SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934
                   For the fiscal year ended December 31, 1995

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934


                          Commission file number 1-7037

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

         NEW YORK                                        14-1505298
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation of organization)

2773 Balltown Road, Schenectady, New York               12309-1090
(Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number (518) 346-6161

Securities registered under Section 12(b) of the Exchange Act:         None

Securities registered under Section 12(g) of the Exchange Act:
                               Title of each class
                           Common Stock $.10 par value

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to 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 contained in this form, and no disclosures 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 ]

Revenue for the year ended December 31, 1995:        $17,340,432

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of January 30, 1996:                   $14,279,394

The number of shares of Common Stock,  par value $.10  outstanding as of January
30, 1996:                                              4,113,709
 
                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for its 1996 Annual Meeting
of Shareholders  (to be filed no later than April 30, 1996) are  incorporated by
reference in response to Items 10 and 11 of Part III of this report.
<PAGE>
                           Environment One Corporation
                                   Form 10-KSB
                                     Part I

Item 1.  Business

The Environment One Corporation  (EONE) is an  environment-oriented  product and
service company which started  operations in January 1969. The Company  operates
in two business  segments:  (A) Sewer Systems Business and (B) Detection Systems
Business. In January,  1996, the Company sold its Cirrus Incipient Fire Detector
product line to PROTEC Fire Detection,  plc of Nelson,  Lancashire,  England. In
the second  quarter of 1994 the assets of the  Measurements  Services  Business,
formerly a component of the Detection Systems Business, were sold to the General
Testing  Corporation of Rochester,  NY.  Information  regarding the sale of both
businesses is set forth below in Item 6.  Information  regarding the percentages
of total sales attributable to the two business segments for the past two fiscal
years is set forth below in Item 6.

                                  Sewer Systems

Today's low pressure, contour following collection system was pioneered by EONE.
It has proven to be an  economical  and effective  method of sewering  otherwise
difficult land  developments  including:  waterfront,  hilly terrain,  very flat
lands and areas with high water tables. As more and more communities are looking
for cost effective solutions to waste water collection problems, Environment One
Corporation's  pressure sewer systems (known as "EONE Sewers"), are increasingly
used in mainstream municipal and developer applications.

Grinder pumps developed by the Company make the pressure sewer system  feasible.
These units accept waste water from point sources,  grind it into a fine slurry,
and pressurize it to permit transport  through small diameter pipes.  This small
diameter  pressurized  pipe can follow the contour of the terrain,  resulting in
reduced costs of installation  compared to conventional  gravity lines.  Several
models of the grinder pump are manufactured with and without storage tanks. More
than 75,000 units have been manufactured at the Company's plant.

The  manufacture of the grinder pump involves use of  independent  suppliers for
several of the  components.  Fabrication,  assembly and testing of the assembled
units are completed at the Company's plant.

The principal  markets  served by the pressure sewer systems are city and county
sewer districts,  builders, land developers and individual homeowners.  Products
are sold to these markets from regional  sales offices  across the United States
and  through a network  of more than 30  representatives  throughout  the United
States,  Canada,  Europe and Japan. There are other pump manufacturers  offering
grinder pumps for these markets.  All but one offers a centrifugal type of pump.
Environment  One's  positive  displacement  pump and tank are  unique,  offering
several distinct advantages over the centrifugal pump. The Company is well known
in the marketplace.

During 1994, the Company introduced two new products. A new grinder pump station
(GP2000) is a redesign of the model GP200 and is establishing  new standards for
the industry.  A second  product,  the After Market Grinder Pump (AMGP),  is the
industry's  first  drop-in  upgrade  unit.  The AMGP is  engineered  to fit into
virtually any other competitor designed grinder pump tank.
<PAGE>
                                Detection Systems

The Company's  Detection  Systems'  products  include:  (1) Generator  Condition
Monitor;  (2) Cirrus  Incipient Fire Detector and (3) Hydrogen  Control Cabinet.
These  detection  instruments  are  based  on  the  Company's  expertise  in the
detection of sub-microscopic particles and gas monitoring.

Generator Condition Monitor (GCM)

The GCM is  designed  to  provide  early  warning  of  certain  thermal  failure
conditions  which  could lead to  shutdown of  hydrogen  cooled  electric  power
generators.  The  monitor  also  facilitates  preventative  maintenance  of such
equipment.  The principal  market  served is electric  utility  companies,  both
domestic  and  international.  Customers  are  served by direct  sales  from the
Company's  marketing  function or by manufacturers'  representatives  in certain
parts of the world.  There are only two other  manufacturers  of this  equipment
worldwide and the Company is believed to be the leader in this market.

As a companion to the GCM, the Company also manufactures and sells an instrument
for  air-cooled  electric  generators  (GCM-A).  This  extends the  marketing of
condition  monitors to include  hydroelectric  and gas turbine driven generating
stations.

As an ancillary  product to the GCM, the Company sells tagging  compounds  under
the name GEN-TAGS  that are applied to critical  areas of large  electric  power
generator units.  The tagging  compounds will assist utilities to quickly locate
"hot spots"  developing in  generators  causing the GCM to alarm at which time a
sample of the overheated tagging compound (pyrolysate) is collected. Analysis of
the sample determines the location of the "hot spot" area. Depending on the area
of overheating,  a different "fingerprint" or "chemical signature" will identify
each area for location of potential trouble.

Cirrus Incipient Fire Detector (IFD)

The Cirrus IFD provides unique  capabilities which allow for area fire detection
often not  attainable  by any other  means,  such as  operational  stability  in
adverse ambient  conditions,  an air-sampling system which allows for small, low
maintenance,  electrically inert sample heads which can be located and used in a
wide variety of physical  arrangements and high and adjustable  sensitivity to a
wide variety of fire conditions resulting in a low false alarm rate.

The Company's  Cirrus IFD  represents  the new  generation of early warning fire
detectors.  The product  utilizes a basic detection  mechanism  developed by the
Company.  The Company is believed to be the leading manufacturer of this type of
fire detection  equipment.  The Cirrus IFD employs a miniaturized  cloud chamber
providing  extremely  rapid  detection  of the  invisible  particles  created by
overheating  and  combustion.  Cloud chamber  technology is considered to be the
most  sensitive  fire  detection  method  due to  its  capability  of  detecting
sub-micron particles produced during the earliest stage of a fire.

The  micro-controller  based Cirrus IFD is fully supervised and virtually immune
to false alarms caused by high air velocity,  dust,  humidity,  and  temperature
variation. An advanced air-sampling system continuously delivers samples back to
the Cirrus IFD detector for analysis.
<PAGE>
The Cirrus IFD is sold by direct sales from the Company's marketing function and
through an independent network of distributors in the United States,  Canada and
a few  countries  overseas.  There are several  manufacturers  who offer similar
early warning fire detection  equipment using  different  principles to the same
market.

Hydrogen Control Cabinet (HCC)

In 1995, the HCC was added to the detection systems product  offerings.  The HCC
continuously analyzes the purity of hydrogen and controls the rate of scavenging
in hydrogen cooled turbine generators. It is vital to maintain the purity of the
hydrogen because it directly  affects both efficiency and safety.  To maintain a
hydrogen purity of approximately  98% in the generator  casing, a small quantity
of hydrogen gas is  continuously  scavenged from the  generator's  end seals and
discharged to the atmosphere.

The HCC is designed and  manufactured to satisfy the requirements of the General
Electric Company's  Industrial and Power Systems group,  located in Schenectady,
NY. The HCC will be used by both  domestic and  international  electric  utility
companies.

The major  components  of the HCC are two  completely  independent,  interactive
hydrogen sensors and associated  electronics  which were designed by Environment
One. The  micro-controller  based system and explosion proof design represents a
new generation of hydrogen purity analyzer.

The HCC is sold direct by the Detection Systems  marketing  function and has the
potential for sale to the same customer base as the GCM.

                         Financial Data - 2 Year Summary

Industry segment information is included in Note 9 to the Company's consolidated
financial statements included in Item 7.

                                Net Sales Backlog

The backlog of unshipped orders by industry  segment is shown below.  Generally,
all orders in the backlog at year-end are shipped during the following year. The
backlog has been  calculated by EONE's normal  practice of including only orders
that are  to be delivered  within  twelve  months.  While these orders are firm,
they could be subject to change or cancellation in the future.  In the past, the
effect of changes and cancellations had been minimal.

Net Sales Backlog as of December 31, 1995:
<TABLE>
<CAPTION>
                                           1995              1994
                                           ----              ----
<S>                                   <C>                 <C>      
         Sewer Systems                $3,385,871          1,516,188
         Detection Systems               249,925            203,297
                                      ----------          ---------
                                      $3,635,796          1,719,485
                                      ==========          =========
</TABLE>
<PAGE>
                                Sources of Supply

Principal  components  used in the  manufacture  of the  Company's  grinder pump
include a motor, high density  polyethylene  parts, cast iron parts,  fabricated
stainless  steel  and  solid  state  controls.  For the  Cirrus  IFD,  principal
components  include  printed circuit  boards,  fabricated  sheet metal, a vacuum
pump,  electric  motors,  miscellaneous  electronics  and formed  plastics.  The
principal components of the GCM and HCC include fabricated aluminum, sheet metal
and stainless steel, assembled miscellaneous electronics, printed circuit boards
and mechanical gauges.

The  Company  does not  believe  that it is  dependent  on any one  supplier  or
subcontractor  to the extent that  termination of the supplier or  subcontractor
would have a material adverse effect on the Company's business.

                                     Patents

Since  inception,  the Company has been issued numerous U.S. and foreign patents
and it has filed numerous patent applications relating to product features.  The
Company believes that patent protection is important and materially  strengthens
its competitive  position  with respect to all the specific products that it now
markets. The Company,  however, does not depend on any single patent or group of
patents.

                            Research and Development

All research and  development  costs  including  license  development  costs are
charged directly to operations as incurred.  Research and development costs were
approximately $266,000 and $328,000 in 1995 and 1994, respectively.

                                  Environmental

Compliance by the Company with federal, state and local environmental protection
laws  during 1995 and 1994 had no material  effect  upon  capital  expenditures,
earnings or the competitive position of the Company.

                                    Employees

At December 31, 1995, the Company had 104 full-time employees.

                               Principal Customers

The  Company had sales  equaling  14% and 15% of total  company  revenues to one
customer in 1995 and 1994, respectively.

                       Foreign Operations and Export Sales

The Company has entered into foreign markets and license agreements with respect
to certain  products.  In December 1990,  Environment One Corporation  Japan Co.
Ltd. was founded in Tokyo,  Japan as a 70% owned subsidiary of the Company.  The
purpose  of this  corporation  is to  promote  the  adaptation  and sales of low
pressure sewer systems in Japan.

Export sales of low pressure sewer systems were  approximately  3.7% and 5.7% of
total  Company sales in 1995 and 1994,  respectively.  Export sales of detection
instruments were  approximately 7.2% and 8.4% of total Company sales in 1995 and
1994, respectively.
<PAGE>
Item 2.   Property

The  Company's  headquarters  in  Schenectady,  New York is located in a modern,
concrete  and steel  frame,  electrically  and gas  heated  and air  conditioned
building on approximately 35 acres of wooded land owned in fee. This facility is
subject to a  mortgage  as  described  in Note 2 to the  Company's  consolidated
financial  statements  included  in Item 7. All  segments  of the  business  are
operated from the Company's  headquarters.  Additional  manufacturing and office
space were leased during 1994 at Hillside Commerce Park in Schenectady, New York
to support expanded product service and warehousing requirements.

Management believes that the Company's  facilities are well maintained,  in good
operating condition, adequately covered by insurance and are well adapted to its
present needs.

Item 3.  Legal Proceedings

The Company is not involved in any material legal proceedings.

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

None
<PAGE>
                           Environment One Corporation
                                   Form 10-KSB
                                     Part II

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

                           Price Range of Common Stock

The Company's  common stock is traded on the National  Association of Securities
Dealers  Automated  Quotation System (NASDAQ) under the trading symbol EONE. The
following table sets forth the high and low sales prices of the common stock for
the calendar quarters indicated, as reported by the NASDAQ:

                                            High                       Low
                                            ----                       --- 
                     1995
                     ----
                  Quarter 1                 3 1/4                      2 1/4
                  Quarter 2                 4 1/4                      2 3/8
                  Quarter 3                 4 7/8                      3 7/8
                  Quarter 4                 5 1/2                      4 5/8

                     1994
                     ----
                  Quarter 1                 3 1/4                      2 3/8
                  Quarter 2                 2 1/2                      2
                  Quarter 3                 2 5/8                      2
                  Quarter 4                 2 1/2                      1 7/8


                     Approximate Number of Security Holders

      Title of Class:                 Approximate Number of Holders at 12/31/95:
      ---------------                 ------------------------------------------
Common Stock $.10 par value                              2283 (1)

(1)  Includes  shareholders  of record in  "nominee"  or  "street"  name held by
brokers and others.

                                    Dividends

The Company paid no  dividends  on its common  stock  during 1995 and 1994.  The
Company's policy with regard to payment of dividends is evaluated  annually with
consideration given to future growth and operating fund requirements. Currently,
Company policy is not to pay dividends.
<PAGE>
Item 6.  Management's Discussion and Analysis and Results of Operations

Cash provided from operations, as shown by the statement of cash flows (Item 7),
for 1995 was $987,749. This represented an increase of $742,847 when compared to
1994. The major  component of the operating cash flow increase from 1994 was the
net  income in 1995.  Other  significant  changes  in  operating  cash flow were
recognized  in  receivables  and  inventory,  both  showing  increases  in asset
balances  from 1994  year-end  levels due to the higher  levels of shipments and
backlog  in the  fourth  quarter  of 1995  versus  1994.  Investment  in capital
expenditures  for 1995  amounted  to  $482,000  and  represented  a decrease  of
$542,455  over 1994.  The  reduction  in capital  expenditures  was  a result of
significant  expenditures in 1994 for tooling and equipment  required to produce
the new grinder pump  station  (GP2000) and the AMGP.  The major  components  of
capital  expenditures  in 1995  related  to the  installation  of a new roof and
heating,   ventilation   and   air-conditioning   equipment  at  the   Company's
headquarters.

In January, 1996, the Company concluded an agreement with PROTEC Fire Detection,
plc of Nelson, Lancashire,  England for the sale of its Cirrus IFD product line.
In a two-stage  transaction with an approximate  value of $750,000,  the Company
transferred  all Cirrus IFD assets and  operations to PROTEC and  simultaneously
entered into a product  technology  development  contract to be concluded during
1996.

In the second  quarter  of 1994,  the  Company  entered  into an asset  purchase
agreement  with the General  Testing  Corporation,  a Rochester,  New York based
laboratory,  for the  purchase  of  certain  assets  owned  by EONE  used in its
Measurements  Services  Business.  The selling  price was $271,458  comprised of
$130,000 paid in cash and EONE  financing the remaining  amount of $141,458 over
five years at an annual interest rate of 7.25%. In 1995, the Company agreed to a
delay of one year, from 1995 to 1996, for General  Testing  Corporation to begin
repayment of principal.  A non-compete  agreement for a period of five years was
entered into at the time of the sale with consideration in the amount of $20,000
paid to EONE by General Testing Corporation.  The pre-tax impact of the sale net
of certain expenses was $214,590 and is recorded as miscellaneous  income in the
statement of operations for the year ended December 31, 1994.

The following table shows selected  balance sheet  information for 1995 and 1994
expressed in thousands of dollars:
<TABLE>
<CAPTION>
                                                1995               1994
                                              ---------         -------
<S>                                            <C>                 <C>  
           Current Assets                      $ 4,896             4,447
           Current Liabilities                   2,465             2,840
           Working Capital                       2,431             1,607
           Total Assets                          8,722             8,379
           Long-Term Debt                        1,839             2,023
           Shareholders' Equity                  4,348             3,481
</TABLE>
<PAGE>
                                     Summary

The following table shows a summary of operating  results for the years 1995 and
1994 expressed as a percentage of sales:
<TABLE>
<CAPTION>
                                                         1995              1994
                                                        ------            ------
<S>                                                     <C>               <C> 
                  Net Sales
                     Sewer Systems                       87.7              81.9
                     Detection Systems                   12.3              18.1
                           Total Sales                  100.0             100.0

                  Cost of Sales                          66.7              76.2
                  Gross Margin                           33.3              23.8
                  Selling, Marketing and G&A             24.0              30.5

                  Income (Loss) from Operations           9.3              (6.7)
                  Other Income (Expenses)                (1.7)              (.1)

                  Income (Loss) Before Income Taxes       7.6              (6.8)
                  Income Tax (Expense) Benefit            2.9              (2.0)

                  Net Income (Loss)                       4.7              (4.8)
</TABLE>

Notes:   Amounts referred to below are set forth in Item 7.
         Gross changes between years include all businesses.
         Detailed  revenue and cost analyses  omit the effect of the sale of the
         Measurement Services Business.


                 Twelve Months Ended December 31, 1995 and 1994

Revenues for the period  increased by $4,976,000 or 40.2% when compared to 1994.
Sewer  Systems  sales  increased by  $5,083,000  while  Detection  Systems sales
decreased  $36,000.  The increase in sales in Sewer Systems is  attributable  to
three main factors.  The first factor is the roll out of the new GP2000  Grinder
Pump in October, 1994 resulting in $3.5 million in orders shortly after the roll
out. The second factor is the increased bidding activity for the small municipal
and community  sewer  projects.  Lastly,  a strong sales and marketing  team has
provided the catalyst to winning key bids on large projects.

As part of the Detection Systems revenue decrease,  sales of the Cirrus IFD fell
$249,000.  This decrease is attributable to a large,  international  shipment in
the first  half of 1994  which  boosted  sales for that  period.  With that sale
factored out, the market for the IFD remained flat during 1995. Sales of the GCM
increased slightly in 1995 from 1994 with sales increasing $76,000 as the market
for the GCM remained  sluggish  throughout  1995. In the fourth quarter of 1995,
the  Company  shipped  the first  units of the new HCC to the  General  Electric
Company's Industrial and Power Systems group resulting in $137,000 in new sales.
<PAGE>
Costs of Sales  increased by  $2,148,000  when compared to 1994.  However,  as a
percent of sales, costs of sales decreased by 9.5% to 66.7%. Direct material and
direct labor costs  expressed as a percent of sales fell by  approximately  .5%.
Indirect  manufacturing costs decreased $98,000 due to a reserve for slow moving
and obsolete inventory of $224,000 recorded in 1994. The majority of the reserve
related  to  writing  down  GP200  and  IFD  II  inventory  as a  result  of the
introduction of the GP2000 and the Cirrus IFD products. Offsetting this decrease
were increases in incoming freight of $70,000, consumable tooling of $12,000 and
miscellaneous expenses of $13,000.

Incremental cost of sales as a percent of incremental  sales was 43.2% The lower
incremental  percent  when  compared  to total  percent is  attributable  to the
Company being past  break-even  sales levels  whereby fixed  indirect  costs and
corporate  allocations  have been fully  absorbed.  As a result,  gross  margins
reflect a nine point gain over the same period last year.

Selling and Marketing  costs  increased  $205,000  when compared to 1994.  Sewer
Systems  costs in this  category  increased  $390,000  while costs in  Detection
Systems decreased $133,000.  Planned expenditures in advertising,  promotion and
sales literature  resulting from the roll out of the GP2000,  increased expenses
for the district  offices  (which  included the opening of Florida and Minnesota
district  offices),   increases  in  miscellaneous  other  expenses  along  with
increased  salaries  and  salespersons'  commissions  (as a result  of the sales
increase)  accounted  for the increase in Sewer  Systems  selling and  marketing
costs. The Detection  Systems  decrease  resulted from reductions in advertising
and sales  literature  expenditures  as well as  reduced  travel  and living and
internal salespersons' commission expenditures.

General and  Administrative  costs,  including  research and  development  (R&D)
expenses,   increased   $183,000   over  1994.   Excluding   R&D,   general  and
administrative   costs  rose  $245,000  while  R&D  costs   decreased   $62,000.
Significant  contributors to the increase in general and administrative expenses
were $236,000 for bonuses and profit  sharing,  $47,000 for legal fees,  $66,000
for directors' fees (which  included a $45,000  expense  associated with a stock
grant of 15,000  shares for Mr.  Ardia),  and  $20,000 for  investor  relations.
Offsetting these increases were reductions of $23,000 for  consultants,  $46,000
for sales taxes,  $15,000 for outside storage rental, and $14,000 for accounting
fees.

Research and  development  labor costs  decreased  $21,000 while non-labor costs
decreased $41,000.  R&D costs in Sewer Systems decreased $143,000 while costs in
Detection  Systems  increased  $81,000.  The reduction in Sewer Systems costs is
attributable to non-recurring  expenses in 1994 pertaining to the development of
the GP2000 Grinder Pump. The increase in Detection  Systems costs is a result of
expenditures  related  to the  development  of the  HCC of  $101,000  offset  by
reductions in Cirrus IFD R&D expenses.

Interest  expense  increased  to $328,000  in 1995 when  compared to $274,000 in
1994. The Company  borrowed  $154,000 on the building and equipment loan in 1995
while  paying back  $338,000 in  principal  payments.  Borrowing  on the line of
credit  decreased by $450,000 at year-end.  As a result of  non-compliance  with
certain loan  covenants at the end of 1994,  the Company's  borrowing  rate over
bank  prime  rate  was  increased  in the  first  half of 1995.  This  increased
borrowing  rate along with a higher bank prime rate  account  for the  increased
interest expense.  However, the Company complied with revised covenants for 1995
thereby reducing the rate in the second half of the year.
<PAGE>
Income taxes  during 1995 were  $507,134,  for an  effective  tax rate of 38.2%,
compared to a tax benefit during 1994 of $250,152,  for an effective tax benefit
rate of 29.7%. Although 1994 resulted in a tax benefit due to the Company's loss
before  income  taxes of  $843,055,  the  effective  tax rates differ due to the
inability to carryback the state tax benefit and utilize available  research and
experimentation credits.

Liquidity
With sources of cash from operations, bank loan financing and the operating line
of credit,  the Company was able to meet its working  capital  needs and capital
expenditure  requirements  in 1995. The Company's line of credit remains at $2.5
million,  of which the Company had borrowed $550,000 as of December 31, 1995. At
December 31, 1994, the Company was not in compliance  with certain  covenants of
the line of credit and building and equipment loan, specifically,  total working
capital,  debt service  coverage ratio and total net worth.  The bank waived the
Company's  non-compliance  with these  covenants  and  established  new covenant
requirements  to be met at certain  interim  dates in 1995.  The Company met and
exceeded all  applicable  covenants  throughout  1995. In addition,  the revised
terms of the bank loan  provided  for a reduction in rate over bank prime if the
covenants were met, thereby reducing the cost of borrowing in the second half of
1995. It is the opinion of management that the Company will comply with all loan
covenants in 1996.

Management  believes that the Company will be able to meet its cash requirements
in 1996 as a result of cash  generated  from  operations  and amounts  available
under the line of credit and building and equipment loan.

Effects of Inflation and Changing Prices
The  impact  of  general  inflation  on the  Company's  operations  has not been
significant to date and the Company believes  inflation will continue to have an
insignificant  impact.  In  response  to the  limited  effect of  inflation  and
changing prices on the Company's  manufacturing and operating costs, the Company
has historically used selling price adjustments,  cost containment  programs and
improved  operating  efficiencies to offset the otherwise negative impact on its
operations.

New Accounting Standards
In March, 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of  Long-Lived  Assets  and  Long-Lived  Assets  to be  disposed  of",  which is
effective for the Company in 1996. SFAS 121 establishes accounting standards for
the  impairment  of long-lived assets and certain  intangibles  related to those
assets.  Management of the Company does not believe that the  implementation  of
this new  accounting  standard  will have a  material  effect  on the  Company's
consolidated financial statements.

In  October,  1995,  the FASB issued SFAS No. 123  "Accounting  for  Stock-Based
Compensation",  which  establishes a fair value based method of  accounting  for
employee  stock  options  or similar  equity  instruments.  Under SFAS No.  123,
entities can recognize  stock-based  compensation expense in the basic financial
statements  using either (i) the intrinsic value based approach set forth in APB
Opinion No. 25 or (ii) the fair value based method  introduced  in SFAS No. 123.
Entities  electing  to remain  with the  accounting  in APB Opinion 25 must make
proforma  disclosures of net income and earnings per share, as if the fair value
based method of accounting defined in SFAS No. 123 had been applied.  Management
has not yet determined which method the Company will use to measure  stock-based
compensation.
<PAGE>
Item 7.  Financial Statements

Index to Financial Statements:
                                                                   
         Independent Auditors' Report                              

         Consolidated Balance Sheet as of December 31, 1995        

         Consolidated Statements of Operations for the Years Ended 
         December 31, 1995 and 1994

         Consolidated Statements of Shareholders' Equity for the   
         Years Ended December 31, 1995 and 1994

         Consolidated Statements of Cash Flows for the Years Ended 
         December 31, 1995 and 1994

         Notes to Consolidated Financial Statements                
<PAGE>
                          Independent Auditors' Report




The Shareholders and Board of Directors
Environment One Corporation:

We have  audited  the  consolidated  financial  statements  of  Environment  One
Corporation  and  subsidiary  as  listed  in  the  accompanying   index.   These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Environment  One
Corporation  and  subsidiary  as of December 31, 1995,  and the results of their
operations  and their  cash flows for each of the years in the  two-year  period
ended  December 31, 1995,  in  conformity  with  generally  accepted  accounting
principles.




Albany, New York
February 23, 1996

<PAGE>
                           ENVIRONMENT ONE CORPORATION
                                 AND SUBSIDIARY

                           Consolidated Balance Sheet

                                December 31, 1995
<TABLE>
<CAPTION>
                              Assets
                              ------
<S>                                                                   <C>       
Current assets:
     Cash .....................................................       $   91,115
     Receivables:
         Trade (note 2) .......................................        2,718,141
         Federal and state income tax refunds .................            1,145
         Other ................................................           28,435
                                                                      ----------
                                                                       2,747,721
         Less allowance for doubtful accounts .................           31,926
                                                                      ----------
              Net receivables .................................        2,715,795

     Current portion of note receivable (note 5) ..............           16,041

     Inventories (note 2):
         Finished products ....................................          259,869
         Work in process ......................................          387,165
         Raw materials and supplies ...........................        1,202,527
                                                                      ----------
              Total inventories ...............................        1,849,561

     Prepaid expenses and other current assets ................          223,018
                                                                      ----------
              Total current assets ............................        4,895,530
                                                                      ----------

Property, plant and equipment (notes 2 and 3):
     Land and land improvements ...............................          334,491
     Building and building improvements .......................        2,271,832
     Machinery and equipment ..................................        4,563,072
     Equipment under capital leases ...........................           10,762
     Construction in progress .................................          109,343
                                                                      ----------
                                                                       7,289,500
     Less accumulated depreciation and amortization ...........        3,752,410
                                                                      ----------
              Net property, plant and equipment ...............        3,537,090

Note receivable (note 5) ......................................          125,417
Patents and other assets, net .................................          163,878
                                                                      ----------
                                                                      $8,721,915
                                                                      ==========
</TABLE>
                                                                     (Continued)
<PAGE>
                           ENVIRONMENT ONE CORPORATION
                                 AND SUBSIDIARY

                      Consolidated Balance Sheet, Continued

                                December 31, 1995
<TABLE>
<CAPTION>
               Liabilities and Shareholders' Equity
               ------------------------------------
<S>                                                                 <C>        
Current liabilities:
     Current installments of long-term debt  (note 2) ..........    $   338,100
     Note payable - bank (note 2) ..............................        550,000
     Current installments of obligations under capital leases
         (note 3) ..............................................            145
     Accounts payable ..........................................      1,144,408
     Accrued expenses:
         Payroll ...............................................        249,199
         Taxes, other than on income ...........................          5,067
         Interest ..............................................         20,410
     Other current liabilities (note 7) ........................        157,937
                                                                    -----------
              Total current liabilities ........................      2,465,266

Long-term debt, excluding current installments (note 2) ........      1,838,594

Deferred income taxes (note 6) .................................         21,716
                                                                    -----------
              Total liabilities ................................      4,325,576
                                                                    -----------

Minority interest ..............................................         48,530
                                                                    -----------
Shareholders' equity (note 4):
     Common stock of $.10 par value per share. Authorized
          6,000,000 shares; issued 4,127,612 shares ............        412,761
     Additional paid-in capital ................................      7,295,115
     Accumulated deficit .......................................     (3,330,851)
                                                                    -----------
                                                                      4,377,025
     Less cost of common shares in treasury (11,328 shares) ....        (29,216)
                                                                    -----------
              Total shareholders' equity .......................      4,347,809
                                                                    -----------

Commitments and contingencies (notes 3 and 10)
                                                                    $ 8,721,915
                                                                    ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
                           ENVIRONMENT ONE CORPORATION
                                 AND SUBSIDIARY

                      Consolidated Statements of Operations

                     Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
                                                       1995             1994
                                                       ----             ----
<S>                                                <C>               <C>       
Sales of products and contract revenues ........   $ 17,340,432      12,364,574

Cost of sales and contract services ............     11,565,534       9,417,825
                                                   ------------    ------------
         Gross margin ..........................      5,774,898       2,946,749
                                                   ------------    ------------

Operating expenses:
     Selling and marketing .....................      2,108,320       1,903,520
     General and administrative ................      2,052,664       1,869,190
                                                   ------------    ------------
         Total operating expenses ..............      4,160,984       3,772,710
                                                   ------------    ------------

         Income (loss) from operations .........      1,613,914        (825,961)
                                                   ------------    ------------

Other income (expense):
     Interest expense ..........................       (328,176)       (274,203)
     Miscellaneous income (note 5) .............         29,765         238,370
     Minority interest in loss of subsidiary ...         13,008          18,739
                                                   ------------    ------------
                                                       (285,403)        (17,094)
                                                   ------------    ------------

         Income (loss) before income taxes .....      1,328,511        (843,055)

Income tax expense (benefit) (note 6) ..........        507,134        (250,152)
                                                   ------------    ------------

         Net income (loss) .....................   $    821,377        (592,903)
                                                   ============    ============


Per share amounts:

         Net income (loss) per common share ...    $        .20            (.15)
                                                   ============    ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                                     ENVIRONMENT ONE CORPORATION
                                                           AND SUBSIDIARY

                                           Consolidated Statements of Shareholders' Equity

                                               Years ended December 31, 1995 and 1994
                                                                                                                           Total
                                                                       Additional                                          share-
                                                         Common          paid-in       Accumulated      Treasury          holders'
                                                         stock           capital        deficit           stock            equity
                                                       ----------      ----------      ----------       ----------       ----------
<S>                                                    <C>              <C>            <C>                 <C>            <C>      
Balance at December 31, 1993 ....................      $  410,801       7,265,316      (3,559,325)         (56,482)       4,060,310

Exercise of options (6,000 shares
     of common stock) ...........................             600           2,775            --               --              3,375

Issuance of 5,000 shares of common
     stock from treasury ........................            --               370            --              9,630           10,000

Net loss - 1994 .................................            --              --          (592,903)            --           (592,903)
                                                       ----------      ----------      ----------       ----------       ----------

Balance at December 31, 1994 ....................         411,401       7,268,461      (4,152,228)         (46,852)       3,480,782

Exercise of options (13,600 shares
     of common stock) ...........................           1,360          10,540            --            (11,250)             650

Issuance of 15,000 shares of common
     stock from treasury ........................            --            16,114            --             28,886           45,000

Net income - 1995 ...............................            --              --           821,377             --            821,377
                                                       ----------      ----------      ----------       ----------       ----------

Balance at December 31, 1995 ....................      $  412,761       7,295,115      (3,330,851)         (29,216)       4,347,809
                                                       ==========      ==========      ==========       ==========       ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
                           ENVIRONMENT ONE CORPORATION
                                 AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                     Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
                                                                         1995               1994
                                                                         ----               ----
<S>                                                                   <C>                <C>      
Cash flows from operating activities:
    Net income (loss) ........................................        $  821,377           (592,903)
    Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
          Depreciation and amortization ......................           570,412            578,003
          Gain on sale of equipment ..........................              --             (233,663)
          Minority interest in loss of subsidiary ............           (13,008)           (18,739)
          Non-cash compensation expense ......................            45,000             10,000
          Deferred income taxes ..............................            54,921            (68,226)
          Decrease (increase) in receivables .................          (426,498)            58,835
          Decrease (increase) in inventories .................          (154,823)           314,416
          Decrease in uncompleted contract work in process ...              --               28,637
          Decrease (increase) in prepaid expenses ............           (14,543)            17,922
          Increase (decrease) in accounts payable ............           (34,960)            41,096
          Increase in accrued expenses .......................            99,904             43,254
          Increase in other current liabilities ..............            39,967             66,270
                                                                      ----------         ----------
              Net cash provided by operating activities ......           987,749            244,902
                                                                      ----------         ----------

Cash flows from investing activities:
    Capital expenditures, including patents ..................          (482,000)        (1,024,455)
    Proceeds from sale of equipment ..........................              --              130,000
                                                                      ----------         ----------
              Net cash (used in) provided by
                  investing activities .......................          (482,000)          (894,455)
                                                                      ----------         ----------

Cash flows from financing activities:
    Net (decrease) increase in note payable - bank ...........          (450,000)           200,000
    Proceeds from issuance of common stock ...................               650              3,375
    Capital contribution by minority interest ................            25,722             46,395
    Proceeds from issuance of long-term debt .................           153,967            810,490
    Principal payments on long-term debt .....................          (338,100)          (210,000)
    Principal payments on capital lease obligations ..........           (29,688)           (77,186)
    Loan financing fees ......................................              (886)              --
                                                                      ----------         ----------
              Net cash (used in) provided by
                  financing activities .......................          (638,335)           773,074
                                                                      ----------         ----------

Net (decrease) increase in cash and cash equivalents .........          (132,586)           123,521

Cash at beginning of year ....................................           223,701            100,180
                                                                      ----------         ----------

Cash at end of year ..........................................        $   91,115            223,701
                                                                      ==========         ==========
</TABLE>
<PAGE>
                           ENVIRONMENT ONE CORPORATION
                                 AND SUBSIDIARY

               Consolidated Statements of Cash Flows -- Continued

                     Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
                                                                         1995               1994
                                                                         ----               ----
<S>                                                                   <C>                <C>      
Supplemental disclosures of cash flow information:
    Cash paid (received) during the year for:
       Interest ..............................................        $  334,407            286,613
       Income taxes, net of refunds ..........................           275,378            (65,933)
                                                                      ==========         ==========

Supplemental disclosure of non-cash financing activity:
    Exchange of 2,000 shares of common stock in partial
       payment of exercise price on options ..................        $   11,250               --
                                                                      ==========         ==========
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>
                           ENVIRONMENT ONE CORPORATION
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1995 and 1994


(1)    Summary of Significant Accounting Policies
       (a)  Description of Business
            Environment    One    Corporation     (the    "Company")    is    an
                environment-oriented  product and service company, which started
                operations  in  January of 1969.  The  Company  operates  in two
                business  segments:  (1) low  pressure  sewer  systems,  and (2)
                detection systems.

            The Sewer  Systems  business  primarily  manufactures  and  services
                grinder  pumps  pioneered  by the  Company to make low  pressure
                sewer systems feasible. The low pressure sewer system has proven
                to be an economical and effective  method of sewering  otherwise
                difficult  land  developments   including:   waterfront,   hilly
                terrain,  very flat lands and areas with high water  tables.  As
                more  and  more  communities  are  looking  for  cost  effective
                solutions to waste water  collection  problems,  Environment One
                Corporation's  solution,  EONE Sewers,  is  increasingly used in
                mainstream municipal and developer  applications.  The principal
                markets  served  by  the  Company  are  city  and  county  sewer
                districts, builders, land developers, and individual homeowners.
                Products are sold by direct sales from the  Company's  marketing
                function and through dealer  networks  across the United States,
                Canada,  Europe,  and Japan.  There are other pump manufacturers
                offering  grinder  pumps for these  markets.  All but one of the
                Company's competitors offer a centrifugal type of pump.

            The Detection Systems business  manufactures the Generator Condition
                Monitor,  the Cirrus  Incipient Fire Detector  ("IFD"),  and the
                Hydrogen Control  Cabinet.  The Generator  Condition  Monitor is
                designed to provide  early  warning of certain  thermal  failure
                conditions,  which could lead to  shutdown  of  hydrogen  cooled
                electric  power  generators.  The  Cirrus  IFD  provides  unique
                capabilities  that  allow  for area  fire  detection  often  not
                attainable by any other means, such as operational  stability in
                adverse ambient  conditions,  an air sampling system that allows
                for small, low maintenance, electrically inert sample heads that
                are adjustable to different  levels of sensitivity  resulting in
                low false alarm rates. During 1995, the Hydrogen Control Cabinet
                was  added  to  the  Detection  Systems  product  offerings. The
                Hydrogen  Control  Cabinet  continuously  analyzes the purity of
                hydrogen and controls the rate of scavenging in hydrogen  cooled
                turbine  generators.  The Detection Systems products are sold by
                direct sales from the Company's  marketing  function and through
                an  independent  network of  distributors  in the United States,
                Canada, and a few countries  overseas.  There are believed to be
                only two other  manufacturers of this type of detection  systems
                equipment worldwide.
<PAGE>
       (b)  Principles of Consolidation
            The consolidated   financial   statements   include  the   financial
                statements of Environment One Corporation and its majority-owned
                foreign   subsidiary,   which  was  incorporated  in  1990.  All
                significant  intercompany  balances and  transactions  have been
                eliminated in consolidation.

       (c)  Net Income (Loss) Per Common Share
            Net income (loss) per common share is based upon 4,090,065  weighted
                average outstanding shares in 1995 and 4,082,563 shares in 1994.
                Fully  diluted  net  income  (loss)  per  common  share  is  not
                materially  different  from primary net income (loss) per common
                share.

       (d)  Revenues, Costs and Inventories
            Sales and related  cost of sales are  recognized  when  products are
                shipped  to  customers.  Inventories  are valued at the lower of
                cost or market (net realizable  value),  costs being  determined
                principally on the basis of standards which approximate  average
                current production costs.

       (e)  Property, Plant and Equipment
            Property,  plant and equipment are stated at cost.  Equipment  under
                capital  leases is stated at the present  value of minimum lease
                payments at the inception of the lease.

            Depreciation on property,  plant and equipment is computed using the
                straight-line  method  for  financial  reporting  purposes,  and
                accelerated  methods for income tax  purposes.  Equipment  under
                capital  leases is amortized  straight-line  over the shorter of
                the  lease  term or  estimated  useful  life of the  asset.  For
                financial   reporting   purposes,   the  Company   provides  for
                depreciation of property, plant and equipment over the following
                estimated useful lives:

                    Land improvements                                 5-20 years
                    Building and building improvements                3-45 years
                    Machinery and equipment                           2-20 years

       (f)  Patents and Other Assets
            The costs of patents  covering  products  expected  to be viable are
                deferred  and  amortized  on a  straight-line  basis over twenty
                years from the date of filing or  seventeen  years from the date
                of grant,  whichever is greater.  The deferred costs of specific
                patent  applications are written off if a patent  application is
                rejected. Loan financing fees are amortized over the term of the
                loan to which they relate.

       (g)  Research and Development
            All research  and   development   costs  are  charged   directly  to
                operations  as  incurred.  Research  and  development  costs  of
                approximately  $266,000  and  $328,000  during  1995  and  1994,
                respectively,   are  included  in  general  and   administrative
                expense.
<PAGE>
       (h)  Income Taxes
            Income taxes are accounted for under the asset and liability method.
                Deferred  tax  assets and  liabilities  are  recognized  for the
                future tax consequences  attributable to differences between the
                financial  statement  carrying  amounts of  existing  assets and
                liabilities  and  their  respective  tax  bases  and tax  credit
                carryforwards.  Deferred tax assets and liabilities are measured
                using enacted tax rates  expected to apply to taxable  income in
                the years in which those  temporary  differences are expected to
                be recovered  or settled.  The effect on deferred tax assets and
                liabilities  of a change in tax rates is recognized in income in
                the period that includes the enactment date.

       (i)  Foreign Currency Translation
            Accounts of the foreign  subsidiary  have been  translated into U.S.
                dollars  substantially in accordance with Statement of Financial
                Accounting Standards No. 52.

       (j)  Use of Estimates
            Management  of the  Company  has  made a  number  of  estimates  and
                assumptions  relating to the reporting of assets and liabilities
                and the  disclosure  of  contingent  assets and  liabilities  to
                prepare these financial  statements in conformity with generally
                accepted accounting principles. Actual results could differ from
                those estimates.

(2)    Short-term and Long-term Debt
       The Company has available a $2,500,000 line of credit of which $1,950,000
          is  available  at  December  31,  1995.  The line is  secured by trade
          accounts   receivable  and  inventories.   The  Company  had  $550,000
          outstanding  on this line of credit at December 31, 1995.  The Company
          must pay a commitment  fee of 1/4 of 1% annually on the unused portion
          of the line of credit. The interest rate on this short-term  borrowing
          at December 31, 1995 was based on the bank's prime rate plus 3/4%, and
          was 9.25%. The line of credit, unless extended or renewed,  expires on
          April 30, 1996.

       The Company's  long-term  debt consisted of the following at December 31,
          1995:
<TABLE>
<S>                                                                   <C>       
Construction  note,  payable in  installments  of $28,175  monthly
   beginning January 1, 1995, plus interest based on the bank's
   prime rate plus 1% (9.5% at December 31, 1995), secured by
   real property ..................................................   $2,176,694

Less installments due within one year .............................      338,100
                                                                      ----------
        Long-term debt, excluding current installments ............   $1,838,594
                                                                      ==========
</TABLE>

       The line of credit and  construction loan agreements  require  compliance
          with certain financial loan covenants related to minimum current, debt
          service coverage and debt-to-worth  ratios, as well as minimum working
          capital,  net  worth,  and  limitations  on capital  expenditures.  At
          December 31, 1995, the Company was in compliance with these covenants.
<PAGE>
       Future principal payments on long-term debt are as follows:

                           1996                      $  338,100
                           1997                         338,100
                           1998                         338,100
                           1999                         338,100
                           2000                         338,100
                           Thereafter                   486,194
                                                      ---------
                                                     $2,176,694
                                                     ==========

       The Company is not required to maintain compensating balances pursuant to
          the credit terms under its line of credit with the bank.

(3)    Leases
       The Company  has  entered  into  capital lease  arrangements  for certain
          machinery and equipment. The Company is also a party to noncancellable
          operating  leases for the rental of equipment and office space.  Total
          rent expense  incurred by the Company  under  operating  leases during
          1995 and 1994 was $17,679 and $37,304, respectively.

       The present value of future minimum capital lease payments and the future
          minimum lease payments  under  noncancellable  operating  leases as of
          December 31, 1995 are as follows:
<TABLE>
<CAPTION>
                                                  Capital            Operating
                                                  Leases              Leases
                                                  ------             ---------
<S>                                               <C>                  <C>   
1996                                              $  150               16,940
1997                                                  -                 8,832
1998                                                  -                 7,004
1999                                                  -                 3,052
                                                  ------               ------
Total future minimum lease payments                  150               35,828
                                                                       ======
Less amount representing interest                      5
                                                  ------
Present value of minimum lease payments           $  145
                                                  ======
</TABLE>
(4)    Shareholders' Equity
       During 1995 and 1994,  13,600 and 6,000  shares of the  Company's  common
          stock were  issued  upon  exercise  of stock  options  for $11,900 and
          $3,375, respectively.  During 1995, 15,000 shares of common stock held
          in treasury  were issued as  compensation  and valued in the amount of
          $45,000 to the Company's  Chairman.  In addition,  during 1994,  5,000
          shares of common  stock held in treasury  were issued as  compensation
          and valued in the amount of $10,000 to an outside consultant.

       The Company  has  reserved  190,350  shares  of its common  stock for the
          exercise of stock options. The options were granted pursuant to a plan
          approved by the  shareholders in 1971  authorizing  100,000 shares for
          option grants.  During 1991, the shareholders approved an amendment to
          the plan,  authorizing  400,000 shares for option  grants.  The option
          price is equal to the fair market value of the stock at date of grant.
<PAGE>
       The following table  summarizes,  by date of grant, the number of options
          issued and exercise price per share.  Unless otherwise noted,  options
          are exercisable 20% per year beginning one year from date of grant and
          expire ten years from date of grant:
<TABLE>
<CAPTION>
                   Date of Grant        Number of Options Issued      Option Price
                   -------------        ------------------------      ------------ 
<S>                                             <C>                     <C>    
                  December 1986                 19,500                  $0.3750
                                                ======                  =======

                  June     1987                 30,000 (a)              $0.9375
                                                ======                  =======

                  June     1988                 22,500                  $0.9375
                                                ======                  =======

                  May      1990                 19,000                  $2.3750
                                                ======                  =======

                  July     1991                 16,500                  $1.4375
                                                ======                  =======

                  July     1992                 30,000                  $2.8750
                                                ======                  =======

                  April    1993                 47,000                  $2.6250
                                                ======                  =======

                  May      1994                 41,000                  $2.3750
                                                ======                  =======

                  May      1995                 48,500                  $3.0000
                                                ======                  =======
</TABLE>
                  (a) Exercisable at 10,000 shares per year beginning one year
                      from the date of grant.
<PAGE>
       The following table summarizes stock option  transactions during 1995 and
1994:
<TABLE>
<CAPTION>
                                                            Option shares
                                                            -------------
                                                        1995             1994
                                                      --------         --------
<S>                                                    <C>              <C>    
Outstanding at beginning of year .............         155,450          144,450
Granted ......................................          48,500           41,000
Exercised ....................................         (13,600)          (6,000)
Expired ......................................            --            (24,000)
                                                      --------         --------

Outstanding at end of year ...................         190,350          155,450
                                                      ========         ========

Exercisable at end of year ...................          73,350           56,250
                                                      ========         ========
</TABLE>

(5)    Sale of Measurements Division
       During April 1994, the Company sold its measurements division and related
          assets to an outside party for a total of $271,458.  The consideration
          received for the sale was $130,000 in cash and a five-year  promissory
          note  receivable  of  $141,458,  payable  in monthly  installments  of
          interest only through April,  1996.  BBeginning May 1, 1996,  payments
          are to be made in sixty  consecutive  equal  monthly  installments  of
          principal  and interest in the amount of $2,818.  Interest on the note
          is 7.5% per annum, and the Company has a secondary  security  interest
          in the assets in the event of default.  The  machinery  and  equipment
          involved in the  transaction  had a net book value at the date of sale
          of $37,795, for a realized gain of $233,663.  The gain, net of certain
          other   expenses,   is  included  in   miscellaneous   income  in  the
          accompanying consolidated financial statements.

(6)    Income Taxes
       Income tax expense  (benefit)  for the years ended  December 31, 1995 and
          1994 consists of:
<TABLE>
<CAPTION>
                                           1995          1994
                                         --------      --------
<S>                                     <C>             <C>
Current:
     Federal ......................      $382,213      (182,351)
     State ........................        70,000           425
                                         --------      --------
                                          452,213      (181,926)
Deferred ..........................        54,921       (68,226)
                                         --------      --------
                                         $507,134      (250,152)
                                         ========      ======== 
</TABLE>
<PAGE>
       The following table  reconciles the expected tax expense (benefit) at the
          Federal statutory rate to the effective tax rate.
<TABLE>
<CAPTION>
                                                            1995                           1994
                                                            ----                           ----
                                                  Amount             %           Amount              %
                                                ---------           ----        ---------           ----
<S>                                             <C>                 <C>         <C>                <C>    
Computed expected tax expense (benefit)         $ 451,694           34.0%       $(286,639)         (34.0)%
State taxes, net of Federal benefit ....           46,200            3.5              281             --
Research and experimentation credit ....          (38,433)          (2.9)            --               --
Nondeductible loss of foreign subsidiary           10,320            0.8           14,866            1.8
Nondeductible expenses .................           12,322            0.9           11,809            1.4
Other ..................................           25,031            1.9            9,531            1.1
                                                ---------           ----        ---------           ----
                                                $ 507,134           38.2%       $(250,152)         (29.7)%
                                                =========           ====        =========           ====
</TABLE>

       For the year ended December 31, 1995, the deferred  income tax expense of
          $54,921  results  from the changes in temporary  differences.  The tax
          effects of temporary differences that give rise to deferred tax assets
          and deferred  tax  liabilities  as of December 31, 1995 are  presented
          below:
<TABLE>
<S>                                                                   <C>      
Deferred tax assets:
    Accounts receivable, due to allowance 
       for doubtful accounts ......................................   $  10,855
    Inventories, principally due to additional costs
       inventoried for tax purposes pursuant to the Tax Reform
       Act of 1986 and inventory reserves .........................      47,999
    Capital lease obligations .....................................          48
    Pension accrual ...............................................      53,699
                                                                      ---------
           Total gross deferred tax assets ........................     112,601
           Less valuation allowance ...............................        --
                                                                      ---------
                                                                        112,601

Deferred tax liabilities:
   Property, plant and equipment, due to differences
      in depreciation lives and methods ...........................     (21,716)
                                                                      ---------
            Net deferred tax asset ................................   $  90,885
                                                                      =========
</TABLE>

       At December 31,  1994,  the net deferred tax asset was $145,806 and there
          was no recorded valuation allowance.

       At December  31,  1995,  the  Company has New York State  investment  tax
          credit carryforwards of approximately $154,000.
<PAGE>
       In assessing  the  realizability  of  deferred  tax  assets,   management
          considers  whether it is more likely than not that some portion or all
          of the  deferred  tax  assets  will  not  be  realized.  The  ultimate
          realization of deferred tax assets is dependent upon the generation of
          future  taxable  income  during the periods in which  those  temporary
          differences  become  deductible.  Management  considers  the projected
          future  taxable  income and tax  planning  strategies  in making  this
          assessment.  In order to fully  realize the deferred  tax assets,  the
          Company will need to generate  future taxable income of  approximately
          $268,000.  The  Company had federal  taxable  income of  approximately
          $1,200,000  in  1995  and a  federal  taxable  loss  of  approximately
          $512,000 in 1994.  Based upon the level of historical  taxable  income
          and  projections  for future  taxable income over the periods in which
          the deferred tax assets are deductible, management believes it is more
          likely  than  not the  Company  will  realize  the  benefits  of these
          deductible   differences.   The  amount  of  the  deferred  tax  asset
          considered  realizable,  however, could be reduced in the near term if
          estimates of future taxable income are reduced.

       At December  31,  1995, $112,601 of deferred  tax assets are  included in
          other current assets.

(7)    Employee Benefit Plans
       The Company  has  a  defined  benefit   pension  plan  available  to  all
          employees.  Effective  January  1,  1993,  the Plan was  amended to be
          non-contributory.  The  benefits are based on years of service and the
          employees'  earnings  history  during  the  years of  employment.  The
          Company's funding policy is to contribute  annually the maximum amount
          that can be deducted for Federal  income tax  purposes.  Contributions
          are intended to provide not only for benefits attributed to service to
          date but also for those  expected  to be earned  in the  future.  Plan
          assets consist of group annuity contracts which represent  investments
          in mortgages and bonds.

       The following  table  sets  forth the Plan's  funded  status  and amounts
          recognized in the Company's consolidated balance sheet at December 31,
          1995:
<TABLE>
<S>                                                                 <C>         
Accumulated benefit obligation, including vested benefits of
   $785,355  ...............................................        $  (825,385)
                                                                    ===========

Projected benefit obligation for service rendered to date ..         (1,358,546)
Plan assets at fair value ..................................            746,995
                                                                    -----------
Deficiency of plan assets over projected benefit obligation            (611,551)
Unrecognized prior service cost ............................            195,171
Unrecognized net loss from past experience different from
   that assumed and effects of changes in assumptions ......            287,897
Unrecognized net asset at January 1, 1987 being recognized
   over 15 years ...........................................            (29,454)
                                                                    -----------

   Accrued pension cost ....................................        $  (157,937)
                                                                    ===========
</TABLE>
<PAGE>
       Net pension cost included the following components:
<TABLE>
<CAPTION>
                                                           1995           1994
                                                           ----           ----
<S>                                                     <C>             <C>    
Service cost - benefits earned during the period ...    $ 134,772       141,379
Interest cost on projected benefit obligation ......       86,818        76,860
Actual return on plan assets .......................      (60,310)      (60,677)
Net amortization and deferral ......................       19,083         9,107
                                                        ---------     ---------
   Net periodic pension cost .......................    $ 180,363       166,669
                                                        =========     =========
</TABLE>

       Assumptions  used in  accounting  for the pension plan as of December 31,
1995 and 1994 were:
<TABLE>
<CAPTION>
                                                                  1995        1994
                                                                  ----        ----
<S>                                                               <C>         <C>  
Discount rate ..........................................          7.25%       8.00%
Rate of increase in compensation levels ................          6.00%       6.00%
Expected long-term rate of return on assets ............          8.00%       8.00%
</TABLE>

       During 1990,  the Company  established a profit  sharing plan that covers
          substantially  all employees of Environment  One  Corporation.  Profit
          sharing expense was $132,852 in 1995 and $0 in 1994.

       During  1992,  the  Company  established  a 401(k)  savings  plan that is
          available to all employees who meet certain eligibility  requirements.
          The Company does not contribute to this plan.

(8)    Fair Value of Financial Instruments
       The following  methods  and  assumptions were used to  estimate  the fair
          value  of  each  class  of  financial  instruments  for  which  it  is
          practicable to estimate that value.

       (a)  Cash,  Accounts  Receivable,  Note Receivable,  Accounts Payable and
            Accrued Expenses
            The carrying amount of cash, accounts  receivable,  accounts payable
                and  accrued  expenses  approximates  fair value  because of the
                short maturity of these instruments.  The carrying amount of the
                note receivable  approximates  fair value because the note bears
                interest that approximates the market rate.

       (b)  Note Payable and Long-term Debt
            The interest  rates on the Company's note payable and long-term debt
                are reset  according to changes in the current  market (see note
                2).  Consequently,  the carrying  value of the note  payable and
                long-term debt approximates fair value.
<PAGE>
(9)    Industry Segment Information
       The Company's operations consist of two segments that are concerned with
          the  development,  production  and marketing of products and services.
          Sewer  Systems  consists of products  designed to transport  and treat
          sanitary  sewer waste.  Operations  of the Detection  Systems  segment
          include  the  production  and sale of  products  designed  to  protect
          equipment  and  facilities,  and until  April 1994 also  included  the
          Measurements  Division.  Total revenue  includes sales to unaffiliated
          customers; there are no intersegment sales.
<TABLE>
<CAPTION>
                         Sales to unaffiliated customers        Income (loss) from operations
                         -------------------------------       -------------------------------
                            1995               1994                1995               1994
                         -----------        -----------        -----------         -----------
<S>                      <C>                 <C>                 <C>                   <C>     
Sewer Systems ...        $15,212,914         10,130,271          1,734,186             (69,822)
Detection Systems          2,127,518          2,234,303            (97,370)           (731,238)
Corporate .......               --                 --              (22,902)            (24,901)
                         -----------        -----------        -----------         -----------
                         $17,340,432         12,364,574          1,613,914            (825,961)
                         ===========        ===========        ===========         ===========
<CAPTION>
                                  Total assets
                         ------------------------------
                            1995               1994    
                         -----------        -----------
<S>                      <C>                 <C>      
Sewer Systems ...        $6,446,760          5,760,390
Detection Systems         1,113,824          1,187,932
Corporate .......         1,161,331          1,431,046
                         ----------         ----------   
   Total                 $8,721,915          8,379,368
                         ==========         ==========                       
<CAPTION>
                                            Property, plant and equipment
                         ---------------------------------------------------------------------
                                    Additions                   Depreciation and amortization
                         ------------------------------        -------------------------------
                            1995               1994                1995               1994
                         -----------        -----------        -----------         -----------
<S>                      <C>                 <C>                   <C>                 <C>     
Sewer Systems ...        $   349,518            812,349            397,584             294,614
Detection Systems             18,157             45,949             28,577              72,503
Corporate .......             80,424            143,612            126,577             180,525
                         -----------        -----------        -----------         -----------
                         $   449,099          1,001,910            552,738             547,642
                         ===========        ===========        ===========         ===========
<PAGE>
<CAPTION>
                          Amortization and abandonment
                              of intangible assets
                         ------------------------------
                            1995               1994    
                         -----------        -----------
<S>                      <C>                 <C>      
Sewer Systems ...         $   16,721             27,560
Detection Systems                953              2,801
                         -----------        -----------
   Total ........         $   17,674             30,361
                         ===========        ===========                      
</TABLE>

       Export sales of low pressure  sewer systems were  approximately  3.7% and
       5.7% of total Company sales in 1995 and 1994, respectively.  Export sales
       of  detection  instruments  were  approximately  7.2%  and  8.4% of total
       Company sales in 1995 and 1994, respectively.

(10)   Business and Credit Concentrations
       (a)  Concentration of Credit Risk and Sales to Major Customers
            Financial  instruments  which  potentially  subject the Company to a
                concentration  of credit risk  principally  consist of trade and
                note  receivables.  The  Company  sells  products  to  customers
                primarily  in  the  United  States.   The  Company's  top  eight
                customers   comprised   approximately   53%  of  trade  accounts
                receivable  at December 31,  1995.  To reduce  credit risk,  the
                Company  performs  ongoing  credit  evaluations of customers but
                generally does not require collateral. Allowances are maintained
                for potential  credit  losses,  and such losses have been within
                management's expectations.

            In  addition,  during the years  ended  December  31, 1995 and 1994,
                sales  to  a  single  customer   amounted  to  14%  and  15%  of
                consolidated sales, respectively.

            The note   receivable   represents  the  financed   portion  of  the
                Measurement  Division sale (see note 5). The Company maintains a
                security interest in the equipment sold.

       (b)  Concentration of Purchasing Risk
            At  December 31, 1995,  approximately 51% of the Company's purchases
                were made from ten vendors.  No individual vendor comprises more
                than 9% of total purchases in 1995.
<PAGE>
(11)   Subsequent Event
       In January  1996,  the Company  concluded an  agreement  with PROTEC Fire
          Detection,  plc of  Nelson,  Lancashire,  England  for the sale of its
          Cirrus IFD product line.  During 1995, sales of the Cirrus IFD product
          line  amounted to  approximately  $1.2 million or 53% of the Detection
          Systems business. In a two-stage transaction with an approximate value
          of $.75 million,  the Company  transferred all Cirrus IFD assets, with
          an  approximate  book value of $6,200,  and  operations  to PROTEC and
          simultaneously  entered into a product technical  development contract
          to be concluded during 1996.


Item 8.  Changes In and Disagreements With Accountants on Accounting and
         Financial Disclosure

                                      None


                           Environment One Corporation
                                   Form 10-KSB
                                    Part III

Item 9.  Directors and Executive Officers of the Company
<TABLE>
<CAPTION>
                                                                  Date
        Name                        Position                  Office Began              Age
        ----                        --------                  ------------              ---
<S>                                 <C>                         <C>                     <C>
Walter W. Aker                      Director                    Dec 1968                77

John L. Allen                       Director                    May 1993                52

Stephen V. Ardia                    Chairman                    May 1995                54
                                    Director

Robert H. Brooks                    Director                    May 1990                **

David M. Doin                       Vice President              Sept 1991               40

Angelo Dounoucos                    President, CEO              May 1988                63
                                    Director

Lars Grenback                       Director                    May 1993                52

Robert G. James                     Director                    May 1984                71

Volker A. Mohnen                    Director                    May 1984                59

Rolf E. Soderstrom                  Director                    May 1991                63

Frank W. Van Luik, Jr.              Director                    Dec 1968                73

Philip W. Welsh                     Treasurer                   May 1995                38

** Deceased January, 1996
</TABLE>
<PAGE>
All executive  officers of the Corporation are included in the preceding  table.
Executive  officers  serve  until the Board of  Directors'  meeting  immediately
following  the Annual  Meeting of  Shareholders  or until their  successors  are
elected.

Directors  elected at the Company's  Annual  Meeting serve until the next Annual
Meeting.  All of the above  directors  were elected by the  Shareholders  at the
Annual Meeting held May 25, 1995.

Business Experience During the Past Five Years:

Walter W. Aker
He was vice president of the Company from 1968 to 1975 and from 1982 to 1993. He
was elected corporate secretary from 1976 to 1993.

John L. Allen
He is managing partner for the Financial Services Practice,  North America,  for
Heidrick & Struggles, Inc., a global executive search firm. He is located in the
Boston,  MA office and is also a director of the firm.  Prior to his joining the
firm in 1991, he had 24 years in banking  including  nearly  thirteen as a chief
executive officer of Amoskeag Bank Shares, Inc. and Key Bank of Southeastern New
York.  He has a  bachelor  of science  degree in  business  administration  from
Rochester  Institute of Technology,  a master of public  administration from the
Graduate School of Public Affairs,  State  University of New York (SUNY) Albany,
and  is a  graduate  of the  Harvard  Business  School  Program  for  Management
Development.

Stephen V. Ardia
He received his master of business  administration from Rutgers University and a
bachelor of science degree from the U.S. Merchant Marine Academy.  After working
with Goulds  Pumps,  Inc.  since 1965,  he became their  president  in 1985.  He
retired in 1994 joining Environment One Corporation as chairman in May, 1995. He
presently  serves  as a member of the board of  directors  of Blue  Cross / Blue
Shield of Rochester, New York and MaxTec Holdings of Dallas, Texas.

Robert H. Brooks
He received his bachelor of science degree from Rensselaer Polytechnic Institute
in 1952. He had extensive  experience in  manufacturing  services and industrial
engineering on a worldwide  basis. The Company was saddened by Mr. Brook's death
in January,  1996.  Mr.  Brooks  contributed a  considerable  amount of time and
effort to Environment One and will be truly missed.

David M. Doin
He was elected vice president in September,  1991 and also serves as the general
manager of the Detection Systems  Business.  He received his bachelor of science
degree in business  from the State  University of New York at Albany in 1983. He
joined  the  Company in 1977 in  Measurement  Services  sales and was  appointed
product manager, Scientific Instuments, in 1981.

Angelo Dounoucos
He was vice president and director of Environment One  Corporation  from 1969 to
1976.  He rejoined the Company in 1986 after eight years as a project  marketing
manager at the General Electric  Corporate  Research and Development  Center. He
was elected  president on January 1, 1989 and chief  executive  officer on March
14, 1990.
<PAGE>
Lars Grenback
He received his bachelor of economics  and business  administration  degree from
Uppsala University,  Sweden in 1969 and his university certificate in marketing,
advertising and public  relations in 1970.  Since 1975, he has been working with
the low  pressure  sewer  system  in the  Scandinavian  countries  and has  been
president of Skandinavisk Kommunalteknik AB since 1980.

Robert G. James
He received his bachelor of science  degree from  Northwestern  University,  his
master's degree in business  administration from Harvard Business School in 1948
and his doctorate in economics from the Harvard  Graduate School in 1952.  Since
1970 he has been  president  and  managing  partner  of  Enterprise  Development
Associates  (Real  Estate  and  Development).  He is  also  a  Certified  Public
Accountant.

Volker A. Mohnen
He studied  at the  Technical  University  at  Karlsruhe,  Germany  majoring  in
physics.  He continued at the  University of Munich where he received his master
of science degree in 1963 and his doctorate in physics in 1966. Since May, 1967,
he has been associated  with the State  University of New York (SUNY) Albany and
served as the director of the Atmospheric  Sciences Research Center from 1975 to
1986.  He is currently a full  professor  in SUNY's  Department  of  Atmospheric
Sciences.

Rolf E. Soderstrom
He received his bachelor of science degree in engineering  from Tufts University
and his master's degree from Northeastern  University.  He has thirty-five years
of line  management  experience as vice  president of Motorola,  executive  vice
president of Codex  Corporation  and  assistant  general  manager of the Systems
Division of the Foxboro Company.  He is president of the TCS Group, a management
consulting firm; vice president of Meta Media, a software company; a director of
Walpole  Massachusetts  Cooperative  Bank; and a managing director of the Nassau
Group, a private investment banking company.

Frank W. Van Luik, Jr.
He was elected president and chief executive officer in March 1984. He served as
executive  vice  president  and chief  executive  officer since June 1982 having
previously  served as vice  president  since 1968.  He was elected  chairman and
chief  executive  officer  effective  January 1, 1989. He retired from the chief
executive officer position on January 1, 1990 and as chairman May 25, 1995.

Philip W. Welsh
He was  elected  treasurer  in May,  1995 and also  serves  as the  director  of
finance.  He  received  his  bachelor  of science  degree in  business  from the
Pennsylvania State University in 1979 and his master of business  administration
from the California State  University at Long Beach in 1987.  Before joining the
Company  in 1992,  he had worked for  Hughes  Aircraft  Company in Los  Angeles,
California as a finance and accounting manager.

Item 10. Executive Compensation

Information  required by this item is contained in the Company's Proxy Statement
for its May 23, 1996 Annual Meeting, which is incorporated herein by reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management

Information  required by this item is contained in the Company's Proxy Statement
for its May 23, 1996 Annual Meeting, which is incorporated herein by reference.
<PAGE>
Item 12. Certain Relationships and Related Transactions

                                      None

Item 13. Exhibits and Reports of Form 8-K

Exhibits
--------
3.1  Registrant's  Certificate of  Incorporation,  as amended,  incorporated  by
     reference to Exhibit 3.1 to Form 10-Q Report for the period ending 6/30/88.
     (File No. 1-7037)

3.2  Registrant's by-laws, as amended,  incorporated by reference to Exhibit 3.2
     to Form 10-Q Report for the period ending 6/30/88. (File No. 1-7037)

4.1  Specimen of Registrant's Common Stock Certificate incorporated by reference
     to Exhibit 4.0 of Registration Statement. (File No. 2-38321)

4.2  $2,500,000  Secured  Working  Capital  Revolving  Line of Credit Loan dated
     August 19, 1992 between the Registrant and Fleet Bank of New York.

4.3  $3,000,000 Loan and Security  Agreement dated December 30, 1992 between the
     Registrant and Fleet Bank of New York.

4.4  Note and Secured Revolving Line of Credit Agreement  Modification Agreement
     No. 2 dated March 20, 1995  between  the  Registrant  and Fleet Bank of New
     York.

4.5  Note and Loan and Security  Agreement  Modification  Agreement  No. 2 dated
     March 20, 1995 between the Registrant and Fleet Bank of New York.

4.6  Note and Secured Revolving Line of Credit Agreement  Modification Agreement
     No. 3 dated March 30, 1995  between  the  Registrant  and Fleet Bank of New
     York.

4.7  Note and Loan and Security  Agreement  Modification  Agreement  No. 3 dated
     March 30, 1995 between the Registrant and Fleet Bank of New York.

4.8  Note and Secured Revolving Line of Credit Agreement  Modification Agreement
     No. 4 dated October 18, 1995 between the  Registrant  and Fleet Bank of New
     York.

4.9  Note and Loan and Security  Agreement  Modification  Agreement  No. 4 dated
     October 18, 1995 between the Registrant and Fleet Bank of New York.

4.10 Building Loan  Agreement  Modification  Agreement  dated  November 15, 1995
     between the Registrant and Fleet Bank of New York.

4.11 $2,500,000  Secured  Working  Capital  Revolving  Line of Credit Note dated
     October 18, 1995 between the Registrant and Fleet Bank of New York.

10.1 Registrant's  1972 Stock Option Plan  incorporated  by reference to Exhibit
     10.1 to Form 10-K Report for the year ended 12/31/88. (File No. 1-7037)

Reports on Form 8-K

No reports on Form 8-K were filed during the fourth  quarter ended  December 31,
1995.
<PAGE>
                           Environment One Corporation
                                   Form 10-KSB

                                   SIGNATURES

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

Environment One Corporation
(Registrant)



---------------------------------           ------------------------
Stephen V. Ardia.                                    Date
Chairman and Director

Pursuant to the requirements of the Securities  Exchange Act of 1934 this report
has been signed by the following  persons,  which  included the chairman,  chief
executive officer,  director of finance and a majority of the Board of Directors
on behalf of the Registrant and in the capacities and on the dates indicated.



---------------------------------   ---------------------------------
Stephen V. Ardia.            Date   Lars Grenback              Date
Chairman and Director               Director



---------------------------------   ---------------------------------
Angelo Dounoucos             Date   Robert G. James              Date
President, CEO and Director         Director



---------------------------------   ---------------------------------
Philip W. Welsh              Date   Volker A. Mohnen             Date
Director of Finance and Treasurer   Director



---------------------------------   ---------------------------------
Walter W. Aker               Date   Rolf E. Soderstrom           Date
Director                            Director



---------------------------------   ---------------------------------
John L. Allen                Date   Frank W. Van Luik, Jr        Date
Director                            Director