends with biosolids thickening and
chemical contact), less allowable deductions, such as the building, site
preparation, paving, land and landscape.

         Minimum annual royalties (based on retaining the existing territory of
15 states listed above) are due each January 1, beginning January 1, 1995, for
the ensuing calendar year through the Long License Expiration. On January 1,
1995, a minimum royalty payment of $45,168 was made. The License Agreement was
amended on December 20, 1996 to change the expiration date of the license and
to provided that no minimum royalty payment would be due on January 1, 1997,
but that such minimum royalty payments would resume on January 1, 1998, in
accordance with the following schedule:

<TABLE>
<CAPTION>
 Date Due                                                      Amount
 --------------------------------------------------------------------
 <S>                                                          <C>              
 January 1, 1998                                              $    90,335.51
 January 2, 1999                                              $   180,671.02
 January 1, 2000                                              $   180,671.02
 January 1, 2001, and on each January  1
 through Long License Expiration                              $   225,838.77
</TABLE>

         Minimum annual royalties will be increased if Synox exercises the
option to extend its territory, based on a formula which takes into account the
population (based on a 1980 Census) of the additional territory.


         SUPPLIERS.

         The Company purchases raw materials and other supplies from a variety
of sources and is not dependent upon any one source. While Sprayroq does
utilize a third party to blend its products, other companies provide similar
blending services. In addition, Sprayroq has performed such blending in the
past and would be able to resume blending quickly, if required.

         OPERATIONAL RISKS AND INSURANCE.

         To cover various insurable risks, the Company has in force $2,000,000
in general liability insurance ($1,000,000 per occurrence), $1,000,000 in
automobile liability insurance, 




                                      12
<PAGE>   13

and $1,000,000 in "umbrella" coverage. In addition, the Company carries various
property coverages and worker's compensation policies as required by each
jurisdiction in which it does business.

         At the present time, Sprayroq's principal products are characterized
as polyurethanes and utilize several chemicals, including diisocyanates.
Diisocyanates have been in general use for many years, in many applications
including automobile parts, insulation, floor coverings, and roofing.
Guidelines regarding the use of diisocyanates were published by the U.S.
Department of Health, Education and Welfare, Public Health Service, Center for
Disease Control, and National Institute for Occupational Safety and Health
(NIOSH) in September, 1978. Additional documentation regarding recommended
precautions and procedures to be used with such chemicals has been provided by
the supplier of the chemicals, and Sprayroq instructs all licensees to follow
the procedures set forth in this documentation. Sprayroq's supplier reports
that diisocyanates and other such chemicals have been in general use for more
than fifty years, and that the issues relating to their safe use are well
known. There can be no assurance, however, that NIOSH or other regulatory
organizations, governmental agencies, etc. might, in the future, determine that
such chemicals are hazardous or otherwise harmful, or might otherwise regulate
or prevent their use.

         Sprayroq's licensee in Denmark has reported that the spraying of
diisocyanates in a confined space is not allowed according to a regulatory
agency of the Danish government. The management of Sprayroq is not aware of any
other similar prohibition of the use of diisocyanates in other countries. While
the management of Sprayroq believes that the objections of the Danish
regulatory agency will eventually be overcome, there can be no assurance that
such objection will not persist, nor can assurance be given that similar
objections will not occur in the future in other countries, geographical and/or
political divisions.

         EQUIPMENT.

         The Company owns or leases a number of trailers, vans, and other
equipment which are necessary to the operations of the Company.

         RESEARCH AND DEVELOPMENT.

         The Company engages in research and development ("R&D") efforts to
develop new products, improve existing products, reduce its costs and expand
potential applications. The Company incurred R&D expenses with respect to Synox
and Sprayroq of approximately $23,000 in the year ended March 29, 1997 and
$28,000 in the year ended March 30, 1996.

         EMPLOYEES.

         As of June 25, 1997, the Company had five full-time employees and two
part-time employees.




                                      13
<PAGE>   14


ITEM 2. PROPERTIES

         (a) The Company owns approximately 10.6 acres of real estate adjacent
to Old Enviroq's facilities at 11511 Phillips Highway South in Jacksonville,
Florida. At the present time, this acreage is undeveloped and is zoned
industrial light and light industrial. The Company currently has no plans to
improve or develop the property and has advertised the property for sale.

         The Company leases, on a month-to-month basis, approximately 1,300
square feet of office space located at 3918 Montclair Road, Birmingham, Alabama
35213. This leased space serves as the principal executive offices of the
Company and, after the initial year of the lease, may be canceled upon 90 days
notice. The Company believes that these executive offices are adequate for the
conduct of the business of the Company. The Company also leases, on a
month-to-month basis, approximately 200 square feet of office space and three
mobile trailers which serve as production facilities for Sprayroq located at
Old Enviroq's facilities at 11511 Phillips Highway South, Jacksonville,
Florida. The Company's Jacksonville facilities are leased by the Company from
Insituform Southeast for an aggregate monthly rental of $600. The Company
anticipates relocating the Jacksonville facilities to Birmingham, Alabama
during the fiscal year ending March, 1998.

         The Company also owns certain equipment, fixtures and other personal
property located on real property owned by the city of Jacksonville, Florida.
This personal property was used in connection with a full-scale demonstration
plant for the Synox Process. The Company anticipates removing this facility
during the fiscal year ending March, 1998.

         (b) The Company does not typically invest in real estate, real estate
mortgages or related securities. There is no policy of the Company which places
restrictions or limitations on the percentage of assets which may be invested
or the type of investment, and this policy may be changed without the vote of
the Company's shareholders. It is not the policy of the Company to acquire
assets primarily for possible capital gain or primarily for income.

         Management believes that the foregoing properties are adequately
insured.


ITEM 3. LEGAL PROCEEDINGS

         The Company is involved, from time to time, in various legal
proceedings incidental to the conduct of its business. The Company is not
currently engaged in any legal proceedings that are presently expected to have
a material adverse effect on the Company.

         The Company filed suit (the "Lawsuit") against Insituform Mid-America,
Inc. on August 1, 1995 in the Circuit Court of Jefferson County, Alabama (the
"Court") to enforce the



                                      14
<PAGE>   15

 

Company's rights under the Subordinated Promissory Note issued by IMA to the
Company on April 12, 1995 (the "Note"). In the Lawsuit, the Company alleged
that the entire principal balance of the Note was accelerated and due and
payable immediately as a result of the failure of IMA to make the first
interest payment due under the Note to the Company on a timely basis. Also, in
the Lawsuit, IMA asserted that it may be entitled to set-off certain amounts
against the Note and a related consulting agreement between the parties dated
April 18, 1995 (the "Consulting Agreement"). On November 16, 1995, a non-final
summary judgment order was entered by the Court in favor of the Company against
IMA in the amount of $3,101,109.45. In this order, the Court directed IMA to
assert any claims of set-off which IMA might have against the Company. As
directed by the Court, IMA filed an Answer and Counterclaim on December 18,
1995 which, among other things, asserted set-off claims, on its own behalf and
on behalf of its subsidiary, for certain expenses allegedly owed to its
subsidiary (alleged by IMA to total approximately $913,000). IMA also asserted
that the Company had breached the Note by enforcing the Note at the time that
the Company did, and, therefore, that the Company was required to indemnify IMA
pursuant to the Merger Agreement dated April 18, 1995, between the Company, IMA
and certain other parties (the "Merger Agreement") for any damages which might
have resulted from the alleged breach. On March 12, 1996, the Company and IMA
executed an agreement (the "Settlement Agreement") to settle all claims and
counterclaims made, or that could have been made, by the parties in the
Lawsuit. The Company received $3,335,000 as payment in full under the
Settlement Agreement, which includes the Note and the Consulting Agreement. In
the Settlement Agreement, the Company released IMA and Insituform Technologies,
Inc. ("ITI"), subject to limited exceptions, from all claims that the Company
had or may have had or may have against IMA or ITI arising out of the Note or
the Merger Agreement, and claims that were or could have been asserted by the
Company in the Lawsuit. In the Settlement Agreement, IMA and ITI released the
Company, subject to limited exceptions, from all claims that they had or may
have had or may have against the Company arising out of the Note or the Merger
Agreement, including any claim with respect to the Expense Deficit (as defined
in the Merger Agreement) and claims that were or could have been asserted by
IMA or ITI in the Lawsuit. The Settlement Agreement also provided for the
dismissal, with prejudice, of the Lawsuit and the associated non-final order of
summary judgment entered by the Court on November 16, 1995.


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

         No matter was submitted to a vote of the Company's shareholders during
the period covered by this Item 4.


                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS





                                      15
<PAGE>   16

         At the present time, the common stock of the Company is traded in the
over-the-counter markets, and bid/asked quotations may be found on the NASD
"Bulletin Board" under the symbol "ENVQ." As the common stock of the Company
does not currently trade on any established exchange, management has no
reliable source of information concerning historical trading prices per share
of the Company's common stock.

         There were 372 shareholders of record as of June 25, 1997, which
number does not include shareholders whose shares were held of record by
brokers, but does include each brokerage firm holding stock as a nominee.

         The Company has not paid any cash dividends on its common stock since
its organization, and currently intends to retain any earnings of the Company
for the Company's operations and the expansion of its business. Other than
state corporate law limitations, there are no restrictions on the Company's
ability to pay dividends.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         This discussion should be read in conjunction with the Company's
consolidated financial statements and notes thereto included elsewhere herein.


         RESULTS OF OPERATIONS.

         Revenue.



                                      16
<PAGE>   17

         Revenues for the fiscal year ended March 29, 1997 were approximately
$1,339,000 as compared to approximately $1,117,000 for fiscal year ended March
30, 1996, an increase of 10%. The increase in revenue for fiscal year 1997 was
primarily attributable to increased sales of resin equal to approximately
$994,000 by Sprayroq, fees relating to three licenses by Sprayroq equal to
$186,000, and additional revenue arising from the sale of equipment, spare
parts, training, etc. by Sprayroq equal to approximately $151,000 during fiscal
year 1997.

         Gross Profit.

         For fiscal year 1997, the Company's gross profit margin was 45%, as
compared to 37% for fiscal year 1996. The increased gross profit margin over
fiscal year 1996 is due primarily to the increase in resin sales by Sprayroq
and fees relating of three licenses by Sprayroq during fiscal year 1997.

         Selling, General and Administrative Expenses.

         Selling, General and Administrative expenses ("S,G&A") for fiscal year
1997 were approximately $759,000 as compared to approximately $931,000 for
fiscal year 1996, a decrease of 23%. The decrease in S,G&A for fiscal year 1996
as compared to fiscal year 1995 is primarily attributable to reductions in
expenses and the writedown of substantially all of the assets of Synox.

         Net Income/(Loss).

         For fiscal year 1997, the Company had net income of approximately
$54,000, as compared to a net income of approximately $1,068,000 for fiscal
year 1996. The decrease in net income is primarily attributable to the
settlement of a lawsuit with IMA during fiscal year 1996. Net income for the
fiscal year 1997 was also increased by an income tax benefit of approximately
$72,000, which offset the net loss before income taxes of approximately
($18,000).

         Financial Condition.

         Total assets, stockholders' equity, and working capital decreased
during fiscal year 1997, as compared to an increase during fiscal year 1996.
The decrease during fiscal year 1997 was primarily the result of the payment of
income taxes related to the settlement of the Company's lawsuit with IMA. The
increase during fiscal year 1996 was primarily the result of the settlement of
the Company's lawsuit with IMA, as well as the increase in net income.

         At March 29, 1997, the Company had approximately $2,784,000 in working
capital and a current ratio of 32.2-to-1, as compared to $2,705,000 in working
capital and a current ratio of 3.2-to-1 at March 30, 1996.




                                      17
<PAGE>   18

         The Company's cash and cash equivalents totaled approximately
$2,380,000 at March 29, 1997. The Company used cash in operating activities of
approximately $1,247,000, as compared to cash provided by operating activities
of approximately $3,098,000 in cash in operating activities in fiscal year
1996. Cash in the amount of approximately $3,000 was used in investing
activities during fiscal year 1997, as compared to cash of approximately
$26,000 provided by investing activities in fiscal year 1996.

         In fiscal years 1997 and 1996, approximately $5,000 and $18,000,
respectively, was expended for capital assets.

         Depreciation and amortization expense was approximately $27,000 in
fiscal year 1997, and $179,000 in fiscal year 1996. During fiscal year 1996,
the Company elected to write off certain assets of Synox, resulting in an
impairment of long-term assets of approximately $1,331,000. Net fixed assets
were approximately $330,000 at the end of fiscal year 1997, as compared to
approximately $334,000 at the end of fiscal year 1996, a decrease of 1%. This
decrease is primarily attributable the additional writedown of assets at Synox,
along with the accumulated depreciation offsetting the purchase of equipment.

         The Company does not believe that there is any appreciable seasonal
impact on the business of the Company, although extreme cold weather may impair
installation of spray-applied materials, which may result in decreased resin
sales by Sprayroq.

         The Company's undeveloped property in Jacksonville, Florida
(approximately 10.6 acres) is currently being offered for sale, which may
result in an increase in the Company's cash.

         Other than normal trade accounts payable, taxes and normal accrued
expenses incurred in the ordinary course of business, the Company is not
currently aware of other material commitments.

         Operating cash flow combined with available cash are currently
expected to provide resources for the Company's working capital needs for the
foreseeable future. To the extent that the Company is not able to meet its
financial goals, however, the Company's revenues may not be sufficient to
satisfy the Company's working capital needs. Consequently, no assurance can be
given that the Company's revenues will be sufficient to adequately fund the
Company's future working capital requirements.

         The operating results and financial statements of the Company include
all of the operating results of Sprayroq, without discount or reduction based
upon the fact that the Company owns 50% of the outstanding capital stock of
Sprayroq.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The consolidated financial statements of the Company as of March 29,
1997 and other 




                                      18
<PAGE>   19

information required by Item 310(a) of Regulation S-B are set forth on pages
F-1 through F-11 hereof.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         There have been no changes in or disagreements with the Company's
accountants regarding accounting procedures or financial disclosure.




                                      19
<PAGE>   20


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
        COMPANY; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Executive officers and directors of the Company as of the date hereof
are as follows:

<TABLE>
<CAPTION>
                                            DIRECTOR          POSITIONS WITH
NAME                               AGE      SINCE             THE COMPANY
----                               ---      -----             -----------
<S>                                <C>      <C>               <C>                     
Antonio M. Marinelli               77       1995              Chairman of the Board
                                                              and Director

William J. Long                    45       1995              President, Chief Executive
                                                              Officer and Director

Orlando M. Marinelli               72       1995              Vice President, Secretary-
                                                              Treasurer and Director

Charles A. Long, Jr.               69       1995              Director

Michael X. Marinelli               38       1995              Director

W. T. Goodloe Rutland              70       1995              Director

Alexander P. Zechella              76       1995              Director
</TABLE>


         Antonio M. Marinelli has been Chairman of the Board and a Director of
the Company since April 1995. Prior to April 1995, Mr. Marinelli had been
Chairman of the Board of Old Enviroq since 1981. Mr. Marinelli is, and has been
for over five years, Vice Chairman of the Board and a Director of Intercounty
Construction Company of Florida, Inc. ("Intercounty"), a heavy construction
contractor and a wholly-owned subsidiary of Micam Industries, Inc. ("Micam").

         William J. Long has been President, Chief Executive Officer and a
Director of the Company since April 1995. Prior to April 1995, Mr. Long had
been Vice President-Marketing and a Director of Old Enviroq since October 1984.
Since May 25, 1995, Mr. Long has been Chairman of the Board and a Director of
Sullivan, Long & Hagerty, an Alabama corporation ("SLH"), a heavy construction
contractor, which is the parent of SCE, Incorporated, an Alabama corporation
("SCE"), a heavy construction contractor. Prior to October, 1995, Mr. Long had
been Chief Executive Officer of SCE and SLH. Prior to May 25, 1995, Mr. Long
had been a Director and Senior Vice President of SCE, and a Director 




                                      20
<PAGE>   21

and Senior Vice President of SLH, for over five years.

         Orlando M. Marinelli has been Secretary-Treasurer of the Company since
April, 1996, and has been Vice President and a Director of the Company since
April 1995. Prior to April 1995, Mr. Marinelli had served as Vice President and
a Director of Old Enviroq since October 1981. He has served as Chairman of the
Board of Intercounty for more than the last five years.

         Charles A. Long, Jr., has been a Director of the Company since April
1995. Prior to April, 1996, Mr. Long had served as Secretary-Treasurer of the
Company. Prior to April 1995, Mr. Long had served as Secretary-Treasurer and a
Director of Old Enviroq since October 1981. Prior to May 25, 1995, Mr. Long
also served since 1970 as the Chairman of the Board and Chief Executive Officer
of SCE and SLH and is currently a director of both SCE and SLH.

         Michael X. Marinelli is an associate with the Washington, D.C. law
firm of Baker & Botts. He graduated from Catholic University Law School in
1989. Mr. Marinelli served as Assistant Secretary of the Company from January
1987 to July 1987. He served as Special Assistant to the General Manager of
Insituform East, Inc., from February 1986 to August 1986. From October 1985 to
February 1986, Mr. Marinelli served as assistant to the President of the
Company, and from October 1984 to October 1985, he was a sales representative
for the Company. He has served as a Director of the Company since April 1995.
Prior to April 1995, he had served as a Director of Old Enviroq since October
1984.

         W. T. Goodloe Rutland served as Chairman of the Board of Directors,
President, Treasurer, and Chief Executive Officer of SouthTrust Mortgage
Corporation, a mortgage banking firm, from May 1975 until his retirement in
June 1982. Since June 1982, Mr. Rutland has been engaged in the management of
personal investments and real estate development. He has served as a Director
of the Company since April 1995. Prior to April 1995, he served as a Director
of Old Enviroq since April 1987.

         Alexander P. Zechella served from September 1983 to April 1984, as
Chairman of Charter Oil Company and Executive Vice President of The Charter
Company ("Charter"). From April 1984 until his retirement in December, 1985 Mr.
Zechella served as President, Chief Executive Officer, and Chief Operating
Officer of Charter. In April 1984, Charter and certain of its subsidiaries,
including Charter Oil, filed for protection under Chapter 11 of the United
States Bankruptcy Code. In December 1986, a plan of reorganization was
confirmed by the bankruptcy court for Charter and certain of its subsidiaries,
including Charter Oil. In March 1987, the plans of reorganization for Charter
and certain of its subsidiaries, including Charter Oil, were implemented and
such entities were discharged from bankruptcy. Mr. Zechella has served as a
Director of the Company since April 1995. Prior to April 1995, he had served as
a Director of Old Enviroq since April 1987.

         Marinelli Securities Associates, a Florida general partnership
("MSA"), is the record 




                                      21
<PAGE>   22

owner of 294,900 shares.


         William J. Long, a Director and Executive Officer of the Company, is
the son of Charles A. Long, Jr., also a Director of the Company. Antonio M.
Marinelli, a Director of the Company, is the brother of Orlando M. Marinelli, a
Director and Executive Officer of the Company. Michael X. Marinelli, a Director
of the Company, is the son of Antonio M. Marinelli.

         Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required by those persons, the Company believes that, during the fiscal year
ended March 29, 1997, all filing requirements applicable to its officers,
directors, and greater-than-10% beneficial owners have been complied with.





                                      22
<PAGE>   23


ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

         The following table sets forth certain information respecting the
compensation paid to the Chief Executive Officer of the Company during the
fiscal year ended March 29, 1997 and relevant preceding fiscal years:


                  SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
     Compensation Awards                                                               Annual
     -------------------                                                               ------
         Name and                                                                     All Other
         Principal                                             Salary               Compensation
         Position                           Year                 ($)                     ($)
         ---------                          ----                ------                -------
         <S>                                <C>                 <C>                   <C>       
         William J. Long                    1997                $84,133               -------
         President and                      1996                $58,333               -------
         Chief Executive                    1995                $50,000               $757.20(1)
         Officer
</TABLE>

         (1) Amount shown for 1995 consists of $102 for group term life
insurance and $655.20 for contributions by the Company to Mr. Long's 401(k).

         Directors' Compensation. Non-employee directors of the Company are
paid $1,000 per quarter for a maximum of six meetings of the Board of Directors
and Committees of the Board. In the event that additional meetings of the Board
of Directors are required, the non-employee Directors are compensated at a rate
of $1,000 per meeting. All Directors and Officers are reimbursed for travel
expenses incurred in connection with their attendance at meetings of the Board
of Directors.

         In addition, non-employee directors are entitled to receive options to
purchase shares of the Company's common stock pursuant to a Non-Employee
Directors Stock Option Plan (the "Directors' Plan"). Options for up to 100,000
shares of common stock are authorized to be issued under the Directors' Plan.
The Directors' Plan allows the Company's Stock Option Committee to grant
options to non-employee directors for a price of not less than eighty-five
percent (85%) of the fair market value of the Company's common stock on the
dates that the options are granted. Options are exercisable in whole or in
part, from time to time, until five (5) years from the date of grant, except
that, absent a change in control of the Company, each option terminates upon
the discontinuance of the option holder's service as a Director of the Company
for any reason except death or disability. Sale of common stock purchased upon
exercise of an option is prohibited for two (2) years from the date of exercise
or three (3) 




                                      23
<PAGE>   24

years from the date of grant, whichever is later, unless there is a change in
control of the Company or in the event of the Director's death. Each option
agreement under the Directors' Plan provides, among other things, that shares
of Common Stock will be issued and delivered to the Director upon payment to
the Company of the exercise price of such shares and that the option price and
number of shares subject to such option will be adjusted for stock splits,
stock dividends or other similar changes in the Company's capital structure. No
options were issued during fiscal year 1997 under the Directors' Plan.

         Incentive Stock Option Plan. Options may be granted under the
Company's Incentive Stock Option Plan (the "ISO Plan"), which provides for the
issuance to key employees of incentive stock options ("ISOs") within the
meaning of Section 422A of the Internal Revenue Code of 1986, as amended. The
ISO Plan is administered by the Stock Option Committee of the Board of
Directors (the "Committee"). As of June 20, 1996, the Committee was authorized
to issue up to 100,000 shares of common stock pursuant to the exercise of the
ISOs. The option price of each ISO granted is 100% of the fair market value of
the common stock on the date of grant. If an ISO is granted to an optionee who
holds more than 10% of the combined voting power of all classes of the
Company's stock at the date of the grant, the option price is 110% of fair
market value of the common stock on the date of grant. The ISO Plan provides
for the exercise of ISOs at the maximum rate of 25% in the first 12 months
after grant and 25% in each 12-month period thereafter. To the extent not
exercised, an optionee may accumulate his or her ISOs and exercise them, in
whole or in part, in any subsequent period but not later than 10 years from the
date on which the option was granted. No options were issued during fiscal 1997
to executive officers of the Company under the ISO Plan.

         Compensation Committee Interlocks and Insider Participation. W.T.
Goodloe Rutland, Antonio M. Marinelli and Alexander P. Zechella serve on the
Compensation Committee of the Board of Directors.



                                      24
<PAGE>   25


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The table set forth below presents certain information regarding the
beneficial ownership as of May 30, 1997 by (i) each shareholder known to the
Company to own more than five percent of any class of the Company's outstanding
securities entitled to vote; (ii) directors of the Company; and (iii) all
executive officers and directors of the Company as a group.



<TABLE>
<CAPTION>
                                                            AMOUNT AND NATURE                    PERCENT OF CLASS
             NAME AND ADDRESS OF                              OF SECURITIES                         (EXCLUDING
             BENEFICIAL OWNER                              BENEFICIAL OWNER(1)                  TREASURY SHARES)(2)
             ----------------                              -------------------                  -------------------
<S>                                                         <C>                                           <C>  
Insituform of North America, Inc.                           73,800 shares                                  7.3%
  3315 Democrat Road                                        of common stock
  Memphis, Tennessee  38118

Marinelli Securities Associates (3)                         294,900 shares                                29.2%
  2100 North Dixie Highway                                  of common stock
  Fort Lauderdale, Florida  33305

Charles A. Long, Jr. (4)                                    5,686 shares                                   0.6%
  P. O. Box 12887                                           of common stock
  Birmingham, Alabama   35202

William J. Long (4)(5)                                      263,389 shares                                26.1%
  3918 Montclair Road, Suite 206                            of common stock
  Birmingham, Alabama  35213

Antonio M. Marinelli (3)(6)                                 299,559 shares                                29.7%
                                                            of common stock

Michael X. Marinelli (3)(7)                                 295,420 shares                                29.3%
                                                            of common stock

Orlando M. Marinelli (3)                                    299,559 shares                                29.7%
                                                            of common stock

W.T. Goodloe Rutland                                        14,061 shares                                  1.4%
  191 Pine Ridge Circle                                     of common stock
  Birmingham, Alabama   35213

Alexander P. Zechella                                       4,221 shares                                   0.4%
  1000 Vicar's Landing Way, #F-109                          of common stock
  Ponte Vedra Beach, Florida 32082

All officers and directors                                  584,942 shares                                58.0%
  as a group (7 persons)                                    of common stock
</TABLE>





                                      25
<PAGE>   26


(1)  Included in such beneficial ownership are shares of common stock issuable
     upon the exercise of certain options exercisable immediately or within 60
     days of June 16, 1997, as follows: None.

(2)  The percentages represent the total of the shares listed in the adjacent
     column divided by the issued and outstanding shares of common stock as of
     June 16, 1997, plus any options exercisable immediately or within 60 days.

(3)  Marinelli Securities Associates ("MSA") is a Florida general partnership
     and is the record owner of 294, 900 shares. The partners of MSA are Micam
     Industries, Inc. ("Micam") (41.16%), Orlando M. Marinelli (7.65%), Marion
     Marinelli (7.65%), Antonio M. Marinelli (7.65%), Phyllis Marinelli
     (7.65%), Michelle Marinelli (7.06%), Kim Vreeland (7.06%), Michael X.
     Marinelli (7.06%), and Michael J. Marinelli (7.06%). Both Antonio M.
     Marinelli and Orlando M. Marinelli are directors and officers of the
     Company, are partners in Micam, and are directors and executive officers
     of Micam. Michael X. Marinelli, a director of the Company, is a partner in
     MSA. Accordingly, the shares owned by MSA may be deemed to be beneficially
     owned by each of them. The address of each of the above-named partners is
     the same as the address of MSA.

(4)  Charles A. Long, Jr. is the record owner of 3,312 shares. Also includes
     2,374 shares owned of record by Long Enterprises, Inc. Both Charles A.
     Long, Jr., and William J. Long are directors, executive officers, and
     controlling shareholders of Long Enterprises, Inc.

(5)  William J. Long is the record owner of 257,975 shares. Also includes an
     aggregate of 3,040 shares owned of record by William J. Long's wife and
     children, and 2,374 shares owned by Long Enterprises, Inc., of which
     William J. Long is a director, executive officer, and controlling
     shareholder. Mr. Long has pledged 257,706 shares to First Commercial Bank
     as security for a loan.

(6)  Antonio M. Marinelli is the record owner of 4,659 shares.

(7)  Michael X. Marinelli is the record owner of 120 shares. Also includes 400
     shares owned of record by Michael X. Marinelli's sons.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Directors Charles A. Long, Jr., and William J. Long, and other members
of the Long family may be deemed to be in control of Assurance Agency, Inc., an
Alabama corporation and an insurance broker ("Assurance"), Long Technologies,
Inc., a research and development company, Integrid, Inc., a consulting company,
Sullivan, Long & Hagerty, and Long Enterprises, Inc.

         The Company has had a number of transactions, which are described
below, with the businesses named above. The Company believes that the
transactions were or are on terms that are no less favorable to the Company
than those which could reasonably have been obtained from an unaffiliated
party.

         In April, 1996, Assurance sold its book of business and certain other
assets to LMJ Corporation. Among other of the terms relating to this sale was
the right of Assurance to receive a percentage of future commissions arising
out of the book of business sold to LMJ by Assurance. With respect to insurance
purchased by Enviroq from LMJ, LMJ pays 22% of the commissions from such
business to Assurance. During fiscal year 1997, all of the Company's 




                                      26
<PAGE>   27

insurance (other than its employee insurance) was provided through LMJ
Corporation. For fiscal year 1997, the Company paid LMJ approximately $66,000
for certain insurance needs. For fiscal years 1995 and 1996, Old Enviroq paid
Assurance approximately $1,027,000 and $58,000, respectively. The payment in
1995 was made by Old Enviroq with respect to its business operations prior to
the Distribution, including primarily those business operations now conducted
by Insituform Southeast, rather than the Company. In April, 1997, much of the
Company' insurance was purchased from an unaffiliated third party, although LMJ
retained the portion of insurance relating to workers' compensation. Management
believes that the Company will make payments to LMJ during fiscal year 1998 for
certain insurance needs equal to approximately $5,000.

         Synox is a party to the License Agreement with Long Enterprises.
Pursuant to the License Agreement, Synox has obtained from Long Enterprises
rights to five U.S. patents relating to the Synox Process. During fiscal years
1995, 1996 and 1997 the Company paid $45,167.76, $0 and $0 respectively, to
Long Enterprises pursuant to the License Agreement. See "Description of
Business -- Patents and Licenses."

         During fiscal years 1997, 1996 and 1995, the Company paid
approximately $13,000, $2,800 and $66,000, respectively, to Market Potential,
Inc., a company controlled by Patricia L. Ford, for marketing and public
relations services performed for the Company. Ms. Ford is the sister of William
J. Long and the daughter of Charles A. Long, Jr. Market Potential, Inc. sub-let
offices, through August, 1996, to the Company. Pursuant to this arrangement,
the Company paid approximately $1,000 to Market Potential, Inc. during fiscal
year 1997. Market Potential, Inc. sub-leases office space from the Company, and
paid approximately $3,000 for this space during fiscal year 1997.

         Charles A. Long, Jr. sub-leases office space from the Company, and
paid the Company approximately $1,400 for this space during fiscal year 1997.

         Integrid, Inc., a company owned by William J. Long, sub-leases office
space from the Company, and paid the Company approximately $800 for this space
during fiscal year 1997.

         Old Enviroq acquired all of the outstanding common stock of Synox from
its existing stockholders on September 30, 1991. The stockholders of Synox at
the time of that merger received shares of Old Enviroq valued at $672,000 in
the aggregate plus the right to receive additional shares of Old Enviroq,
dependent on the earnings of Synox, up to a maximum value of $2,017,000. The
right to receive these additional shares was represented by certificates of
contingent shares of Old Enviroq ("Contingent Share Certificates"). In addition
to other past stockholders of Synox, certain directors of the Company or their
affiliates, including Long Enterprises, Inc., and Sullivan, Long & Hagerty,
Inc., Orlando M. Marinelli, Antonio M. Marinelli, W. T. Goodloe Rutland, and
Alexander P. Zechella, held Contingent Share Certificates.

         The Company has issued replacement contingent share certificates
representing the 




                                      27
<PAGE>   28


contingent right to receive shares of the common stock of the Company ("New
Contingent Share Certificates"), partly in consideration of the agreement of
the holders of the Contingent Share Certificates to surrender their Contingent
Share Certificates. The New Contingent Share Certificates have rights and
privileges substantially similar to those afforded by the Contingent Share
Certificates except that (i) any shares to be issued pursuant to the New
Contingent Share Certificates will be shares of the common stock of the Company
rather than Old Enviroq, and (ii) the arbitration provisions contained in the
Contingent Share Certificates giving the holders thereof the right to arbitrate
the reasonableness of the decision to abandon the Synox Process are not
contained in the New Contingent Share Certificates.

         Synox has issued certain promissory notes to certain directors and
officers of the Company and certain of their affiliates. The aggregate amount
of such indebtedness as of June 25, 1997 was approximately $1,091,179. These
notes provide that interest will be deferred and paid only if and after Synox
has after-tax net income and then only to the extent that the amount of
interest paid does not exceed the amount of such after-tax net income; and
principal will be paid after Synox has accumulated retained earnings, and then
only to the extent that the payment of such indebtedness does not exceed the
amount of such retained earnings.

         Any future transactions with officers, directors, principal
stockholders, or affiliates of any officers, directors, or principal
stockholders will be on terms which management believes are no less favorable
to the Company than those which could reasonably be obtained from an
unaffiliated party and will be subject to the approval of a majority of the
disinterested directors.



                                      28
<PAGE>   29


ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a) The following financial statements are filed with this report on
Form 10-KSB:

<TABLE>
<CAPTION>
                                                                                 Page
                                                                                 Reference
                                                                                 ---------
 <S>                                                                              <C>
 Independent Auditors' Report                                                     F-1
 Consolidated Balance Sheets                                                      F-2
 Consolidated Statements of Operations                                            F-4
 Consolidated Statements of Stockholders'
   Equity                                                                         F-5
 Consolidated Statements of Cash Flows                                            F-6
 Notes to Consolidated Financial
   Statements                                                                     F-7
</TABLE>

         (b) No financial statement schedules are filed with this report on
Form 10-KSB.

         (c) The Company filed no reports on Form 8-K during the last quarter
of the period covered by this report.





               [remainder of this page intentionally left blank]



                                      29
<PAGE>   30
ENVIROQ CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS 
ENDED MARCH 29, 1997 AND MARCH 30, 1996
AND INDEPENDENT AUDITORS' REPORT


<PAGE>   31
















INDEPENDENT AUDITORS' REPORT


To The Board of Directors and Stockholders of
 Enviroq Corporation:

We have audited the accompanying consolidated balance sheets of Enviroq
Corporation and subsidiaries as of March 29, 1997 and March 30, 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. 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 generally accepted auditing
standards. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Enviroq Corporation and
subsidiaries as of March 29, 1997 and March 30, 1996, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.



/s/ DELOITTE & TOUCHE, LLP
Birmingham, Alabama
May 21, 1997



<PAGE>   32
ENVIROQ CORPORATION

CONSOLIDATED BALANCE SHEETS
MARCH 29, 1997 AND MARCH 30, 1996

<TABLE>
<CAPTION>
                                                1997            1996
<S>                                           <C>              <C>      
ASSETS                                        

CURRENT ASSETS:
 Cash and cash equivalents                    $2,379,613       $3,628,990
 Accounts receivable (Note 6)                    314,772          126,397
 Interest receivable                                                7,890
 License fees receivable                             930            4,960
 Inventories                                      52,830          118,390
 Refundable income taxes                         101,147
 Prepaid expenses and other assets                23,564           34,078
                                              ----------       ----------
       Total current assets                    2,872,856        3,920,705
                                              ----------       ----------
OTHER ASSETS:
 Employee notes receivable                        13,819           17,000
 Other                                                             17,989
                                              ----------       ----------
       Total other assets                         13,819           34,989

PROPERTY, PLANT AND EQUIPMENT (Note 8):
 Land                                            310,135          310,135
 Operating equipment                              25,563           25,563
 Other equipment and vehicles                     40,241           55,048
                                              ----------       ----------
                                                 375,939          390,746
 Less accumulated depreciation                    45,506           56,402
                                              ----------       ----------
       Property, plant, and equipment, net       330,433          334,344
                                              ----------       ----------
TOTAL                                         $3,217,108       $4,290,038
                                              ==========       ==========
</TABLE>



                                     F-2
<PAGE>   33
ENVIROQ CORPORATION


CONSOLIDATED BALANCE SHEETS
MARCH 29, 1997 AND MARCH 30, 1996

<TABLE>
<CAPTION>


                                                                           1997                       1996

LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                  <C>                            <C>
CURRENT LAIBILITIES:
 Accounts payable and accrued expenses                               $    69,292                    $    165,753
 Salaries, wages and related taxes                                        18,824                           9,814
 Income taxes payable (Note 2)                                               958                       1,040,504
                                                                     -----------                    ------------
       Total liabilities                                                  89,074                       1,216,071
                                                                     -----------                    ------------

COMMITMENTS AND CONTINGENCIES (Note 4)

STOCKHOLDERS' EQUITY (Notes 1 and 3):
 Common stock (par value $.01 per share, authorized
  10,000,000 shares, issued and outstanding 1,009,377 shares)             10,094                          10,094
 Additional paid-in capital                                            6,190,647                       6,190,647
 Accumulated deficit                                                  (3,072,707)                     (3,126,774)
                                                                     -----------                    ------------
       Total stockholders' equity, net                                 3,128,034                       3,073,967
                                                                     -----------                    ------------  

TOTAL                                                                $ 3,217,108                    $  4,290,038
                                                                     ===========                    ============

</TABLE>


See notes to consolidated financial statements.



                                     F-3
<PAGE>   34
ENVIROQ CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996

<TABLE>
<CAPTION>

                                                                        1997            1996  
<S>                                                                  <C>            <C>                     
                                                                                                            
REVENUES (Note 6)                                                    $ 1,338,807    $ 1,116,930             
                                                                                                            
COST OF REVENUES                                                         738,666        698,498             
                                                                     -----------    -----------             
                                                                                                            
GROSS PROFIT                                                             600,141        418,432             
                                                                                                            
SELLING, GENERAL AND ADMINISTRATIVE                                                                         
 EXPENSES (Note 5)                                                       759,418        931,151             
                                                                                                            
IMPAIRMENT OF LONG-TERM ASSETS (Note 8)                                               1,331,048                            
                                                                     -----------    -----------             

LOSS FROM OPERATIONS                                                    (159,277)    (1,843,767)            
                                                                     -----------    -----------             
                                                                                                            
OTHER INCOME:                                                                                               
 Interest                                                                136,958         67,780             
 Gain on settlement of litigation (Note 7)                                            3,852,000                            
 Other, net                                                                4,587         32,997             
                                                                     -----------    -----------             
                                                                         141,545      3,952,777             
                                                                     -----------    -----------             
                                                                                                            
INCOME (LOSS) BEFORE INCOME TAXES                                        (17,732)     2,109,010             
                                                                                                            
INCOME TAX (EXPENSE) BENEFIT (Note 2)                                     71,799     (1,040,504)            
                                                                     -----------    -----------             
                                                                                                            
NET INCOME                                                           $    54,067    $ 1,068,506             
                                                                     ===========    ===========             
                                                                                                            
NET INCOME PER SHARE                                                 $      0.05    $      1.06             
                                                                     ===========    ===========             

WEIGHTED AVERAGE SHARES OUTSTANDING                                    1,009,377      1,009,377             
                                                                     ===========    ===========             
</TABLE>

See notes to consolidated financial statements 





                                      F-4
<PAGE>   35
ENVIROQ CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996

<TABLE>
<CAPTION>

                                        Additional
                             Common      Paid-In     Accumulated
                             Stock       Capital       Deficit       Total

<S>                       <C>          <C>          <C>            <C>

BALANCE, MARCH 25, 1995   $   10,094   $6,190,647   $(4,195,280)   $2,005,461

 Net income                                           1,068,506     1,068,506
                          ----------   ----------   -----------    ----------

BALANCE, MARCH 30, 1996       10,094    6,190,647    (3,126,774)    3,073,967

 Net income                                              54,067        54,067
                          ----------   ----------   -----------    ----------

BALANCE, MARCH 29, 1997   $   10,094   $6,190,647   $(3,072,707)   $3,128,034
                          ==========   ==========   ===========    ==========

</TABLE>

See notes to consolidated financial statements.







                                      F-5
<PAGE>   36
ENVIROQ CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996

<TABLE>
<CAPTION>

                                                                    1997             1996
<S>                                                            <C>              <C>
OPERATING ACTIVITIES:
 Net income                                                    $    54,067      $ 1,068,506
 Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:

   Depreciation                                                      8,715           92,549
   Amortization                                                     17,989           86,002
   Impairment of long-term assets                                                 1,331,048
   Gain on sale of property, plant and equipment                    (2,000)
   Provision for uncollectible notes receivable                     10,000
   Changes in assets and liabilities provided (used) cash:
    Accounts receivable                                           (188,375)        (108,026)
    Interest receivable                                              7,890           (7,890)
    License fees receivable                                          4,030           19,100
    Inventories                                                     65,560          (24,014)
    Refundable income taxes                                       (101,147)
    Prepaid expenses and other assets                                  514           12,621
    Employee notes receivable                                        3,181
    Accounts payable and accrued expenses                          (96,462)         125,457
    Salaries, wages and related taxes                                9,010            4,208
    Income taxes payable                                        (1,039,546)       1,040,504
    Accrued organizational costs                                                   (517,000)
    Other                                                                           (25,052)
                                                               -----------       ---------- 
      Net cash provided by (used in) operating activities       (1,246,574)       3,098,013
                                                               -----------       ----------- 

INVESTING ACTIVITIES:
 Decrease in other assets                                                            43,865
 Proceeds from sale of property, plant and equipment                 2,000
 Additions to property, plant and equipment                         (4,803)         (18,057)
                                                               -----------       ---------- 

      Net cash provided by (used in) investing activities           (2,803)         (25,808)
                                                               -----------       ---------- 

 NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                              (1,249,377)       3,123,821

 CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                            3,628,990          505,169
                                                               -----------       ----------- 

 CASH AND CASH EQUIVALENTS
  AT END OF PERIOD                                             $ 2,379,613       $3,628,990
                                                               ===========       ===========

</TABLE>

See notes to consolidated financial statements.





                                      F-6
<PAGE>   37


ENVIROQ CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      ORGANIZATION - Enviroq Corporation was incorporated on February 9, 1995
      (the "Company"). Prior to April 18, 1995, the Company was named "New
      Enviroq." The Company was initially a wholly-owned subsidiary of a
      predecessor company which was named Enviroq Corporation (hereafter
      referred to as "Old Enviroq"). On April 18, 1995, a transaction was
      completed in which all of the outstanding shares of New Enviroq were
      distributed to the shareholders of Old Enviroq (the "Distribution"), and
      the name of Old Enviroq was changed to Insituform Southeast, Inc.
      Insituform Southeast, Inc. was then merged (the "Merger") into a
      subsidiary of Insituform MidAmerica ("IMA"), after which the name of New
      Enviroq was then changed to Enviroq Corporation. Also on April 18, 1995,
      the stock of Synox Corporation ("Synox"), a wholly-owned subsidiary of Old
      Enviroq, and Sprayroq, Inc. ("Sprayroq"), a 50% owned subsidiary of Old
      Enviroq, approximately 11 acres of unimproved land and $500,000 in cash
      were transferred to the Company, a newly formed public entity effective
      April 18, 1995, at their respective book values. Each share of common
      stock of Old Enviroq issued and outstanding was converted into a right to
      receive a cash payment equal to the pro-rata portion of the merger
      consideration of $15,250,000.

      NATURE OF OPERATIONS - The Company's operations are conducted primarily
      through Sprayroq. Sprayroq is engaged in development, commercialization,
      manufacture and marketing of spray-applied resinous materials. The Synox
      process relates to the treatment of municipal wastewater biosolids. During
      fiscal 1996, management elected to minimize the development stage
      activities of Synox (see Note 8).

      FISCAL YEAR - The Company's 1997 and 1996 fiscal years ended on
      March 29, 1997 and March 30, 1996, respectively.  Fiscal years 1997 and 
      1996 included 52 weeks.

      PRINCIPLES OF CONSOLIDATION - These consolidated financial statements are
      presented as if the Company had existed as of March 1994. These financial
      statements include the historical financial statements of Synox and
      Sprayroq, wholly-owned and 50% owned subsidiaries of the Company effective
      April 18, 1995, respectively, as if the operations included herein had
      been operating as one entity for the periods presented. They include, at
      their historical amounts, the assets, liabilities, revenues and expenses
      directly related and those allocated to the businesses which comprise the
      Company's operations. Any transactions between Synox and Sprayroq are
      eliminated in these consolidated financial statements.

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

      CASH EQUIVALENTS - Cash equivalents consist of highly liquid investments
      purchased with an original maturity of three months or less.

      INVENTORIES - Inventories, consisting of raw materials and supplies, are
      valued at the lower of cost (first-in, first-out method) or market.


                                      F-7

<PAGE>   38

      PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is carried
      at cost, less accumulated depreciation. Depreciation is provided
      principally on the straight-line method over the estimated useful lives of
      the assets. Repairs and maintenance costs are charged to expense as
      incurred.

      RESEARCH AND DEVELOPMENT COSTS - Research and development costs are 
      expensed as incurred.  Such costs were $22,798 (1997) and $28,172 (1996).

      LICENSE FEES - Sprayroq licenses its technology for use within certain
      geographic regions. These licenses allow the licensee use of the
      proprietary technology within their territory and are subject to
      restrictions as specified in the individual agreements.

      NET INCOME PER SHARE - The Company's net income per share is based on the
      weighted average number of shares of common stock outstanding during the
      year.

      NEW ACCOUNTING STANDARDS NOT YET ADOPTED - Statement of Financial
      Accounting Standards No. 128, Earnings Per Share, will require the
      presentation of basic and diluted net income per share. Basic net income
      per share excludes common stock equivalents such as options, while diluted
      net income per share considers the possible effect of all common shares
      which can be potentially issued. The Statement will be effective for
      financial statements issued for periods ending after December 15, 1997,
      including interim periods. Early adoption of this Statement is not
      permitted. The Company expects the impact of this Statement to be
      immaterial.

2.    INCOME TAXES

      Income tax (expense) benefit for the years ended March 29, 1997 and March
      30, 1996 is current.     

      The differences between the income tax (expense) benefit and income taxes
      computed using the federal statutory rate are as follows:


<TABLE>
<CAPTION>
                                                                1997                  1996
      <S>                                                    <C>                 <C> 
      Income tax (expense) benefit as federal
        statutory rate                                       $  5,059            $  (717,000)
      State income taxes, net of federal                        
        tax benefit                                            (1,019)               (85,000)
      Losses producing no current tax benefit
      Write-down of Synox intangible producing                                      
        no tax benefit                                                              (318,000)
      Benefit of operating loss carryforwards                  71,796                 66,000
      Nondeductible expenses                                   (6,116)                (3,000) 
      Other                                                     2,079                 16,496
                                                              -------            ----------- 
      Income tax (expense) benefit                            $71,799            $(1,040,504)
                                                              =======            ===========

</TABLE>

The types of temporary differences and their related tax effects are summarized
as follows:

<TABLE>
<CAPTION>

                                                               1997                   1996

     <S>                                                      <C>                   <C>
     Long-term asset:
        Net operating loss carryforwards                      $ 25,803              $  75,000
        Valuation allowance                                    (25,803)               (75,000)
                                                              --------              --------- 
        Net asset                                             $   -                 $    -
                                                              ========              =========  
</TABLE>
   
   

                                      F-8

<PAGE>   39





      A valuation allowance has been established against the net deferred 
      income  tax asset.  Such valuation allowance can be adjusted in future
      periods as the probability of realization of the net deferred tax asset
      increases.

      During 1996, Enviroq elected to waive its right to all but $79,000 of
      future use of Synox's net operating loss carryforwards. In accordance with
      provisions of the Internal Revenue Code, this treatment allowed Old
      Enviroq to avoid taxable gains on the merger transaction (see Note 1). At
      March 29, 1997, Synox had a remaining net operating loss carryforward of
      approximately $75,000 which, if not utilized, will expire in 2010.

3.    RETIREMENT AND INCENTIVE PLANS

      Subsequent to April 18, 1995, the Company formed a retirement plan for its
      employees pursuant to Section 401(k) of the Internal Revenue Code. Certain
      previous participants of the Old Enviroq 401(k) retirement plan rolled
      over into this plan. Participants may make contributions by salary
      reduction pursuant to Section 401(k) of the Internal Revenue Code.

      Non-employee Directors are entitled to receive options to purchase shares
      of the Company's common stock pursuant to a Non-Employee Directors Stock
      Option Plan (the "Directors' Plan"). Options for up to 100,000 shares of
      common stock are authorized to be issued under the Directors' Plan. The
      Directors' Plan allows the Company's Stock Option Committee (the
      "Committee") to grant options to non-employee Directors for a price of not
      less than eighty-five percent of the fair market value of the Company's
      common stock on the dates that the options are granted. Options are
      exercisable in whole or in part, from time to time, until five years from
      the date of grant, except that, absent a change in control of the Company,
      each option terminates upon the discontinuance of the option holder's
      service as a Director of the Company for any reason except death or
      disability. Sale of common stock purchased upon exercise of an option is
      prohibited for two years from the date of exercise or three years from the
      date of grant, whichever is later, unless there is a change in control of
      the Company or in the event of the Director's death. Each option agreement
      under the Directors' Plan provides, among other things, that shares of
      Common Stock will be issued and delivered to the Director upon payment to
      the Company of the exercise price of such shares and that the option price
      and number of shares subject to option will be adjusted for stock splits,
      stock dividends or other similar changes in the Company's capital
      structure.

      The Company also has an Incentive Stock Option Plan (the "ISO Plan")
      administered by the Committee which provides for the issuance to key
      employees of incentive stock options ("ISOs") within the meaning of
      Section 422A of the Internal Revenue Code of 1986, as amended. The
      Committee is authorized to issue up to 100,000 shares of common stock
      pursuant to the exercise of the ISOs. The option price of each ISO granted
      is 100% of the fair market value of the common stock on the date of grant.
      If an ISO is granted to an optionee who holds more than 10% of the
      combined voting power of all classes of the Company's stock at the date of
      the grant, the option price is 110% of fair market value of the common
      stock on the date of grant. The ISO Plan provides for the exercise of ISOs
      at the maximum rate of 25% in the first 12 months after grant and 25% in
      each 12-month period thereafter. To the extent not exercised, an optionee
      may accumulate his or her ISOs and exercise them, in whole or in part, in
      any subsequent period but not later than 10 years from the date on which
      the option was granted.

      No options have been issued by the Company under the Directors' Plan or   
      the ISO Plan.

                                      F-9
<PAGE>   40

4.    COMMITMENTS AND CONTINGENCIES

      Synox is the exclusive licensee of certain technology and know-how under a
      license agreement with an organization controlled by a stockholder of the
      Company. The agreement currently covers 15 states in the license territory
      and grants an option to acquire additional territory on a payment of a
      prepaid royalty. The option rights expire December 31, 1997.

      Under the terms of its license agreement, Synox is subject to minimum
      royalty provisions and to the maintenance of a $50,000 net worth and the
      performance of other material provisions of the license agreement. On
      December 20, 1996, the license agreement was amended to change the
      expiration date of the license and to provide that no minimum royalty
      payment would be due on January 1, 1997. The minimum annual royalties
      (based upon retaining the 15 states currently under the agreement) resume
      on January 1, 1998 in accordance with the following schedule:

          Due Date                                       Amount

          January 1, 1998                                90,336
          January 1, 1999                               180,671
          January 1, 2000 through 2007                  180,671    
          January 1, 2001 through 2008                  225,839


      Pursuant to the merger agreement between Old Enviroq and Synox, the
      stockholders of Synox at the time of the merger received Old Enviroq
      shares valued at $672,000 in the aggregate plus the right to receive
      additional shares of Old Enviroq, dependent on the earnings of Synox, up
      to a maximum value of $2,017,000. In addition, the then existing
      obligations of Synox under promissory notes to certain shareholders
      ($767,376 at September 30, 1991 plus additional interest at 7.66%) shall
      become payable by Synox in cash only after such time as (i) all the
      contingent shares have been issued and (ii) accumulated retained earnings
      are available for such payment. Interest shall become payable only to the
      extent of available net earnings. To the extent additional, contingent
      shares become issuable in the future or additional obligations become
      payable in the future, such consideration will be recorded at that time at
      its fair value and accounted for as additional intangible assets.

5.    RELATED PARTY TRANSACTIONS

      The Company's insurance (other than its employee insurance) is provided 
      through an insurance agency controlled by stockholders of the Company. 
      For fiscal years 1997 and 1996, the Company paid this agency 
      approximately $2,000 and $58,000, respectively.

      During fiscal years 1997 and 1996, the Company paid approximately $8,000
      and $4,000, respectively, to a marketing and public relations company 
      controlled by a family member of stockholders of the Company.

6.    SIGNIFICANT CUSTOMERS

      The Company had sales transactions with four unrelated customers which
      accounted for approximately 92% and 95% of total sales in fiscal 1997 and
      1996, respectively. Trade accounts receivable included approximately
      $303,000 and $114,000 due from these customers at March 29, 1997 and March
      30, 1996, respectively.

                                      F-10
<PAGE>   41

7.    LITIGATION SETTLEMENT

      In March, 1996 the Company reached an agreement (the "Settlement
      Agreement") with Insituform MidAmerica, Inc. ("IMA") and Insituform
      Technologies, Inc. ("ITI") to settle all claims and counterclaims made, or
      that could have been made, by the parties in the lawsuit filed by the
      Company against IMA (the "Lawsuit"). Enviroq received $3,335,000 in cash
      and was relieved of its $517,000 note payable to IMA as payment in full
      for the Settlement Agreement, which includes the Subordinated Promissory
      Note ("Note") and the Consulting Agreement dated April 18, 1995 between
      Enviroq and IMA. The Note and the Consulting Agreement, which arose out of
      the merger agreement between the Company and IMA (the "Merger Agreement"),
      had not been recorded by the Company because of their contingent and
      uncertain nature. In the Settlement Agreement, Enviroq released IMA and
      ITI, subject to limited exceptions, from all claims that Enviroq had or
      may have had or may have against IMA or ITI arising out of the Note or the
      Merger Agreement, and claims that were or could have been asserted by
      Enviroq in the Lawsuit. In the Settlement Agreement, IMA and ITI released
      Enviroq, subject to limited exceptions, from all claims that they had or
      may have against Enviroq arising out of the Note or the Merger Agreement,
      including any claim with respect to the Expense Deficit (as defined in the
      Merger Agreement) and claims that were or could have been asserted by IMA
      or ITI in the Lawsuit. Accordingly, the Company's 1996 consolidated
      statement of income includes a $3.85 million gain as a result of this
      settlement.

8.    IMPAIRMENT OF ASSETS

      During the fourth quarter of fiscal 1996, management elected to minimize
      the development stage activities of the Synox subsidiary. This decision
      was based in part on the fact that future cash flows cannot be anticipated
      in the current environment. Accordingly, the Company recorded a write-down
      of $1,331,048 related to impairment of the long-term assets of Synox. The
      excess of Old Enviroq's basis in Synox over the underlying net asset value
      had been pushed down to Synox and recorded as an intangible, which was
      being amortized over 15 years using the straight-line method. This
      impairment includes a write-off of the entire unamortized intangible
      balance of $586,012 and a $745,036 write-down of property, plant and
      equipment.


                                   * * * * *






                                      F-11
<PAGE>   42


         The following exhibits are filed as part of this Form 10-K or are
incorporated herein by reference, and this list comprises the Exhibit Index.

                   Description of Exhibit

Item

3.01      Certificate of Incorporation of New Enviroq Corporation. Exhibit 3.01
          to the Company's Registration Statement on Form 10-SB/A2 dated April
          12, 1995, is incorporated herein by reference (Commission File No.
          0-25528).

3.02      Certificate of Amendment to Certificate of Incorporation of New
          Enviroq Corporation. Exhibit 3.02 to the Company's Registration
          Statement on Form 10-SB/A2 dated April 12, 1995, is incorporated
          herein by reference (Commission File No. 0-25528).

3.03      Bylaws of New Enviroq Corporation. Exhibit 3.03 to the Company's
          Registration Statement on Form 10-SB/A2 dated April 12, 1995, is
          incorporated herein by reference (Commission File No. 0-25528).

4.01      Certificate of Designation of Rights and Preferences of Series A
          Preferred Stock. Exhibit 4.01 to the Company's Registration Statement
          on Form 10-SB/A2 dated April 12, 1995 , is incorporated herein by
          reference (Commission File No. 0-25528).

4.02      Form of Certificate of Common Stock. Exhibit 4.02 to the Company's
          Registration Statement on Form 10-SB/A2 dated April 12, 1995, is
          incorporated herein by reference (Commission File No. 0-25528).

4.03      Form of Certificate of Series A Preferred Stock. Exhibit 4.03 to the
          Company's Registration Statement on Form 10-SB/A2 dated April 12,
          1995, is incorporated herein by reference (Commission File No.
          0-25528).

10.01     Merger Agreement between Enviroq Corporation, New Enviroq 
          Corporation, Insituform Mid-America, Inc. and IMA Merger
          Sub, Inc. dated as of November 2, 1994.  Exhibit 10.01 to the
          Company's Registration Statement on Form 10-SB/A2 dated April 12,
          1995, is incorporated herein by reference (Commission File No.
          0-25528).

10.02     Form of Consulting Agreement between New Enviroq Corporation and
          Insituform Mid-America, Inc. Exhibit 10.02 to the Company's
          Registration Statement on Form 10-SB/A2 dated April 12, 1995, is
          incorporated herein by reference (Commission File No. 0-25528).




                                      30
<PAGE>   43


10.03     Form of Covenant Not to Compete Agreement between New Enviroq
          Corporation, Insituform Mid-America, Inc., Marinelli Securities
          Associates, and SCE, Inc. Exhibit 10.03 to the Company's Registration
          Statement on Form 10-SB/A2 dated April 12, 1995, is incorporated
          herein by reference (Commission File No. 0-25528).

10.04     License Agreement between Synox Corporation and Long Enterprises,
          Inc. dated May 26, 1986, together with amendments dated May 16, 1991
          and October 5, 1994. Exhibit 10.05 to the Company's Registration
          Statement on Form 10-SB/A2 dated April 12, 1995, is incorporated
          herein by reference (Commission File No. 0-25528).

10.05     Shareholder Agreement between Sprayroq, Inc. Enviroq Corporation, and
          Replico Development Company, Inc. dated March 25, 1992. Exhibit 10.06
          to the Company's Registration Statement on Form 10-SB/A2 dated April
          12, 1995, is incorporated herein by reference (Commission File No.
          0-25528).

10.06     License Agreement dated May 22, 1992, between Sprayroq, Inc. and
          Enviroq Services, Inc. Exhibit 10.07 to the Company's Registration
          Statement on Form 10-SB/A2 dated April 12, 1995, is incorporated
          herein by reference (Commission File No. 0-25528).

10.07     License Agreements dated June 12, 1994, between Sprayroq, Inc., Toa
          Grout Kogyo Company, LTD., and Sprayroq, Inc., and Mitsui Toatsu
          Chemicals, Inc. Exhibit 10.08 to the Company's Registration Statement
          on Form 10-SB/A2 dated April 12, 1995, is incorporated herein by
          reference (Commission File No. 0-25528).

10.08     Amended and Restated Promissory Notes dated September 27, 1991 and
          issued by Synox Corporation in favor of Charles A. Long, Jr. in the
          principal amounts of $6,000, $6,000, $6,000, $3,000, $6,000, and
          $6,000, respectively. Exhibit 10.09 to the Company's Registration
          Statement on Form 10-SB/A2 dated April 12, 1995, is incorporated
          herein by reference (Commission File No. 0-25528).

10.09     Amended and Restated Promissory Notes dated September 27, 1991 and
          issued by Synox Corporation in favor of Long Enterprises, Inc. in the
          principal amount of $3,000. Exhibit 10.10 to the Company's
          Registration Statement on Form 10-SB/A2 dated April 12, 1995, is
          incorporated herein by reference (Commission File No. 0-25528).

10.10     Amended and Restated Promissory Notes dated September 27, 1991 and
          issued by Synox Corporation in favor of Sullivan, Long and Hagerty,
          Inc. in the principal amounts of $132,000, $17,020, $22,000, $11,000,
          $11,000  





                                      31
<PAGE>   44

          $11,000 $22,000, $11,000, $22,000, and $22,000, respectively. 
          Exhibit 10.11 to the Company's Registration Statement on Form 
          10-SB/A2 dated April 12, 1995, is incorporated herein by reference 
          (Commission File No. 0-25528).

10.11     Amended and Restated Promissory Notes dated September 27, 1991 and
          issued by Synox Corporation in favor of Orlando M. Marinelli in the
          principal amounts of $66,000, $8,510, $11,000, $5,500, and $1,000,
          respectively. Exhibit 10.12 to the Company's Registration Statement
          on Form 10-SB/A2 dated April 12, 1995, is incorporated herein by
          reference (Commission File No. 0-25528).

10.12     Amended and Restated Promissory Notes dated September 27, 1991 and
          issued by Synox Corporation in favor of Antonio M. Marinelli in the
          principal amounts of $66,000, $8,510, $11,000, $5,500, and $1,000,
          respectively. Exhibit 10.13 to the Company's Registration Statement
          on Form 10-SB/A2 dated April 12, 1995, is incorporated herein by
          reference (Commission File No. 0-25528).

10.13     Amended and Restated Promissory Notes dated September 27, 1991 and
          issued by Synox Corporation in favor of Road Machinery, Inc., in the
          principal amounts of $22,000, $11,000, $11,000, $11,000 and $10,000,
          respectively. Exhibit 10.14 to the Company's Registration Statement
          on Form 10-SB/A2 dated April 12, 1995, is incorporated herein by
          reference (Commission File No. 0-25528).

10.14     Amended and Restated Promissory Notes dated September 27, 1991 and
          issued by Synox Corporation in favor of Micam Industries, Inc., in
          the principal amounts of $11,000, and $11,000 respectively. Exhibit
          10.15 to the Company's Registration Statement on Form 10-SB/A2 dated
          April 12, 1995, is incorporated herein by reference (Commission File
          No. 0-25528).

10.15     Amended and Restated Promissory Notes dated September 27, 1991 and
          issued by Synox Corporation in favor of Marinelli Securities
          Associates in the principal amount of $10,000. Exhibit 10.16 to the
          Company's Registration Statement on Form 10-SB/A2 dated April 12,
          1995, is incorporated herein by reference (Commission File No.
          0-25528).

10.16     Non-Employee Director Stock Option Plan of the Company, as amended.
          Exhibit 10.17 to the Company's Registration Statement on Form
          10-SB/A2 dated April 12, 1995, is incorporated herein by reference
          (Commission File No. 0-25528).

10.17     Incentive Stock Option Plan of the Company. Exhibit 10.18 to the





                                      32
<PAGE>   45

          Company's Registration Statement on Form 10-SB/A2 dated April 12,
          1995, is incorporated herein by reference (Commission File No.
          0-25528).

10.18     Mutual Release and Settlement Agreement dated March 12, 1996 by and
          between the Company, Insituform Mid-America, Inc. and Insituform
          Technologies, Inc. Exhibit 10.18 to the Company's annual report on
          Form 10-KSB dated June 26, 1996 is incorporated herein by reference 
          (Commission File No. 0-25528).

10.19     Promissory Note dated March 27, 1993 in the aggregate principal sum
          of $206,203.46 made by Sprayroq, Inc. in favor of the Company.
          Exhibit 10.19 to the Company's annual report on Form 10-KSB dated 
          June 26, 1996 is incorporated herein by reference. (Commission File 
          No. 0-25528).

10.20     Promissory Note dated March 26, 1994 in the aggregate principal sum
          of $159,872.95 made by Sprayroq, Inc. in favor of the Company.
          Exhibit 10.20 to the Company's annual report on Form 10-KSB dated
          June 26, 1996 is incorporated herein by reference. (Commission File
          No. 0-25528).                                      

10.21     SprayWall System License Agreement dated December 1, 1993, between
          Sprayroq, Inc., a Florida corporation, and Southwestern Underground
          Supply and Environmental Services, Inc., a Texas corporation.
          Exhibit 10.21 to the Company's annual report on Form 10-KSB dated
          June 26, 1996 is incorporated herein by reference. (Commission File
          No. 0-25528).                                      

10.22     Form of SprayWall License Agreement dated January 1, 1996, between
          Sprayroq, Inc., a Florida corporation and Per Aarsleff A/S, a
          corporation organized and existing under the laws of Denmark.
          Exhibit 10.22 to the Company's annual report on Form 10-KSB dated
          June 26, 1996 is incorporated herein by reference. (Commission File
          No. 0-25528).                                      

10.23     Consolidated Note dated October 21, 1996 and issued by Sprayroq, Inc.
          in favor of the Company in aggregate principal sum of $840,249.
          Exhibit 10.01 to the Company's quarterly report on Form 10-QSB dated
          November 5, 1996 is incorporated herein by reference (Commission 
          File No. 0-25528).

10.24     Further Amended Agreement as of December 20, 1996 by and between Long
          Enterprises, Inc. and Synox Corporation.  Exhibit 10.01 to the
          Company's quarterly report on Form 10-QSB dated February 11, 1997 is
          incorporated herein by reference (Commission File No. 0-25528).

21.0      Subsidiaries:

          1.  Synox Corporation, a Delaware corporation (100%).
          2.  Sprayroq, Inc., a Florida corporation (50%).

27        Financial Data Schedule




                                      33
<PAGE>   46


                                   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.

                                         ENVIROQ CORPORATION


Date:            June 27, 1997     By:    /s/ William J. Long
                                      --------------------------------
                                          William J. Long, President
                                          and Chief Executive 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 in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
         Signature                                        Title                                    Date
         ---------                                        -----                                    ----
         <S>                                              <C>                                      <C>  
         /s/ William J. Long                              President, Chief                         June 27, 1997
         ------------------------------------             Executive Officer and       
         William J. Long                                  Director (Principal         
                                                          Executive Officer          
                                                          and Principal Financial                            
                                                          and Accounting Officer)

         /s/ Charles A. Long, Jr.                         Director                                 June 27, 1997
         ------------------------------------
         Charles A. Long, Jr.

                                                          Chairman of the Board                    
         ------------------------------------             of Directors, Director,        
         Antonio M. Marinelli                             Secretary/Treasurer            
                                                                 
                                                                     
                                                          Vice President,                          
         ------------------------------------
         Orlando M. Marinelli                             Director

         /s/ Michael X. Marinelli                         Director                                 June 27, 1997
         ------------------------------------
         Michael X. Marinelli

         /s/ W.T. Goodloe Rutland                         Director                                 June 27, 1997
         ------------------------------------
         W.T. Goodloe Rutland

                                                          Director                                
         ------------------------------------
         Alexander P. Zechella                                                                     
</TABLE>




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