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

             [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2003.

                                       OR

             [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
                         COMMISSION FILE NUMBER: 000-21953

                         ENVIRONMENTAL SAFEGUARDS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                    NEVADA                                  87-0429198
          (State or other jurisdiction                    (IRS Employer
        of incorporation or organization)              Identification  No.)

                              2600 SOUTH LOOP WEST,
                                   SUITE 645,
                              HOUSTON, TEXAS 77054
          (Address of principal executive offices, including zip code)

                                 (713) 641-3838
              (Registrant's telephone number, including area code)

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

                                                 NAME OF EACH EXCHANGE
           TITLE OF EACH CLASS                    ON WHICH REGISTERED
     ----------------------------------     -----------------------------
       Common Stock, $.001 par value               OTC Bulletin Board

        Securities registered pursuant to 12(g) of the Exchange Act: NONE

     Check  whether  the  issuer  (1)  filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the registrant was required to file such reports), and (2)
has  been subject to such filing requirements for the past 90 days.
                                                                  Yes [X] No [ ]

     Check  if  there  is no disclosure of delinquent filers in response to Item
405  of  Regulation  S-B  is  not  contained  herein,  and no disclosure will be
contained,  to  the  best  of  registrant's  knowledge,  in  definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or  any  amendment  to  this  Form  10-KSB.  [X]

     State issuers revenues for its most recent fiscal year. $ 1,723,000.

     State the aggregate market value of the voting and non-voting common equity
held  by  non-affiliates  computed by reference to the price at which the common
equity was sold, or the average bid and ask price of such common equity, as of a
specified date within the past 60 days. $967,058 as of March 15, 2004.

     State  the  number of shares outstanding of each of the issuer's classes of
common  equity,  as of the latest practicable date.  10,745,091 shares of Common
Stock  as  of  March  15,  2004.

                      DOCUMENTS INCORPORATED BY REFERENCE


Transitional Small Business Disclosure Format:  Yes [ ] ; No [X]


<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS


                                                                                    PAGE
<S>       <C>                                                                       <C>
                                     PART I

Item 1.   Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1
Item 2.   Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5
Item 3.   Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . .       6
Item 4.   Submission of Matters to a Vote of Security Holders. . . . . . . . .       6


                                    PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters
          And Small Business Issuer Purchases of Equity Securities . . . . . .       7
Item 6.   Management's Discussion and Analysis or Plan of Operations . . . . .       8
Item 7.   Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .      12
Item 8.   Changes in and Disagreements With Accountants on Accounting
          and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . .      12
Item 8A.  Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . .      13


                                    PART III

Item 9.   Directors and Executive Officers of the Registrant . . . . . . . . .      14
Item 10.  Executive Compensation . . . . . . . . . . . . . . . . . . . . . . .      14
Item 11.  Security Ownership of Certain Beneficial Owners and
          Management and Related Stockholder Matters . . . . . . . . . . . . .      14
Item 12.  Certain Relationships and Related Transactions . . . . . . . . . . .      14
Item 13.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . .      14
Item 14.  Principal Accountant Fees and Services . . . . . . . . . . . . . . .      16
</TABLE>


<PAGE>
                                     PART I

ITEM  1.  BUSINESS

INTRODUCTION

     Environmental  Safeguards,  Inc.  is engaged in the development, production
and sale of environmental remediation and recycling technologies and services to
waste  management  companies,  oil  and  gas  companies,  and  other  industrial
customers,  through  its  wholly-owned  subsidiary  OnSite  Technology,  L.L.C.
("OnSite").  We are devoting substantially all of our efforts to the development
of  markets for OnSite's services. We are currently providing recycling services
to  companies  engaged  in  waste  management,  refining,  and  other industrial
applications.

     During  the  period  from  1996  until  2000  a  substantial portion of our
revenues  were  generated  from  major  international  oil  and  gas  industry
participants  in  Latin America (Columbia, Venezuela and Mexico) as well as from
other  domestic  and  foreign  industrial applications. As of March 2004 we have
completed  our  foreign  contract operations, and have taken steps to close down
certain  of  our  foreign  subsidiaries.  We are now concentrating our marketing
efforts  and  resources  on domestic downstream plants, manufacturing facilities
and  waste  management  facilities,  where our proprietary equipment and process
have a competitive advantage in waste minimization, and recycling/reuse of waste
streams.

          Highlights  of  our  foreign  operations:

     OnSite  Colombia,  Inc.  ("OSC"):  In  November 1996, we formed a 50%-owned
joint company OSC to provide hydrocarbon contaminated soil recycling services to
oil  and  gas  industry  participants  operating  in  Colombia. Having completed
contract  operations  in  Colombia, we re-acquired the 50% minority ownership of
OSC and subsequently moved our equipment back to the United States and initiated
formal  procedures  to  liquidate  the  legal  entity  OSC. As of March 2004 the
liquidation  process  was  under  way.

     OnSite  Venezuela,  Inc. ("OSV"): In January 1998, we formed our 100% owned
subsidiary  OSV,  and  commenced  operations to provide hydrocarbon contaminated
soil  recycling  services  to  oil  and  gas  industry participants operating in
Venezuela.  Following  completion  of  contract  operations  in  Venezuela,  the
equipment  was  moved back to the Unites States and the liquidation of the legal
entity  has  been  completed.

     OnSite  Arabia, Inc. ("OSA"): In December 1998, we formed a 50%-owned joint
company  OSA  to provide hydrocarbon contaminated soil recycling services to oil
and gas industry participants operating in the Arabian Gulf region.

     OnSite  Environmental  UK,  Ltd.  ("OSE"):  In April 1999, we formed OSE, a
wholly-owned  subsidiary,  for operations in Scotland. Having completed contract
operations  in  Scotland,  the equipment was moved back to the United States and
the  liquidation  of  this  legal  entity  has  been  completed.

     OnSite  Mexico LLC ("OSM"): In July 1999, we registered OSM, a wholly-owned
subsidiary,  for  operations  in  Mexico. OSM has completed operations, sold the
equipment  and  the  procedures  for  the  liquidation  of the legal entity have
commenced.

     OST  Ambiental  S  de RL de CV ("SRL"): In March 2001, we registered SRL, a
wholly-owned  subsidiary,  for  operations  in  Mexico.  SRL  has  completed all
operations,  moved  the equipment back to the United States, and the liquidation
of  this  legal  entity  has  been  completed.

Refining  and  other  types  of  industrial activities often produce significant
quantities  of  petroleum-contaminated  waste  from  which  our Indirect Thermal
Desorption  ("ITD")  process  can  extract  and  recover  the  hydrocarbons  as
re-useable  or  re-saleable  liquids, and produce recycled solids compliant with
environmental  regulations.  The  activities  of  OnSite  include  use  of  ITD
technology  to  address  hydrocarbon  contamination  problems  and  hydrocarbon
recycling  and  reclamation  opportunities  at  heavy  industrial,  refining,
petrochemical  and  waste management sites, as well as at Superfund, DOD and DOE
sites. We provide these services on-site or at the central location to which the
customer  hauls  the  contaminated  materials.


                                        1
<PAGE>
HISTORY

     We  were  incorporated  under  the  laws of the State of Nevada in December
1985,  under the name of Cape Cod Investment Company. In December 1986, our name
was  changed  to  Cape  Cod  Ventures,  Inc.  In  August 1987, an initial public
offering was completed for 4,148,000 shares of Common Stock at a price of $0.001
per  share  pursuant  to the exemption from the registration requirements of the
Securities  Act  of 1933 provided by Regulation A. In May 1993, an Agreement and
Plan of Reorganization was executed with National Fuel & Energy, Inc., a Wyoming
corporation,  providing for the acquisition of NFE in exchange for shares of our
Common  Stock.  In  connection  with the reorganization, our name was changed to
Environmental Safeguards, Inc., and NFE became our wholly-owned subsidiary.

     In  January 1995, we entered into an agreement with Parker Drilling Company
("Parker"),  a  Delaware corporation, granting Parker exclusive marketing rights
to  our  proprietary processes for on-site remediation and recycling services in
connection  with  drill  cuttings  at  oil and gas drilling sites throughout the
United  States  and  in  certain  foreign  countries  and  in  return  received
engineering,  fabrication  and technical assistance from Parker. In August 1995,
we  formed  OnSite  as  a corporate embodiment of our January 1995 agreement, in
which  NFE  and  Parker  each  owned  50%.  In  December 1997, we entered into a
Purchase Agreement (the "Purchase Agreement") with Parker which provided for our
acquisition, through NFE, of Parker's 50% equity interest in OnSite resulting in
NFE becoming the owner of 100% of the equity interest in OnSite. Pursuant to the
terms  of the Purchase Agreement, we paid $8,000,000 for the 50% equity interest
and repaid a $3,000,000 loan that had been made to us by an affiliate of Parker.
As  part  of  the  transaction,  Parker  returned  to us unexercised warrants to
purchase  300,000  shares  of  our  Common  Stock.

     Our  sources  of  funds  to  effect  the  acquisition  included the sale of
$8,000,000  of  new  Series B Convertible Preferred Stock and Series C Preferred
Stock  to  an  investor  group  consisting of Cahill, Warnock Strategic Partners
Fund,  L.P.,  Strategic  Associates,  L.P., Newpark Resources, Inc. and James H.
Stone,  who  is  the  Chairman of Stone Energy Corporation and a secured loan of
$6,000,000  from  the  same  investor  group ("Loan Agreement"). Pursuant to the
financing,  David  L.  Warnock,  a  member  of Cahill, Warnock & Co., L.L.C. and
general  partner of Cahill, Warnock Strategic Partners Fund, L.P., was appointed
as  one  of  our  Directors.


BUSINESS  ACTIVITIES

     General:  Substantially all of our activities are conducted through OnSite,
which  is engaged in the development and production of remediation and recycling
technology  and  the  sale  of environmental remediation and recycling services.
OnSite owns the technologies included in its Indirect Thermal Desorption ("ITD")
units,  and  the  proprietary processes for on-site remediation and recycling of
hydrocarbon  contaminated  solids.  To  date,  the environmental remediation and
recycling  services  we  have  provided  have  involved the removal of petroleum
contaminants  from  waste  streams using our ITD units. Our ITD units are easily
transported  processing  systems  which  produce  clean solids from contaminated
solids  while  reclaiming  the  hydrocarbons. Our customers consist primarily of
large corporations with hydrocarbon or hydrocarbon derivative contaminated waste
streams  and  waste  management  companies  in  the  business  of offering waste
disposal  services.

     The  primary  services  we  offer  involve the remediation and recycling of
waste streams contaminated by oil-based drilling fluids, fuel spills, leakage at
storage  tanks,  refinery  wastes, ship sludges and other sources of hydrocarbon
contamination,  as well as the remediation of industrial waste. To remediate and
recycle  the  contaminated solids, we utilize our ITD units consisting of (i) an
indirect  thermal desorption unit wherein the hydrocarbon contaminated materials
are  indirectly  heated,  thereby  causing  the  hydrocarbon  contamination  to
vaporize;  and  (ii) a condensation process system, which causes the hydrocarbon
vapor  to  condense  to  a  liquid, or an afterburner or thermal oxidizer, which
incinerates the hydrocarbon vapor resulting in a safe and clean process. Our ITD
units  are  mobile, and thus, contaminated solids can be remediated and recycled
at  the site where the contaminated waste streams are located. We do not haul or
dispose  of  solids  or  contaminants  away  from  the  customer's  location.

     We operate with our own trained personnel through wholly or partially-owned
subsidiaries  as  discussed  above


                                        2
<PAGE>
     As  of  March  2004,  we owned five ITD units, and our 50%-owned subsidiary
OnSite  Arabia,  Inc.  owned  two  additional  units.

     Customers:  Our  targeted  customers  are  companies  that  have industrial
activities  or  sites  that  produce  or  process  quantities  of  hydrocarbon
contaminated  waste.  Through  OnSite,  we  typically submit a bid for a project
based  on  the  costs  of  moving  the  equipment to the location, the estimated
charges for labor and fuel, the nature and extent of the contamination, the type
and  moisture  content  of  the  soil  and the estimated processing time. Once a
contract  has been awarded, equipment is moved to the client's desired location.
While  we  have  currently  outstanding  a  number  of  proposals  to  prior and
prospective customers, as of March 2004 we have one current ongoing project with
Rineco  Chemical  Industries  Inc.

     Indirect  Thermal  Remediation and Recycling: The primary services we offer
involve:  (i)  the  remediation  and  recycling  of  hydrocarbon  contaminated
industrial  waste  streams,  (ii)  the  remediation and recycling of hydrocarbon
contamination  at  settling  ponds,  oil  and gas exploration sites, refineries,
petrochemical  facilities,  abandoned  production  fields, Department of Defense
installations,  ships  and  dock  facilities  and other similar sites; (iii) the
remediation  and  recycling of soil contaminated by oil-based drilling mud, fuel
spills,  leakage  at  storage  tanks,  leakage  from  pipelines;  and  (iv)  the
remediation  and  recycling of valuable drilling fluids which have been captured
in  soil and drilling muds during the drilling process. To date we have employed
our  ITD  units  to  provide  remediation  and recycling services to oil and gas
industry  refining  and  drilling  operations,  tank farms and compressor sites,
industrial  waste  disposal  facilities  and oilfield waste disposal facilities.
This  process  is known as "indirect thermal desorption" because it reverses the
contamination  process  and  removes  the  hydrocarbons  from  the  solids  and
discharges  the  contaminants  previously absorbed without direct contact of the
solid  to  a  flame.

     Our  ITD  units,  which  are  portable  equipment,  utilize  a  rotating,
heat-jacketed  trundle  to vaporize hydrocarbons from contaminated soil or other
contaminated  materials.  Our ITD units consist of two principal components: (i)
an  indirect  thermal desorption unit wherein the hydrocarbon contaminated solid
is indirectly heated, thereby causing the hydrocarbon contamination to vaporize;
and  (ii)  a  condensation process system, which causes the hydrocarbon vapor to
condense  to a liquid for recycling. As an alternative to the condensing system,
the  vapor  can  be  passed  through  an  afterburner or thermal oxidizer, which
incinerates  the  hydrocarbon  vapors.

     The  heat  exchange  system  is comprised of a large fabricated steel shell
which houses a rotating trundle. Hot gases pass through the shell and around the
outside  surface  of the trundle. Hydrocarbon contaminated materials, are loaded
into  the  elevated end of the trundle by a conveyor belt or a front-end loader.
As  the  trundle  revolves,  the contaminated materials are agitated by internal
lifts  and oars as they passes through the inside of the trundle by gravity flow
and  are  heated  to temperatures from 200 to 1,000 degrees Fahrenheit. At these
temperatures,  the hydrocarbon contaminants in the solids transform into vapors,
which  are  vacuumed out of the heat exchange system into the condensing system,
the  afterburner  or  the thermal oxidizer. The clean materials then drop out of
the  discharge  door  at  the  low  end of the trundle and are passed through an
enclosed  conveyor  for  re-hydration before final discharge. Random samples are
tested  at  the  end  of  the process to confirm that the contaminants have been
removed.

     The  hydrocarbon vapors removed from the heat exchange system by vacuum are
passed  through  a  fan-cooled  condensing system. The vapors are condensed into
liquids  and  collected  in  storage tanks and can then be recycled or disposed,
depending  on  the  nature of the contaminant, the needs of the customer and the
specifications  required  for  reuse.  To  date, our ITD units have demonstrated
their ability to process up to 192 tons of contaminated soil in a 24-hour period
with  30%  hydrocarbon  saturation.  However,  the  processing  capacity  varies
significantly  depending  on the moisture content, degree of contamination, soil
type,  contamination  type and the remediation and recycling required. There can
be  no  assurance  that our ITD units will continue to perform at this level, or
that  this  performance  will continue to be competitive with other technologies
available  in  the  market.

     Recycling  of  Hydrocarbon  Contaminants:  We  have  developed  proprietary
processes  that are embodied in the condensation process system unit, one of the
two principal components of our ITD units. Within this component the hydrocarbon
contaminants  are  condensed  from  the vapor state created in the heat exchange
unit  back  into  a  liquid  state via the proprietary processes and placed into
storage  for  recycling  back  to  the client. This allows the client to realize
actual  savings from its ability to re-utilize the hydrocarbons. We believe that
this ability to recycle the hydrocarbon contaminants is an important competitive
advantage,  as  compared  to  the  bioremediation, direct burn or "dig and haul"
remediation  technologies.


                                        3
<PAGE>
     Manufacturing  of  ITD  Units: We have historically contracted with outside
fabricators  to  manufacture our ITD units. The primary contractors we have used
are  National  Oilwell and Houston ProFab. Currently, we have no ITD units under
construction  by  fabricators.

COMPETITION

     There are many companies that currently dispose of hazardous and industrial
wastes and remediate or clean contaminated sites. Such companies are continually
attempting  to  develop  new and improved products and services. Other companies
utilize  competing  technologies  and  techniques  in an attempt to provide more
economical  or  superior  remediation  services.  Many  of  our  competitors are
established  companies  with  substantially  greater  capital  resources, larger
research  and  development  staffs  and  facilities  and  greater  marketing
capabilities  than  us. We believe that we presently have a nominal share of the
market  in  which  we  compete.  There  can  be  no  assurance  that  we will be
competitive in the remediation and recycling industry in the future.

     We  obtain  our  contracts  through  competitive  bidding and are in direct
competition  with  companies  providing  alternative  means  of,  and  utilizing
alternative  technologies  for,  remediating  environmental  problems.  The most
significant  competition  comes  from companies utilizing "dig and haul," direct
burn, and bioremediation technology to remediate hydrocarbon contamination.

     Companies  utilizing  the  "dig  and  haul"  method generally transport the
contaminated  materials  to other facilities for processing. We believe that the
technology  we utilize is competitive because our equipment is mobile, and thus,
contaminated  materials  can  be  remediated  on location. The waste processing,
remediation  and recycling businesses are, to a large extent, dependent upon and
constrained  by  the  costs  and  regulations  associated with transporting such
wastes.  More  importantly,  our remediation and recycling process addresses the
latent  liability  associated  with  the  contamination  at  the  site.

     Companies  utilizing  direct  burn  technology  use  direct heat sources to
incinerate  contaminants  found  in  the solids. Due to the closed nature of the
heat  transfer  systems  of  our  ITD  units,  we  can safely handle much higher
concentrations  of  contaminants  than  conventional  direct  burn  methods.
Conventional  direct  burn  methods  process material with maximum contamination
levels  of  3%  to  4%  while  our  ITD  units  have  processed  materials  with
contamination levels as high as 40%. In addition, the portable nature of our ITD
units  permit  them  to be located at the contamination site. Our ITD units also
permit  the  customer  to recapture certain valuable liquids which are otherwise
destroyed.

     We  differentiate ourselves from our competitors by providing significantly
higher operational service and a significantly higher value-added result for our
clients  for the remediation of hydrocarbons from  materials, and the subsequent
reclaiming  of  the  hydrocarbons into liquids for customer recycling or resale.
For  example,  some  of  the  design  features of our ITD unit, which we believe
provide  service-level  advantages,  include:

     Remediation:  Our  ITD  units remove 99.9% of hydrocarbon contaminants from
the waste-stream, effectively eliminating the client's latent liability.

     Recycling: Our ITD units transform waste streams into value for our clients
by reclaiming valuable hydrocarbons for client recycling or resale. For example,
our  equipment  has reclaimed millions of gallons of diesel oil while processing
drill  cuttings  for  major  oil  and  gas  participants.

     Tonnage:  Our  ITD  units have proven processing capability of 1 to 10 tons
per hour with up to 30% hydrocarbon-saturation in the soil. Some competitors are
capable  of  similar  processing  speeds,  but  at  lower hydrocarbon-saturation
levels,  resulting  in  throughput  advantages  for  us.

     Portability: Our ITD units are built on two 44 foot trailer beds for easier
transport  to  our  client's  location,  avoiding  costly  hauling  expenses  of
contaminated materials to a central location. In addition, the design of our ITD
units  permit  rig-down and/or rig-up in less than a day. Some competitive units
are  much  less  transportable,  or  not  transportable  at  all.

     Wide  Range  of  Hydrocarbons  Treated:  Our  ITD  units  operate  at  low
temperatures  (200  degrees  Fahrenheit),  high  temperatures  (1,000  degrees
Fahrenheit),  and  anywhere  in  between,  thereby  enabling  the


                                        4
<PAGE>
remediation of wide ranges of hydrocarbon contaminants encountered at a client's
site  including  both  oil  and  gas  and  industrial  waste.  We  believe  that
competition in the industry is concentrated in remediation services, whereas our
ITD  technology  not  only provides remediation services, but also is capable of
reclaiming  and  recycling  valuable  hydrocarbons. Further, we believe that our
pricing  policies  are  competitive. No assurance, however, can be given that we
will  be  able  to  successfully  compete  with  other  companies or alternative
technologies.

GOVERNMENTAL REGULATIONS -- COST OF COMPLIANCE

     We  render  services  in  connection  with  the  remediation, recycling and
disposal  of  various wastes. Federal, state and local laws and regulations have
been  enacted  regulating  the  handling  and  disposal  of  wastes and creating
liability  for  certain  environmental  contamination  caused  by  such  waste.
Environmental  laws  regulate,  among other things, the transportation, storage,
handling  and disposal of waste. Governmental regulations govern matters such as
the  disposal  of  residual  chemical  wastes, operating procedures, waste water
discharges,  air emissions, fire protection, worker and community right-to-know,
and  emergency  response  plans. Moreover, so-called "toxic tort" litigation has
increased  markedly  in  recent  years  as persons allegedly injured by chemical
contamination  seek  recovery  for  personal  injuries or property damage. These
legal  developments  present  a  risk  of  liability  should  we be deemed to be
responsible  for  contamination  or  pollution  caused  or  increased  by  any
evaluation,  remediation  or  cleanup effort conducted by us, or for an accident
which  occurs  in the course of such remediation or cleanup effort. There can be
no  assurance that our policy of establishing and implementing proper procedures
for  complying with environmental regulations will be effective at preventing us
from  incurring  a  substantial  environmental  liability. If we were to incur a
substantial  uninsured  liability  for  environmental  damage,  our  financial
condition  could  be  materially  adversely  affected.

     We presently have the ability to deliver remediation and recycling services
that  meet  applicable  federal  and  state  standards  for  the delivery of its
services, and for the level of contaminant removal. The government can, however,
impose  new standards. If new regulations were to be imposed, we may not be able
to comply in either the delivery of our services, or in the level of contaminant
removal  from  the  waste  stream.

     Operating permits are generally required by federal and state environmental
agencies  for  the  operation  of  our  ITD  units.  The  costs of acquiring the
operating  permits  have been borne by our customers. Most of these permits must
be  renewed  periodically  and  the  governmental  authorities involved have the
power,  under  various  circumstances,  to  revoke,  modify, or deny issuance or
renewal  of  these  permits.  Site-related  permits,  however, are generally the
responsibility  of  the  client.

EMPLOYEES

     We currently have 15 employees, 5 of whom are in domestic and international
management  or  supervisory  positions,  including  corporate and administrative
functions.  None  of  our  employees are represented by a union. We consider our
employee  relations  to  be  good.

TRANSFER  AGENT  AND  REGISTRAR

     The  transfer  agent  and  registrar for our Common Stock is Colonial Stock
Transfer  Company,  Inc.,  addressed  at 66 Exchange Place, Salt Lake City, Utah
84111;  (801)  355-5740.

ITEM  2.  PROPERTIES

     Our  principal  executive  offices are located in leased facilities at 2600
South Loop West, Suite 645, Houston, Texas 77054, which consist of approximately
3,500 square feet. The lease for the executive offices will expire in May, 2005.
We believe that our offices are adequate for our present needs and that suitable
space  will  be  available  to  accommodate  our  future  needs.

     We  incorporate  by  reference in response to this item the information set
forth  in  Note  5 of the Notes to Consolidated Financial Statements included in
Item  8  of  this  report.


                                        5
<PAGE>
ITEM  3.  LEGAL  PROCEEDINGS

     In  July  2002,  OnSite  filed  a  lawsuit  styled OnSite Technology LLC v.
Duratherm,  Inc., Duratherm Group, Inc., Steven R. Heuer and Victor R. Reynolds;
Civil Action No. H-02-2624; in the United States District Court for the Southern
District  of  Texas against Duratherm, Inc. and Duratherm Group, Inc., Steven R.
Heuer  and  Victor  R.  Reynolds.  OnSite  alleges  that Duratherm's remediation
operations  at  its  Galveston  County, Texas facility infringe on OnSite's U.S.
Patent No. 5,738,031 and requests a declaratory judgment that OnSite's operation
of  its remediation process does not infringe either of Heuer and Reynolds' U.S.
Patent  Nos.  4,990,237  and  5,269,906  over  which  Duratherm alleges control.
OnSite  also seeks damages for patent infringement, injunctive relief to prevent
further  patent infringement, and other relief that the courts find appropriate.
Defendants  have filed an answer asserting that they do not infringe on OnSite's
patent  or  alternatively,  that such patent is invalid.  Defendants denial that
there  is  any controversy between the parties regarding the Heuer and Reynolds'
patents  has  been  rejected  by the court. Defendants have now alleged in their
pleadings  that OnSite infringes on the above patents along with U.S. Patent No.
5,523,060, all of which OnSite denies. Defendants, although originally asserting
that  OnSite infringed each of the patents in suit, have announced in open court
that  they  are  no  longer  claiming  infringement of U.S. Patent No. 4,990,237
against  OnSite.  Discovery  is closed, and the case is now set for trial on the
May/June,  2004  trial  docket. After the close of discovery, the District Court
heard argument regarding the interpretation of the claims of each of the patents
in suit. A ruling on this issue is expected before trial. The District Court has
set  a  scheduling  conference  on  April  23,  2004.

     In  July  2002,  OnSite also initiated litigation styled OnSite Technology,
LLC v. Duratherm, Inc. et al.; Cause No. 02CV0801; In the 56th Judicial District
Court  of  Galveston  County,  Texas,  against Duratherm, Inc., Duratherm Group,
Inc.,  Barry  Hogan  and Jim Hogan.  This lawsuit alleges that in November 1999,
OnSite  and  Waste  Control  Specialists, L.L.C. ("WCS") entered into a contract
wherein  OnSite  would,  among  other  things,  provide  the necessary services,
supplies  and  equipment to perform recycling and remediation services utilizing
an  indirect thermal desorption unit as specified therein.  OnSite alleges that,
in  late  July  or  early  August  2000,  Defendants,  acting in concert through
Duratherm,  Inc.,  sent  or  caused  to  be  sent  a  letter(s)  and/or  other
communication(s)  to  WCS,  which  OnSite alleges contained statements that were
false  and  intended  to  deceive  WCS, as to OnSite and OnSite's technology and
indirect  thermal  desorption  unit.  OnSite  also  alleges that a suit filed by
Duratherm  in  August 2000 for patent infringement against OnSite and WCS in the
United  States  District  Court  for  the Southern District of Texas under Civil
Action  No.  H-00-2727,  which suit was subsequently dismissed with prejudice by
the  United  States District Judge, was malicious and contained false statements
and  allegations  about  OnSite  and  OnSite's  technology  and indirect thermal
desorption  unit.  OnSite  alleges that as a result of such false, deceptive and
malicious statements, WCS terminated its contract with OnSite. In February, 2003
OnSite amended its petition to add John C. Hilliard as a defendant and to add as
a  claim  against  the  defendants,  the  loss  of  a  prospective contract with
ExxonMobil.  OnSite  has  also  amended  its  petition to include as a defendant
Duratherm's  counsel,  Conley  Rose P.C.  The causes of action alleged by OnSite
against  the  Defendants  are  (i)  interference  with  contract and prospective
business  relations;  (ii)  unfair competition and business disparagement; (iii)
unjust  enrichment;  and (iv) injury to OnSite's business reputation.  OnSite is
seeking  actual,  consequential, incidental and compensatory damages, including,
but  not  limited  to, disgorgement, pre- and post-judgment interest, attorney's
fees  and  costs  and exemplary and punitive damages.  OnSite is also seeking to
enjoin  these  defendants  and  Duratherm's  counsel,  Conley  Rose  P.C.,  from
interfering  with  the  current and prospective business relationships of OnSite
with  regard to the thermal desorption units.  The Defendants in this litigation
have  filed  an  answer  denying the allegations contained in OnSite's petition.
This  case  is  in  the  discovery  stage  and  is  set  for trial in July 2004.


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

     There  were  no  matters submitted to a vote of security holders during the
fourth  quarter  of  2003.


CERTAIN  SECURITIES  FILINGS

     The  Company  believes  that  the  reports required by section 16(a) of the
Exchange  Act  have  been  filed  timely.


                                        6
<PAGE>
                                     PART II

ITEM  5.  MARKET  FOR  COMMON  EQUITY,  RELATED  STOCKHOLDER  MATTERS  AND SMALL
BUSINESS  ISSUER  PURCHASES  OF  EQUITY  SECURITIES

PRICE  RANGE  OF  COMMON  STOCK

     Our  Common  Stock  commenced  trading  on the OTC Bulletin Board under the
symbol  "ELSF"  on  October  17, 2002.  Prior thereto, for the periods set forth
below,  our  common stock traded on the American Stock Exchange under the symbol
"EVV".  The  following  table sets forth the range of high and low closing sales
prices  of  our  Common  Stock  for  the  periods  shown:

<TABLE>
<CAPTION>
                    COMMON STOCK PRICE RANGE

                         HIGH    LOW
<S>                      <C>    <C>
2002
First Quarter  . . . . .  $0.40  $0.20
Second Quarter . . . . .  $0.28  $0.12
Third Quarter  . . . . .  $0.18  $0.03
Fourth Quarter . . . . .  $0.08  $0.02

2003
First Quarter  . . . . .  $0.43  $0.04
Second Quarter . . . . .  $0.25  $0.13
Third Quarter  . . . . .  $0.25  $0.17
Fourth Quarter . . . . .  $0.25  $0.08
</TABLE>

     On  March  15,  2004,  the  closing price of our Common Stock was $0.09 per
share.  On  the  same  date,  we had approximately 1,000 stockholders of record,
including  broker-dealers  holding shares beneficially owned by their customers.

<TABLE>
<CAPTION>
EQUITY  COMPENSATION  PLAN  INFORMATION

                                                                     NUMBER OF SECURITIES
                                                                      REMAINING AVAILABLE
                     NUMBER OF SECURITIES                             FOR FUTURE ISSUANCE
                       TO BE ISSUED UPON       WEIGHTED-AVERAGE          UNDER EQUITY
                          EXERCISE OF         EXERCISE PRICE OF       COMPENSATION PLANS
                     OUTSTANDING OPTIONS,    OUTSTANDING OPTIONS,    (EXCLUDING SECURITIES
                      WARRANTS AND RIGHTS    WARRANTS AND RIGHTS    REFLECTED IN COLUMN(a))
     PLAN CATEGORY            (a)                    (b)                      c)
-------------------  ---------------------  ----------------------  -----------------------
<S>                  <C>                    <C>                     <C>
Equity compensation
plans approved by
security holders                   792,500  $                 1.23                    7,500

Equity compensation
plans not approved
by security holders              4,481,162                    1.37                        -
                     ---------------------  ----------------------  -----------------------

Total                            5,273,662  $                 1.27                    7,500
                     =====================  ======================  =======================
</TABLE>


For  information relating to the equity compensation plans, reference is made to
Footnote  8  to  our Financial Statements, Stockholders' Equity - Stock Options.


                                        7
<PAGE>
DIVIDEND  POLICY

     We  have not paid, and do not currently intend to pay cash dividends on our
Common  Stock  in  the  foreseeable  future.  The current policy of our Board of
Directors  is to retain all earnings, if any, to provide funds for the operation
and  expansion  of  our  business. The declaration of dividends, if any, will be
subject  to  the  discretion  of our Board of Directors, which may consider such
factors  as  our  results  of operations, financial condition, capital needs and
acquisition  strategy,  among  other  factors.


ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The  following  discussion  should  be  read  in  conjunction  with  our
consolidated  financial  statements and related notes included in Item 7 of this
annual  report,  and  our  "Forward-Looking  Statements" which discusses certain
limitations  inherent  in  such  statements.


INFORMATION REGARDING AND FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

     We  are including the following cautionary statement in this Form 10-KSB to
make  applicable  and take advantage of the safe harbor provision of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements made
by  us,  or  on  behalf  of  us.  Forward-looking  statements include statements
concerning  plans,  objectives,  goals, strategies, future events or performance
and  underlying assumptions and other statements which are other than statements
of  historical facts. Certain statements in this Form 10-KSB are forward-looking
statements.  Words  such  as  "expects",  "anticipates", "estimates" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to risks and uncertainties that could cause actual results to differ
materially  from  those  projected.  Such  risks and uncertainties are set forth
below. Our expectations, beliefs and projections are expressed in good faith and
are  believed  to  have  a  reasonable  basis, including without limitation, our
examination  of  historical  operating trends, data contained in our records and
other  data  available  from  third parties. There can be no assurance, however,
that  our  expectations,  beliefs or projections will result, be achieved, or be
accomplished.

     In  addition  to  other factors and matters discussed elsewhere herein, the
following  are important factors that, in our view, could cause material adverse
affects  on  our  financial  condition and results of operations: our ability to
secure  contracts  for  our  ITD  units; our ability to attain widespread market
acceptance of our technology; our ability to obtain acceptable forms and amounts
of  financing;  the  demand  for,  and price level of, our services; competitive
factors;  the  actual  useful  life  of  our  ITD  Units;  ability  to  mitigate
concentration  of business in a small number of customers; the evolving industry
and  technology  standards;  the  ability to protect proprietary technology; the
dependence  on  key  personnel;  the  effect  of  business  interruption  due to
political  unrest;  and  our ability to maintain acceptable utilization rates on
our  equipment.  We  are not obligated to update or revise these forward-looking
statements to reflect the occurrence of future events or circumstances.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our  discussion  and  analysis  of  its  financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared  in  accordance  with  accounting  principles generally accepted in the
United States of America. The preparation of these financial statements requires
us  to  make estimates and judgments that affect the reported amounts of assets,
liabilities,  revenue  and expenses, and related disclosure of contingent assets
and  liabilities.  On  an  ongoing  basis,  we  evaluate  our  estimates and our
estimates  are  based  on historical experience and on various other assumptions
that  are believed to be reasonable under the circumstances. These estimates and
assumptions  provide  a  basis  for  our  judgments about the carrying values of
assets  and liabilities that are not readily apparent from other sources. Actual
results may differ from our estimates under different assumptions or conditions,
and  these  differences  may  be  material.

     -    We  believe that the following critical accounting policies affect our
          more  significant  judgments  and estimates used in the preparation of
          our  consolidated  financial  statements:

     -    We  recognize  revenue  at  the time services are performed, or in the
          event  of  the  sale  of  an  ITD unit, when the equipment is shipped.


                                        8
<PAGE>
     -    We  record  property  and  equipment at cost. and compute depreciation
          using  the  straight-line  method  over  an estimated useful live of 8
          years  on  our  ITD Units and 3 to 5 years on our office furniture and
          equipment and transportation and other equipment. Effective October 1,
          2002,  we  changed  the estimated useful lives of our ITD units from 5
          years  to  8  years to more accurately reflect our experience with the
          useful  lives  of  the  units and to conform to industry practices for
          equipment  used in similar applications. Any additions or improvements
          that  increase  the  value  or  extend  the  life  of  our  assets are
          capitalized  and  expenditures  for normal maintenance and repairs are
          expensed  as incurred. Disposals are removed from the accounts at cost
          less accumulated depreciation and any gain or loss from disposition is
          reflected  in  operations  currently.

RESULTS  OF  OPERATIONS

COMPARISON OF OPERATING RESULTS -- YEARS ENDED DECEMBER 31, 2003 AND 2002

     Summary.  For  the  year  ended  December  31,  2003,  we had a net loss of
$2,079,000  as  compared  to  a 2002 net loss of $3,043,000. The improvement was
primarily  the  result  of  an  increase  in revenue resulting from a processing
contract  signed  in  2003.

     Revenue  and  Gross  Margin.  Revenue  of  $1,723,000  for 2003 generated a
$573,000  gross  margin  as compared to revenue of $943,000 and a negative gross
margin  of  $1,025,000 in 2002. The increase in revenue and gross margin was due
to  a  processing  contract  signed  in  2003.  On  average  we had 0.8 units in
operation  in  2003  as  compared  to  0.1  units  during  2002.

     Selling,  General  and  Administrative ("SGA") Expense. SGA expenses during
2003  were  $1,961,000  as  compared  to  $1,713,000 in  2002. This increase was
mainly  due  to  an  increase  in legal fees relating to the registration of the
common  stock  pertaining  to  the warrants issued in 2003 and litigation costs.

     Amortization  of  Engineering  Design  and  Technology.  This  calculation
represents the amortization of Acquired Engineering Design and Technology costs,
an  intangible  asset  related to the December 1997 acquisition of the remaining
50%  interest  in  OnSite  from  Parker  Drilling. The intangible asset is being
amortized  over  an  8-year  estimated  economic  life.

     Research  &  Development  Costs ("R&D"). The expense for 2003 is $60,000 as
compared  to $30,000 for 2002. This expense reflects ongoing R&D improvements to
our  Series  6000  ITD  system  design.

     Interest  Expense.  During 2003, $254,000 of interest expense was incurred,
compared  to  interest  expense  of  $42,000  for 2002. The increase in interest
expense for 2003 was mainly due to the long term debt incurred in 2003.

     Other  Income (Expense). The category "Other" is mainly composed of foreign
currency  translation  gains and losses. The financial statements of our foreign
subsidiaries  are  measured  as  if  the functional currency was the U.S. Dollar
("USD").  The  re-measurement  of  local currencies into USD created unfavorable
translation adjustments that were included in net income in 2002.

     Income  Taxes. The $79,000 tax benefit in 2002 is the result of a refund of
2001  federal  income tax. We incurred net operating losses ("NOLs") in the U.S.
in  recent  years.  The balance of our NOLs may be used to offset taxable income
reported in future periods. The NOLs have generated deferred tax assets, but due
to  uncertainties  regarding the future realization of these assets, a valuation
allowance  has  been  provided  for  the full amount of the deferred tax assets.
However,  presently  there  can be no assurances that the NOLs will be utilized.

     Minority  Interest.  Minority  interest  for 2003 and 2002 reflects our 50%
minority partner's interest in the net loss of OnSite Arabia.


                                        9
<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES

     We currently have no significant commitments for capital expenditures.

     Since  our  inception,  we  have  expended  a  significant  portion  of our
resources  to  develop markets and industry awareness of our ITD remediation and
recycling/reclamation  process  technology.  Our  efforts  have  been  focused
primarily  on hydrocarbon soil contamination inherent in oil and gas exploration
activities.  Our  efforts to develop markets and produce equipment have required
significant  amounts  of  capital.

     In December 2001 we completed the sale of three of our ITD units along with
certain licensing rights, and utilized the bulk of the proceeds from the sale to
retire  our  senior  debt.  With  the  exception  of this sale, we have incurred
recurring  net losses and have been dependent on revenue from a limited customer
base  to  provide  cash  flows. During 2002 and 2003 have been exploring ways to
expand  our  revenue.  In  January  2003 we signed a contract to process various
waste  streams  at  a  facility  in Arkansas. We are currently seeking to obtain
additional service contracts in our served markets and are considering strategic
alternatives  including  the  possible additional sale of certain of our assets.

     The  company does not expect that its existing cash reserves and cash flows
from  operations will be sufficient to cover the Company's cash requirements for
2004.  We  will need to successfully raise funds through an equity infusion, the
issuance  of  debt  securities  or  the  sale of ITD units. Financing may not be
available  on terms acceptable to us, or at all. Further, the sale of additional
equity  or  convertible  debt  securities  may  result  in  dilution  to  our
stockholders.

     During  July  2002,  the  Company  obtained uncollateralized loans totaling
$250,000 from Cahill Warnock Strategic Partners, L. P. and Strategic Associates,
L.P.  These  loans  bear  interest  at  12%  per year and are due in April 2004.

     During March 2003, the Company obtained a loan of $1,500,000 from a private
investor group. The loan is collateralized by three ITD units and bears interest
at  12%  per  year.  Principal  payments are due in 20 quarterly installments of
$75,000  beginning  in  August  2003  with  the  final  payment due in May 2008.
Warrants  to  purchase  1,500,000 shares of our common stock at a price of $0.01
were  issued  in  connection  with  this  loan.

     If  we  default  on the $1,500,000 loan and if the lender forecloses on the
collateral, we would be left with only two ITD Units in the U.S. The loss of the
three  ITD Units would (i) greatly reduce our capacity to serve customers in the
U.S.,  (ii)  would  put a limit on the potential revenue we could achieve in the
U.S.,  and  (iii)  would  create  an  additional  competitor  in  the  U.S.


ACCOUNTING MATTERS AND RECENTLY ISSUED PRONOUNCEMENTS

     In  June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for Costs
Associated  with  Exit  or  Disposal  Activities,"  which  addresses  financial
accounting  and  reporting for costs associated with exit or disposal activities
and  supersedes  Emerging  Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity  (including  Certain  Costs Incurred in a Restructuring)." SFAS No. 146
requires  companies  to  recognize  costs  associated  with  exit  or  disposal
activities  when they are incurred rather than at the date of a commitment to an
exit  or disposal plan. In addition, SFAS No. 146 establishes that fair value is
the  objective  for  initial  measurement  of  the  liability.  SFAS  No. 146 is
effective for exit or disposal activities initiated after December 31, 2002, but
early  adoption  is  permitted.  We  adopted  SFAS  No.  148 on January 1, 2003;
however, adoption did not have a significant impact on our financial position or
results  of  operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation",  which  amends  SFAS  No.  123  to provide alternative methods of
transition  for  an  entity that voluntarily changes to the fair value method of
accounting for stock based employee compensation.  It also amends the disclosure
provisions  of SFAS No. 123 to require prominent disclosure about the effects on
reported  net  income of an entity's accounting policy decisions with respect to
stock based employee compensation.  Finally, SFAS No. 148 amends APB Opinion No.
28,  "Interim  Financial  Reporting",  to require disclosure of those effects in
interim  financial


                                       10
<PAGE>
statements.  SFAS No. 148 is effective for fiscal years ended after December 15,
2002,  but  early  adoption is permitted.  We adopted SFAS No. 148 on January 1,
2003;  however,  adoption  did  not  have  a significant impact on our financial
reporting  .

     In  January  2003,  the  FASB  issued  FASB  Interpretation  (FIN)  No.  46
"Consolidation  of Variable Interest Entities." FIN No. 46 requires a company to
consolidate  a  variable  interest  entity  ("VIE")  if the company has variable
interests  that  give  it a majority of the expected losses or a majority of the
expected residual returns of the entity. Prior to FIN No. 46, VIEs were commonly
referred  to as SPEs. FIN No. 46 is effective immediately for VIEs created after
January  31,  2003.  This  interpretation  did not have a material effect on the
Company's  financial  condition  or  results  of  operations.

     In April 2003, the FASB issued SFAS No. 149, Amendment to Statement No. 133
on  Derivative  Instruments  and  Hedging  Activities. This statement amends and
clarifies  financial  accounting  and  reporting  for  derivative  instruments,
including  certain  derivative  instruments  embedded  in  other  contracts
(collectively  referred to as derivatives) and for hedging activities under SFAS
No.  133.  The  changes in SFAS No. 149 improve financial reporting by requiring
that contracts with comparable characteristics be accounted for similarly. Those
changes  will  result  in  more  consistent  reporting  of  contracts  as either
derivatives  or  hybrid  instruments.  SFAS  No.  149 is effective for contracts
entered  into  or  modified  after  June  30,  2003, except in certain instances
detailed  in  the statement, and hedging relationships designated after June 30,
2003.  Except  as  otherwise  stated  in  SFAS No. 149, all provisions should be
applied  prospectively.  The  adoption of this statement did not have a material
effect on the Company's financial condition or results of operations.

     In  May  2003,  the  FASB  issued  SFAS  No.  150,  "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No.  150,  which  is  effective  at  the  beginning  of the first interim period
beginning  after  June 15, 2003, must be implemented by reporting the cumulative
effect  of  a  change  in accounting principle for financial instruments created
before the issuance date of the statement and still existing at the beginning of
the  interim  period  of  adoption.  The  statement  requires  that  a financial
instrument  which  falls  within the scope of the statement to be classified and
measured  as a liability. The following financial instruments are required to be
classified  as  liabilities:  (1) shares that are mandatorily redeemable, (2) an
obligation  to  repurchase  the issuer's equity shares or one indexed to such an
obligation  and  that  requires or may require settlement by transferring assets
and (3) the embodiment of an unconditional obligation that the issuer may or may
not  settle  by issuing a variable number of equity shares if, at inception, the
monetary value of the obligation is based on certain measurements defined in the
statement.  The adoption of this statement did not have a material effect on the
Company's  financial  condition  or  results  of  operations.


ACCOUNTING  ESTIMATES  AND  CHOICES

     Preparation  of  financial  statements  under generally accepted accounting
principles  in  the United States of America requires us to make choices between
acceptable  methods  of  accounting  and  to  make estimates of future events to
determine  the value we report for certain assets and liabilities at the date of
our  financial statements and the value we report for revenues and expenses in a
period  covered  by  our  financial statements. While we try to be as precise as
possible  in  making  these estimates, many of them are subjective in nature and
involve  matters  of  judgement.  We  believe  the  most subjective and material
estimates  in  our financial statements are the reserve, if any, which we report
for  accounts  receivable,  the  amount  of  our  deferred taxes and our accrued
warranty  costs.

     Accounts Receivable. When an account receivable is considered impaired, the
amount  of  the  impairment  is  measured based on the present value of expected
future  cash  flows  or  the  fair  value  of  collateral.  Impairment  losses
(recoveries)  are  included  in the allowance for doubtful accounts. At December
31,  2003  we  had  accounts  receivable  of $400,000 and the entire balance was
collected  subsequent  to  year end. Accordingly, we estimated that no allowance
was  necessary  at  December  31,  2003.

     Deferred  Taxes.  We  record  a  valuation allowance to reduce our deferred
income  tax  assets  to  an  amount  that  we believe to be realizable under the
"more-likely-than-not"  recognition  criteria.  While we consider future taxable
income and ongoing prudent and feasible tax planning strategies in assessing the
need  for a valuation allowance, in the future we may change our estimate of the
amount  of  the  deferred income tax assets that would "more-likely-than-not" be
realized,  resulting in an adjustment to the deferred income tax asset valuation
allowance


                                       11
<PAGE>
that  would  either  increase or decrease, as applicable, reported net income in
the  period.  At  December  31,  2003  we had net deferred tax assets totaling $
2,938,000 that were fully reserved because we could not demonstrate their future
realization.  Our  deferred  tax  assets  relate  primarily  to  the tax benefit
associated  with  net  operating  loss  carryforwards.  We  could  realize these
deferred  tax  assets  in  the  future  if we generate profits from a sufficient
number  of  contracts  or  the  sale  of  equipment.

     Accrued  Warranty  and  Other  Contingent  Costs.  We record an accrual for
product  warranty  and  other  contingencies  when estimated future expenditures
associated  with  such  contingencies  become  probable,  and  the  amounts  can
reasonably  be  estimated.  However,  new  information  may become available, or
circumstances  (such  as  applicable  laws  and regulations) may change, thereby
resulting  in  an  increase or decrease in the amount required to be accrued for
such matters (and therefore a decrease or increase in reported net income in the
period  of  such  change).  At December 31, 2003 we had no product that remained
under  warranty  and,  accordingly,  we  estimated  that no warranty reserve was
necessary.

     We  believe  that  all  of  the  estimates we used to prepare our financial
statements  are  reasonable.

OFF BALANCE SHEET ARRANGEMENTS

     During  the  year  ended  December  31,  2003  we  had no off-balance sheet
arrangements.


ITEM  7.  FINANCIAL  STATEMENTS

     The  information required hereunder is included in this report as set forth
in  the  "Table  of  Contents"  on  page  F-1.

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

     There have been no disagreements with our independent accountants regarding
accounting  and  financial  disclosure  matters.

     On  April  2,  2002,  we  dismissed  PricewaterhouseCoopers,  LLP  as  our
independent  accountants.  Our  audit  committee  and  board  of  directors
participated  in  and  approved  the decision to change independent accountants.

     The  reports  of PricewaterhouseCoopers LLP on the financial statements for
2000 and 2001 contained no adverse opinion or disclaimer of opinion and were not
qualified  as  to  audit scope or accounting principle, however such reports for
each of the years were modified to express substantial doubt with respect to our
ability  to  continue  as  a  going  concern.

     In  connection with the audits for 2000 and 2001 and through April 2, 2002,
there  were  no  disagreements  with PricewaterhouseCoopers LLP on any matter of
accounting  principles  or practices, financial statement disclosure or auditing
scope  or  procedure, which disagreements if not resolved to the satisfaction of
PricewaterhouseCoopers  LLP  would have caused them to make reference thereto in
their  report  on  the  financial  statements  for  such  years.

     During  2000  and  2001 and through April 2, 2002, there were no reportable
events  (as  defined  in  Regulation  S-K  Item  304(a)(1)(v)).

     PricewaterhouseCoopers  LLP  has  furnished  a  letter addressed to the SEC
stating  it  agrees  with  the  above  statements.

     We  engaged Ham, Langston & Brezina, LLP as our new independent accountants
as  of  April  3, 2002.  During 2000 and 2001 and through April 3, 2002, we have
not  consulted  with  Ham,  Langston  &  Brezina,  LLP  regarding either (i) the
application  of  accounting  principles  to  a  specified  transaction,  either
completed  or  proposed;  or the type of audit opinion that might be rendered on
our  financial  statements,  and  neither a written report was provided to us or
oral  advice  was  provided  that  Ham, Langston & Brezina, LLP concluded was an
important  factor


                                       12
<PAGE>
considered  by  us  in  reaching  a  decision  as to the accounting, auditing or
financial  reporting  issue; or (ii) any matter that was either the subject of a
disagreement,  as  that  term is defined in Item 304(a)(1)(iv) or Regulation S-K
and  the  related  instructions  to  Item 304 of Regulation S-K, or a reportable
event,  as  that  term  is  defined  in  Item  304(a)(1)(v)  of  Regulation S-K.


ITEM  8A.  CONTROLS  AND  PROCEDURES

     James  S. Percell, our Chief Executive Officer and Michael D. Thompson, our
Chief  Financial  Officer,  have  concluded  that  our  disclosure  controls are
appropriate  and effective. They have evaluated these controls and procedures as
of a date within 90 days of the filing of this report on Form 10-KSB. There were
no  significant  changes in our internal controls or in other factors that could
significantly  affect these controls subsequent to the date of their evaluation,
including  any  corrective  actions  with regard to significant deficiencies and
material  weaknesses.

     There have been no changes in our internal control over financial reporting
identified  in connection with the evaluation required by Rule 13a-14(b) or Rule
15d-14(b)  that  occurred  during  our  last  fiscal quarter that has materially
affected,  or  is  reasonably  likely to materially affect, our internal control
over  financial  reporting.


                                       13
<PAGE>
                                    PART III


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

     The  information  required by this item is incorporated by reference to our
definitive  proxy  statement,  which  is  to  be  filed  with the Securities and
Exchange  Commission  (the "Commission") pursuant to the Securities Exchange Act
of  1934  (the "Exchange Act") within 120 days of our fiscal year ended December
31,  2003.

     CODE  OF  ETHICS
     ----------------

     The  Company  has  adopted a Code of Ethics for its Principal Executive and
Senior Financial Officers which is attached hereto as Exhibit 14.1.

ITEM  10.  EXECUTIVE  COMPENSATION

     The  information  required by this item is incorporated by reference to our
definitive  proxy  statement,  which  is  to  be  filed  with the Securities and
Exchange  Commission  (the "Commission") pursuant to the Securities Exchange Act
of  1934  (the "Exchange Act") within 120 days of our fiscal year ended December
31,  2003.

ITEM  11.  SECURITY  OWNERSHIP  OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED  STOCKHOLDER  MATTERS

     The  information  required by this item is incorporated by reference to our
definitive  proxy  statement,  which  is  to  be  filed  with the Securities and
Exchange  Commission  (the "Commission") pursuant to the Securities Exchange Act
of  1934  (the "Exchange Act") within 120 days of our fiscal year ended December
31,  2003.

ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

The  information  required  by  this  item  is  incorporated by reference to our
definitive  proxy  statement,  which  is  to  be  filed  with the Securities and
Exchange  Commission  (the "Commission") pursuant to the Securities Exchange Act
of  1934  (the "Exchange Act") within 120 days of our fiscal year ended December
31,  2003.

ITEM  13.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(A)  FINANCIAL  STATEMENTS

     Reports  of  Independent  Accountants/Auditors.                         F-2

     Consolidated  Balance  Sheet  as  of  December  31,  2003.              F-4

     Consolidated Statement of Operations for the years ended
           December 31, 2003, and  2002.                                     F-5

     Consolidated Statement of Stockholders' Equity for the years ended
           December 31, 2003,  and  2002.                                    F-6

     Consolidated Statement of Cash Flows for the years ended
          December 31, 2003, and  2002.                                      F-7

     Notes  to  Consolidated  Financial  Statements.                         F-8


                                       14
<PAGE>


                         ENVIRONMENTAL SAFEGUARDS, INC.
                                   __________




                        CONSOLIDATED FINANCIAL STATEMENTS
                     WITH REPORT OF INDEPENDENT ACCOUNTANTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002




<PAGE>
<TABLE>
<CAPTION>
                         ENVIRONMENTAL SAFEGUARDS, INC.
                                TABLE OF CONTENTS
                                   __________


                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Report of Independent Accountants                                            F-2

Audited Financial Statements

  Consolidated Balance Sheet as of December 31,
    2003                                                                     F-3

  Consolidated Statement of Operations for the
    years ended December 31, 2003 and 2002                                   F-4

  Consolidated Statement of Stockholders' Equity
    for the years ended December 31, 2003 and 2002                           F-5

  Consolidated Statement of Cash Flows for the
    years ended December 31, 2003 and 2002                                   F-6

Notes to Consolidated Financial Statements                                   F-7
</TABLE>


                                       F-1
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders
Environmental Safeguards, Inc.


We  have  audited  the  accompanying consolidated balance sheet of Environmental
Safeguards, Inc. as of December 31, 2003 and the related consolidated statements
of operations, stockholders' deficit and cash flows for each of the two years in
the period then ended.  These financial statements are the responsibility of the
Company's  management.  Our  responsibility  is  to  express an opinion on these
financial  statements  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audits  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  consolidated  financial  position of
Environmental  Safeguards,  Inc.  as  of December 31, 2003, and the consolidated
results  of  its  operations and its cash flows for each of the two years in the
period  then  ended, in conformity with accounting principles generally accepted
in  the  United  States  of  America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue  as  a  going  concern.  As  discussed  in Note 2 to the
financial  statements,  the Company has suffered recurring losses, negative cash
flows from operations and has a net capital deficiency at December 31, 2003 that
raise  substantial  doubt  about  its  ability  to  continue as a going concern.
Management's  plans  with  regard  to  this matter are also discussed in Note 2.
These financial statements do not include any adjustments that might result from
the  outcome  of  this  uncertainty.




                                     /s/  Ham,  Langston  &  Brezina,  L.L.P.

Houston, Texas
February 18, 2004


                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                         ENVIRONMENTAL SAFEGUARDS, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003
                                   __________

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)


     ASSETS
     ------
<S>                                                             <C>
Current assets:
  Cash and cash equivalents                                     $    386
  Accounts receivable                                                400
  Prepaid expenses                                                    61
                                                                ---------

    Total current assets                                             847

Property and equipment, net                                        5,053
Acquired engineering design and technology, net of
  accumulated amortization of $2,164                                 795
Other assets                                                           2
                                                                ---------

      Total assets                                              $  6,697
                                                                =========


LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------

Current liabilities:
  Current portion of notes payable to related parties           $    420
  Accounts payable                                                    85
  Dividends payable                                                  845
  Accrued interest                                                   160
  Other accrued liabilities                                          862
                                                                ---------

    Total current liabilities                                      2,372
                                                                ---------

Notes payable to related parties                                     786

Minority interest                                                  1,912

Commitments and contingencies

Stockholders' equity:
  Preferred stock; Series B convertible; voting,
    $.001 par value (aggregate liquidation
    value - $2,898) 5,000,000 shares authorized;
    2,733,686 shares issued and outstanding                            3
  Preferred stock; Series D convertible, non-voting,
    cumulative $.001 par value (aggregate liquidation
    value $4,000); 400,000 shares authorized, issued
    and outstanding                                                    1
  Common stock; $.001 par value; 50,000,000 shares
    authorized; 10,745,091 shares issued and outstanding              10
  Additional paid-in capital                                      15,332
  Accumulated deficit                                            (13,719)
                                                                ---------

    Total stockholders' equity                                     1,627
                                                                ---------

      Total liabilities and stockholders' equity                $  6,697
                                                                =========
</TABLE>



                  The accompanying notes are an integral part
                  of these consolidated financial statements.
                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                         ENVIRONMENTAL SAFEGUARDS, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
                                   __________

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


                                                           2003      2002
                                                         --------  --------
<S>                                                      <C>       <C>
Revenue                                                  $ 1,723   $   943
Cost of revenue                                            1,150     1,968
                                                         --------  --------

  Gross margin                                               573    (1,025)

Selling, general and administrative expenses               1,961     1,713
Amortization of acquired engineering design
  and technology                                             408       408
Research and development                                      60        30
                                                         --------  --------

    Income (loss) from operations                         (1,856)   (3,176)

Other income (expenses):
  Interest income                                              -         2
  Interest expense                                          (254)      (43)
  Other                                                        -        (2)
                                                         --------  --------

Loss before benefit for income taxes and
  minority interest                                       (2,110)   (3,219)

Benefit for income taxes                                       -        79
                                                         --------  --------

Loss before minority interest                             (2,110)   (3,140)

Minority interest                                             31        97
                                                         --------  --------

Net loss                                                 $(2,079)  $(3,043)
                                                         ========  ========

Net loss applicable to common stockholders               $(2,307)  $(3,296)
                                                         ========  ========

Net loss per share - basic and diluted                   $ (0.21)  $ (0.33)
                                                         ========  ========

Weighted average shares outstanding - basic and diluted   10,745    10,112
                                                         ========  ========
</TABLE>



                   The accompanying notes are an integral part
                   of these consolidated financial statements.
                                       F-4
<PAGE>
<TABLE>
<CAPTION>
                                                  ENVIRONMENTAL SAFEGUARDS, INC.
                                          CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                          FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
                                                             __________

                                                (IN THOUSANDS, EXCEPT SHARE AMOUNTS)


                                                                                                                        TOTAL
                                              SERIES B    SERIES C    SERIES D            ADDITIONAL                    STOCK-
                                             PREFERRED   PREFERRED   PREFERRED   COMMON     PAID-IN     ACCUMULATED    HOLDERS'
                                               STOCK       STOCK       STOCK      STOCK     CAPITAL       DEFICIT       EQUITY
                                             ----------  ----------  ----------  -------  -----------  -------------  ----------
<S>                                          <C>         <C>         <C>         <C>      <C>          <C>            <C>
Balance as of December 31, 2001              $        3  $        -  $        1  $    10  $    14,981  $     (8,116)  $   6,879

Dividends on Series D Preferred stock                 -           -           -        -            -          (253)       (253)

Net income                                            -           -           -        -            -        (3,043)     (3,043)
                                             ----------  ----------  ----------  -------  -----------  -------------  ----------

Balance as of December 31, 2002                       3           -           1       10       14,981       (11,412)      3,583

Issuance of 1,500,000 warrants to purchase
  common stock in connection with long-term
  debt                                                -           -           -        -          345             -         345

Exercise of warrants to purchase 632,947
  shares of common stock                              -           -           -        -            6             -           6

Dividends on Series D preferred stock                 -           -           -        -            -          (228)       (228)

Net income                                            -           -           -        -            -        (2,079)     (2,079)
                                             ----------  ----------  ----------  -------  -----------  -------------  ----------

Balance as of December 31, 2003              $        3  $        -  $        1  $    10  $    15,332  $    (13,719)  $   1,627
                                             ==========  ==========  ==========  =======  ===========  =============  ==========
</TABLE>



                  The accompanying notes are an integral part
                  of these consolidated financial statements.
                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                         ENVIRONMENTAL SAFEGUARDS, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
                                   __________

                                 (IN THOUSANDS)


                                                        2003      2002
                                                      --------  --------
<S>                                                   <C>       <C>
Cash flows from operating activities:
  Net loss                                            $(2,079)  $(3,043)
  Adjustment to reconcile net loss to net cash
    used in operating activities:
    Minority interest                                     (31)      (97)
    Depreciation expense                                  465     1,218
    Amortization of acquired engineering design
      and technology                                      408       408
    Amortization of loan costs                             63         -
    Changes in operating assets and liabilities:
      Accounts receivable                                (303)    1,212
      Prepaid expenses and other assets                   113       (37)
      Accounts payable                                     54      (115)
      Accrued liabilities                                 367       (58)
      Income taxes payable                                  -      (254)
                                                      --------  --------

        Net cash used by operating activities            (943)     (766)
                                                      --------  --------

Cash flows from investing activities:
  Proceeds from sale of equipment                           6         -
  Purchases of equipment                                  (18)     (185)
                                                      --------  --------

        Net cash used by investing activities             (12)     (185)
                                                      --------  --------

Cash flows from financing activities:
  Proceeds from notes payable to stockholders               -       250
  Proceeds from long-term debt                          1,390         -
  Payments on long-term debt                             (152)        -
  Proceeds from exercise of stock warrants                  6         -
                                                      --------  --------

        Net cash provided by financing activities       1,244       250
                                                      --------  --------

Net increase (decrease) in cash and cash equivalents      289      (701)

Cash and cash equivalents, beginning of year               97       798
                                                      --------  --------

Cash and cash equivalents, end of year                $   386   $    97
                                                      ========  ========


Supplemental disclosure of cash flow information:

  Cash paid for interest                              $    43   $     -
                                                      ========  ========

  Cash paid for income taxes                          $     -   $     -
                                                      ========  ========
</TABLE>



                  The accompanying notes are an integral part
                  of these consolidated financial statements.
                                      F-6
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________


1.   ORGANIZATION  AND  SIGNIFICANT  ACCOUNTING  POLICIES
     ----------------------------------------------------

     Environmental  Safeguards,  Inc.  (the  "Company")  provides  environmental
     remediation  and  hydrocarbon reclamation/recycling services principally to
     oil  and  gas  companies,  using  proprietary  Indirect  Thermal Desorption
     ("ITD")  technology. To date the primary service offered by the Company has
     been  the  remediation of soil contaminated by oil-based drill cuttings and
     the  subsequent  recovery  of  diesel  and  synthetic  oils.

     PRINCIPLES  OF  CONSOLIDATION
     -----------------------------

     The  consolidated  financial statements include the accounts of the Company
     and  its majority owned or controlled subsidiaries after elimination of all
     significant  intercompany  accounts  and  transactions.

     MANAGEMENT  ESTIMATES
     ---------------------

     The  preparation  of  financial  statements  in  conformity with accounting
     principles  generally  accepted  in  the  United States of America requires
     management  to  make  estimates  and  assumptions  that affect the reported
     amounts  of  assets and liabilities at the date of the financial statements
     and  the  reported  amounts  of  revenue  and expenses during the reporting
     period.  Actual  results could differ from those estimates. These estimates
     mainly involve the useful lives of property and equipment, the valuation of
     deferred  tax  assets  and  the  realizability  of  accounts  receivable.

     RESEARCH  AND  DEVELOPMENT
     --------------------------

     Research  and  development  activities  are expensed as incurred, including
     costs  relating  to  patents  or  rights  which  may  result  from  such
     expenditures.

     REVENUE  RECOGNITION
     --------------------

     Revenue  is  recognized at the time services are performed, or in the event
     of  the  sale  of  an  ITD  unit,  when  the  equipment  is  shipped.

     CONCENTRATIONS  OF  CREDIT  RISK
     --------------------------------

     Financial instruments which subject the Company to concentrations of credit
     risk include cash and cash equivalents and accounts receivable. The Company
     maintains  its  cash and cash equivalents with major financial institutions
     selected  based  upon  management's  assessment  of  the  banks'  financial
     stability.  Balances  periodically  exceed  the $100,000 federal depository
     insurance  limit.  The  Company has not experienced any losses on deposits.
     Accounts  receivable  generally  arise  from sales of services to customers
     operating  in  the United States and Latin America. Collateral is generally
     not  required  for  credit  granted.  As  of  December 31, 2003, all of the
     Company's  trade  receivables  were  due  from  one  customer  for services
     performed in the United States. The Company has in place insurance to cover
     certain  exposure  in  its  foreign  operations and provides allowances for
     potential  credit  losses  when  necessary.

     CASH  EQUIVALENTS
     -----------------

     The  Company considers all short-term investments with an original maturity
     of  three  months  or  less  when  purchased  to  be  cash  equivalents.

     PROPERTY  AND  EQUIPMENT
     ------------------------

     Property  and  equipment  is stated at cost. Depreciation is computed using
     the straight-line method over the estimated useful lives of 8 years for ITD
     Units  and  3  to  5  years  for  office  furniture  and  equipment  and
     transportation  and other equipment. Effective October 1, 2002, the Company
     changed  the  estimated useful lives of ITD units from 5 to 8 years to more
     accurately reflect the Company's experience with useful lives of ITD unites
     (See  Note  3). Additions or improvements that increase the value or extend
     the  life  of an asset are capitalized. Expenditures for normal maintenance
     and  repairs  are  expensed  as  incurred.  Disposals  are removed from the
     accounts  at  cost  less accumulated depreciation and any gain or loss from
     disposition  is  reflected  in  operations  currently.


                                      F-7
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


1.   ORGANIZATION  AND  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     ----------------------------------------------------------------

     INCOME  TAXES
     -------------

     The Company uses the liability method in accounting for income taxes. Under
     this  method,  deferred  tax assets and liabilities are determined based on
     differences  between financial reporting and income tax carrying amounts of
     assets  and  liabilities  and  are measured using the enacted tax rates and
     laws that will be in effect when the differences are expected to reverse. A
     valuation allowance, if necessary, is provided against deferred tax assets,
     based  upon  management's  assessment  as  to  their  realization.

     STOCK-BASED  COMPENSATION
     -------------------------

     Financial  Accounting  Standard  No.  123,  "Accounting  for  Stock-Based
     Compensation"  ("SFAS  No.  123")  established  financial  accounting  and
     reporting standards for stock-based employee compensation plans. It defined
     a  fair  value  based  method of accounting for an employee stock option or
     similar  equity instrument and encouraged all entities to adopt that method
     of  accounting  for  all  of  their  employee  stock compensation plans and
     include  the cost in the income statement as compensation expense. However,
     it also allows an entity to continue to measure compensation cost for those
     plans  using  the  intrinsic value based method of accounting prescribed by
     Accounting  Principles  Board ("APB") Opinion No. 25, "Accounting for Stock
     Issued  to Employees". The Company accounts for compensation cost for stock
     option  plans  in  accordance  with  APB  Opinion  No.  25.

     ACQUIRED  ENGINEERING  DESIGN  AND  TECHNOLOGY
     ----------------------------------------------

     Acquired  engineering design and technology represents the intangible value
     associated  with certain proprietary equipment and process designs acquired
     by  the  Company in the acquisition of OnSite Technology, L.L.C. ("OnSite")
     in  1997. In the acquisition of OnSite, the purchase price was allocated to
     the assets acquired and liabilities assumed based on independent appraisal.
     This intangible asset is being amortized over an estimated useful life of 8
     years  using  the  straight-line  method.

     IMPAIRMENT  OF  LONG-LIVED  ASSETS
     ----------------------------------

     In  the  event  facts  and  circumstances  indicate the carrying value of a
     long-lived  asset,  including  associated  intangibles, may be impaired, an
     evaluation of recoverability is performed by comparing the estimated future
     undiscounted  cash  flows associated with the asset to the asset's carrying
     amount to determine if a write-down to market value or discounted cash flow
     is  required.  Given  the  homogeneous  nature  and  geographic  deployment
     flexibility  of  such  assets,  and  based  upon  a  recent  evaluation  by
     management, an impairment write-down of the Company's long-lived assets was
     not  deemed  necessary.

     Management has evaluated the carrying value of long-lived assets, including
     associated  intangibles.  An  evaluation  of recoverability is performed by
     comparing  the estimated future undiscounted cash flows associated with the
     asset to the asset's carrying amount to determine if a write-down to market
     value or discounted cash flow is required. Given the homogeneous nature and
     geographic  deployment  flexibility  of  such  assets,  and based upon this
     evaluation by management, impairment of the Company's long-lived assets has
     not  been  deemed  necessary.


     TRANSLATION  OF  FOREIGN  CURRENCIES
     ------------------------------------

     The  financial  statements  of  foreign subsidiaries are measured as if the
     functional  currency  were  the  U.S.  dollar.  The re-measurement of local
     currencies  into  U.S.  dollars  creates  translation adjustments which are
     included  in  net  income.

     FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS
     ---------------------------------------

     The  Company  includes  fair  value  information  in the notes to financial
     statements  when  the  fair value of its financial instruments is different
     from  the  book  value.  When  the  book  value approximates fair value, no
     additional  disclosure  is  made.


                                       F-8
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


1.   ORGANIZATION  AND  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     ----------------------------------------------------------------

     RECENTLY  ISSUED  ACCOUNTING  PRONOUNCEMENTS
     --------------------------------------------

     In  June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for Costs
     Associated  with  Exit  or  Disposal Activities," which addresses financial
     accounting  and  reporting  for  costs  associated  with  exit  or disposal
     activities  and  supersedes  Emerging  Issues Task Force ("EITF") Issue No.
     94-3,  "Liability Recognition for Certain Employee Termination Benefits and
     Other  Costs  to  Exit  an  Activity (including Certain Costs Incurred in a
     Restructuring)."  SFAS  No.  146  requires  companies  to  recognize  costs
     associated  with  exit or disposal activities when they are incurred rather
     than  at the date of a commitment to an exit or disposal plan. In addition,
     SFAS  No.  146  establishes  that  fair  value is the objective for initial
     measurement  of  the  liability.  SFAS  No.  146  is  effective for exit or
     disposal  activities  initiated after December 31, 2002, but early adoption
     is permitted. The Company adopted SFAS No. 146 on January 1, 2003; however,
     its  adoption  did not have a significant impact on the Company's financial
     position  or  results  of  operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
     Compensation",  which amends SFAS No. 123 to provide alternative methods of
     transition  for an entity that voluntarily changes to the fair value method
     of  accounting  for  stock  based employee compensation. It also amends the
     disclosure provisions of SFAS No. 123 to require prominent disclosure about
     the  effects  on  reported  net  income  of  an  entity's accounting policy
     decisions  with respect to stock based employee compensation. Finally, SFAS
     No.  148  amends  APB  Opinion  No.  28,  "Interim Financial Reporting", to
     require  disclosure  of those effects in interim financial statements. SFAS
     No.  148  is  effective for fiscal years ended after December 15, 2002, but
     early adoption is permitted. The Company adopted SFAS No. 148 on January 1,
     2003;  however, adoption did not have a significant impact on its financial
     reporting.

     In  January  2003,  the  FASB  issued  FASB  Interpretation  (FIN)  No.  46
     "Consolidation  of  Variable  Interest  Entities."  FIN  No.  46 requires a
     company  to  consolidate  a variable interest entity ("VIE") if the company
     has  variable interests that give it a majority of the expected losses or a
     majority  of  the expected residual returns of the entity. Prior to FIN No.
     46,  VIEs  were  commonly  referred  to  as  SPEs.  FIN No. 46 is effective
     immediately  for  VIEs  created after January 31, 2003. This interpretation
     did  not  have  a  material  effect on the Company's financial condition or
     results  of  operations.

     In April 2003, the FASB issued SFAS No. 149, Amendment to Statement No. 133
     on Derivative Instruments and Hedging Activities. This statement amends and
     clarifies  financial  accounting  and reporting for derivative instruments,
     including  certain  derivative  instruments  embedded  in  other  contracts
     (collectively  referred to as derivatives) and for hedging activities under
     SFAS  No.  133.  The changes in SFAS No. 149 improve financial reporting by
     requiring  that  contracts with comparable characteristics be accounted for
     similarly.  Those  changes  will  result  in  more  consistent reporting of
     contracts  as  either  derivatives  or  hybrid instruments. SFAS No. 149 is
     effective  for  contracts  entered  into  or  modified after June 30, 2003,
     except  in  certain  instances  detailed  in  the  statement,  and  hedging
     relationships designated after June 30, 2003. Except as otherwise stated in
     SFAS  No. 149, all provisions should be applied prospectively. The adoption
     of this statement did not have a material effect on the Company's financial
     condition  or  results  of  operations.


                                       F-9
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


1.   ORGANIZATION  AND  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     ----------------------------------------------------------------

     RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS, CONTINUED
     ----------------------------------------------------

     In  May  2003,  the  FASB  issued  SFAS  No.  150,  "Accounting for Certain
     Financial Instruments with Characteristics of both Liabilities and Equity."
     SFAS  No.  150,  which  is  effective at the beginning of the first interim
     period  beginning after June 15, 2003, must be implemented by reporting the
     cumulative  effect  of  a  change  in  accounting  principle  for financial
     instruments  created  before  the  issuance date of the statement and still
     existing  at the beginning of the interim period of adoption. The statement
     requires  that  a  financial instrument which falls within the scope of the
     statement  to  be  classified  and  measured  as a liability. The following
     financial  instruments  are  required  to be classified as liabilities: (1)
     shares that are mandatorily redeemable, (2) an obligation to repurchase the
     issuer's  equity  shares  or  one  indexed  to  such an obligation and that
     requires  or  may  require  settlement  by  transferring assets and (3) the
     embodiment  of  an  unconditional obligation that the issuer may or may not
     settle  by issuing a variable number of equity shares if, at inception, the
     monetary  value  of the obligation is based on certain measurements defined
     in  the  statement.  The adoption of this statement did not have a material
     effect  on  the  Company's  financial  condition  or results of operations.

2.   LIQUIDITY  ISSUES
     -----------------

     Since  its inception, the Company has expended a significant portion of its
     resources  to develop markets and industry awareness of the capabilities of
     its  indirect  thermal  desorption recycling process. The Company's efforts
     have  been focused on the development, production and sale of environmental
     recycling  technologies  and services to oil and gas industry participants,
     waste  management  companies  and other industrial customers. The Company's
     efforts  to develop markets and produce equipment have required significant
     amounts  of  capital  including long-term debt secured by the Company's ITD
     units  and  related ITD technology. With the exception of the profitability
     impact  from  the  Company's  sale of three ITD units and certain licensing
     rights  in  late  2001  (as  noted  below  and  in Note 3), the Company has
     incurred  recurring  net  losses  and  has been dependent on revenue from a
     limited  customer  base  to  provide  cash  flows.  These  factors  raise
     substantial  doubt  about  the  Company's  ability  to  continue as a going
     concern.

     The Company is currently seeking to obtain service contracts in the markets
     that  it  serves and is also considering strategic alternatives including a
     possible  additional  sale  of certain of its assets. In December 2001, the
     company  completed the sale of three of its ITD units and certain licensing
     rights,  and  the  proceeds  were  used to pay off all the Company's senior
     debt.

     The  Company's  long-term  viability as a going concern is dependent on the
     repositioning  of  its asset base and the achievement of a sustaining level
     of  profitability. To the extent the Company's cash reserves and cash flows
     from  operations  are  insufficient  to  meet future cash requirements, the
     Company  will  need  to  raise  funds  through  the infusion of equity, the
     issuance  of  debt  securities or the sale of ITD units. Such financing may
     not be available on terms acceptable to the Company or at all. Further, the
     sale  of  additional  equity  or  convertible debt securities may result in
     dilution  to  the  Company's  stockholders.  The  accompanying  financial
     statements  do  not  include any adjustments that might be necessary if the
     company  is  unable  to  continue  as  a  going  concern.


3.   PROPERTY  AND  EQUIPMENT
     ------------------------

     Property and equipment, at December 31, 2003, consists of the following (in
     thousands):

<TABLE>
<CAPTION>
<S>                                                                   <C>
  ITD Remediation/Recycling Units and
    auxiliary equipment                                                $11,966
  Office furniture and equipment                                            36
  Transportation and other equipment                                        41
                                                                       -------
                                                                        12,043
  Less accumulated depreciation                                          6,990
                                                                       -------

  Property and equipment, net                                          $ 5,053
                                                                       =======
</TABLE>


                                      F-10
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________



3.   PROPERTY  AND  EQUIPMENT,  CONTINUED
     ------------------------------------

     On  October  1,  2002, the Company changed the depreciable lives of its ITD
     units  from  five  to eight years. This change in estimate was made to more
     accurately  reflect  the Company's experience concerning the useful life of
     its equipment and to conform with industry practices for similar equipment.
     The  change  in  estimate,  which  is being applied on a prospective basis,
     resulted in a decrease in depreciation expense and net loss of $215,000 for
     the year ended December 31, 2002. The change reduced basic and diluted loss
     per share by $0.02 and, accordingly, if the change in estimate had not been
     adopted  by  the Company, basic and diluted net loss per share for the year
     ended  December  31,  2002  would  have  been  $0.35  per  share.


4.   OTHER  ACCRUED  LIABILITIES
     ---------------------------

     Other  accrued liabilities, at December 21, 2003, consists of the following
     (in  thousands):

     Accrued  property  and  franchise  taxes                            $    41
     Accrued  professional  fees                                              59
     Accrued  joint-company  expenses                                        369
     Accrued  executive  salaries                                            300
     Accrued  operating  costs                                                93
                                                                         -------

                                                                         $   862
                                                                         =======

5.   LEASE  COMMITMENTS
     ------------------

     The  Company leases office space and a storage and maintenance area for its
     equipment  under  operating  leases.  The  lease  for  office  space  has a
     remaining  term  of  greater  than one year. Rental expense under operating
     leases was $66,000 and $70,000 during the years ended December 31, 2003 and
     2002,  respectively.

6.   INCOME  TAXES
     -------------

     Deferred  income taxes reflect the net tax effects of temporary differences
     between  the  carrying  amounts  of  assets  and  liabilities for financial
     reporting  purposes  and  the  amounts  used  for  income  tax  purposes.
     Significant  components  of  the  Company's  deferred  tax  assets  and
     liabilities,  at  December  31,  2003,  were  as  follows  (in  thousands):

     Deferred tax liabilities:
       Basis  of  property  and  equipment                               $   195
                                                                         -------

         Total  deferred  tax  liabilities                                   195
                                                                         -------

     Deferred  tax  assets:
       Net  operating  loss  carryforwards                                 2,741
       All  other,  net                                                      392
                                                                         -------

         Total  deferred  tax  assets                                      3,133
                                                                         -------

       Valuation  allowance                                              (2,938)
                                                                         -------

                                                                             195
                                                                         -------

         Net  deferred  tax  assets                                      $     -
                                                                         =======


                                      F-11
<PAGE>

                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


6.   INCOME  TAXES,  CONTINUED
     -------------------------

     For  financial reporting purposes, income before provision for income taxes
     and  minority  interest,  for  the  years ended December 31, 2003 and 2002,
     includes  the  following  components  (in  thousands):

<TABLE>
<CAPTION>
                                         2003      2002
                                       --------  --------
<S>                                    <C>       <C>
     United States                     $(1,897)  $(2,931)
     Foreign                              (182)     (288)
                                       --------  --------

       Loss before benefit for income
         taxes and minority interest   $(2,079)  $(3,219)
                                       ========  ========
</TABLE>

     The  $79,000  benefit for income taxes for the year ended December 31, 2002
     relates  to  current  United  States  federal  income  taxes. There were no
     current  or  deferred income taxes related to foreign operations during the
     years  ended  December  31,  2003  and  2002.

     The  differences  between  the  statutory income tax rate and the Company's
     effective  income  tax  rate  are  as  follows:

<TABLE>
<CAPTION>
                                            2003   2002
                                            -----  ----
<S>                                        <C>    <C>
     Federal statutory rate                  34%    34%
     Foreign tax credits and other            -    (16%)
     Change in valuation allowance          (34%)  (18%)
                                            -----  -----

           Benefit for income taxes          - %     2%
                                            =====  =====
</TABLE>

     As  of  December  31, 2003, for U.S. federal income tax reporting purposes,
     the  Company  has  approximately  $8,063,000 of unused net operating losses
     ("NOLs")  available  for  carryforward  to  future  years. The benefit from
     carryforward  of  such NOLs will expire during the years ended December 31,
     2017  to  2023.  Because United States tax laws limit the time during which
     NOL carryforwards may be applied against future taxable income, the Company
     may  be  unable  to  take  full advantage of its NOL for federal income tax
     purposes  should  the  Company  generate  taxable  income.  Based  on  such
     limitation,  the  Company  has  significant  NOL  carryforwards  for  which
     realization  of  tax  benefits  is  uncertain.  Further,  the  benefit from
     utilization  of  NOL  carryforwards  could  be  subject  to  limitations if
     material ownership changes occur in the Company. Based on such limitations,
     the  Company has significant NOL's for which realization of tax benefits is
     uncertain.

7.   NOTES  PAYABLE  TO  RELATED  PARTIES
     ------------------------------------

     In July 2002, the Company obtained uncollateralized loans totaling $250,000
     from Cahill Warnock Strategic Partners, L.P. and Strategic Associates, L.P.
     These  loans  bear  interest  of  12%  per  year and were originally due in
     January  2003  but  have  been  extended  to  April  2004. David Warnock, a
     director  of  the Company, is a general partner of Cahill Warnock Strategic
     Partners,  L.P.  and  a managing member of the general partner of Strategic
     Associates,  L.P.

     In March 2003 the Company signed a $1,500,000 long-term loan agreement. The
     loan  is  collateralized  by three ITD units and bears interest at a stated
     rate  of  12%  per  year.  Principal  payments  are  due  in  20  quarterly
     installments of $75,000 beginning in August 2003 with the final payment due
     in  May  2008.  In  connection with this long-term loan, the Company issued
     1,500,000  warrants  to  purchase shares of its common stock at an exercise
     price  of  $0.01  per share and these warrants were valued at $345,000. The
     loan origination fees and warrants results in an effective interest rate on
     the  loan  of  approximately  35%  per  year.  (See  Note  12)


                                      F-12
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________



7.   NOTES  PAYABLE  TO  RELATED  PARTIES,  CONTINUED
     ------------------------------------------------

     In  September 2003 the Company borrowed $8,000 from a financial institution
     to  purchase a vehicle. The loan bears interest of 6.5% per year and is due
     in  payments of $245 per month, including interest, through September 2006.
     The  vehicle  is  collateral  for  the  loan.

     Long-term  debt  as  of December 31, 2003 consists of amounts due under the
     long-term  debt  agreements  as  described  in the previous paragraphs. The
     long-term  debt has an original face value of $1,500,000 and is carried net
     of  unamortized  loan  costs  of  approximately $402,000 as of December 31,
     2003.  Such  loan  costs are being amortized over the term of the long-term
     debt  using  the  interest  method.

     Long-term  debt,  as  of  December  31, 2003, consists of the following (in
     thousands):

     Cahill  Warnock  Strategic  Partners,  L.P.                         $   237

     Strategic  Associates,  L.P.                                             13

     Note  payable  to  a  related  party                                  1,350

     Other  note  payable                                                      8
                                                                         -------

     Contractual  balance                                                  1,608

     Less  unamortized  loan  costs                                        (402)
                                                                         -------

       Long-term  debt                                                     1,206

     Less  current  maturities                                             (420)
                                                                         -------

         Long-term  debt,  net  of  current  portion                     $   786
                                                                         =======

     The  following  is  an  analysis  of  future annual scheduled maturities of
     contractual  balances  of  long-term  debt  (in  thousands):

      YEAR ENDED
     DECEMBER 31,
     ------------

          2004                                                           $   552
          2005                                                               303
          2006                                                               303
          2007                                                               300
          2008                                                               150
                                                                         -------

     Long-term  debt                                                    $  1,608
                                                                        ========

8.   STOCKHOLDERS'  EQUITY
     ---------------------

     The  Company's  articles  of  incorporation authorize the issuance of up to
     10,000,000 shares of preferred stock with characteristics determined by the
     Company's  board  of  directors.  Effective December 17, 1997, the board of
     directors  authorized  the  issuance  and sale of up to 5,000,000 shares of
     Series  B  convertible preferred stock and up to 400,000 shares of Series C
     non-voting  non-convertible preferred stock. During the year ended December
     31,  2000,  the board of directors authorized the issuance of up to 400,000
     shares  of  Series  D  convertible  preferred  stock.

     SERIES  B  CONVERTIBLE  PREFERRED  STOCK
     ----------------------------------------

     In  1997,  the Company issued 3,771,422 shares of $0.001 par value Series B
     convertible  preferred  stock for $4,000,000, or $1.06 per share. Dividends
     are  paid  at the same rate as common stock based upon the conversion rate.
     The  Series  B convertible preferred stock can be converted to common stock
     at any time at the option of the holder. The initial rate is 1 common share
     for  each  preferred  share;  however,  the  conversion  rate is subject to
     adjustments  to  prevent  dilution. The holders of the Series B convertible
     preferred  stock  have essentially the same voting rights as the holders of
     common  stock.  The  Series B convertible preferred stock has a liquidation
     preference  of  $1.06  per  share  plus  any  unpaid  dividends.


                                      F-13
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


8.   STOCKHOLDERS'  EQUITY,  CONTINUED
     ---------------------------------

     SERIES  C  PREFERRED  STOCK
     ---------------------------

     In 1997, the Company issued 400,000 shares of Series C non-voting preferred
     stock  with  a $0.001 per share par value and a $10 per share stated value.
     The  Series  C  preferred  stock  carried  a  quarterly dividend payable in
     arrears  of  prime  plus  1.5%  based on the stated value of the stock. The
     Series  C  preferred stock was redeemable at the option of the Company at a
     price  of  $10  per share plus any unpaid dividends. Proceeds of $4,000,000
     from  the  Series  C  preferred  stock  were  recorded net of a discount of
     $809,000, which included related offering costs incurred and the allocation
     of  a portion of the proceeds to the warrants issued to the same investors.
     The  Series  C preferred stock was accreted to its liquidation value over a
     period  of  26  months  to February 17, 2000. The accretion of the Series C
     preferred  stock  was  deducted  from  the  net loss to derive the net loss
     applicable  to common stockholders in the calculation of earnings per share
     (See Note 9). As described below, during 2000, Series C preferred stock was
     exchanged  for  Series  D  convertible  preferred  stock.

     SERIES  D  PREFERRED  STOCK
     ---------------------------

     During  2000, the Company exchanged 400,000 newly issued shares of Series D
     convertible  Preferred  Stock  for Series C non-convertible Preferred Stock
     held  by  the Company's primary lender. The newly issued shares of Series D
     Preferred  stock are convertible into common stock at a conversion price of
     $2.25  per  share  until December 31, 2002, and a conversion price of $1.00
     after  December  31,  2002.

     In  the  event  of a default under the loan agreement, the conversion price
     was  originally  the  lesser of $1.00 per share or the averaging thirty-day
     trailing  price;  however, in March 2001, the conversion price was fixed at
     $0.37.  The conversion feature associated with the 400,000 shares of Series
     D Preferred Stock was valued at $168,000 based on an independent appraisal.
     The  value of the conversion feature, representing unaccreted discount, was
     amortized  to  expense  over  the  remaining  term  of  the  debt using the
     effective  interest method. Other than the conversion feature of the Series
     D  Preferred Stock, its features and preferences are the same as the Series
     C  Preferred  Stock.

     The  Series  D  preferred  stock  carried  a  quarterly dividend payable in
     arrears of prime (4.00% at December 31, 2003) plus 1.5% based on the stated
     value  of  the  stock.  The  Series  D preferred stock is redeemable at the
     option  of  the  Company  at  a  price  of  $10  per  share plus any unpaid
     dividends.  The  holders  of  Series  D preferred stock have deferred their
     dividend  payments,  totaling $842,000 at December 31, 2003, until April 1,
     2004.

     STOCK  OPTIONS
     --------------

     The  Company  periodically issues incentive stock options to key employees,
     officers,  and  directors  to  provide additional incentives to promote the
     success of the Company's business and to enhance the ability to attract and
     retain  the services of qualified persons. The issuance of such options are
     approved by the Board of Directors. The exercise price of an option granted
     is  determined  by the fair market value of the stock on the date of grant.

     The  Company  has elected to follow Accounting Principles Board Opinion No.
     25,  "Accounting  for  Stock  Issued  to  Employees"  (APB  25) and related
     Interpretations  in  accounting  for its employee stock options because, as
     discussed  below,  the alternative fair value accounting provided for under
     FASB Statement No. 123, "Accounting for Stock-Based Compensation", requires
     use  of  option valuation models that were not developed for use in valuing
     employee  stock  options.  Under  APB 25, because the exercise price of the
     Company's employee stock options is greater than or equals the market price
     of  the  underlying stock on the date of grant, no compensation expense has
     been  recognized.

     Proforma  information  regarding  net  income  and  earnings  per  share is
     required  by  Statement  123, and has been determined as if the Company had
     accounted  for  its  employee  stock options under the fair value method of
     that  Statement. The fair value for these options was estimated at the date
     of  grant  using  a  Black-Scholes  option-pricing  model.  No options were
     granted  or  vested  in  or  2002  and,  accordingly,  no  option-pricing
     assumptions or proforma disclosures are presented for that year.


                                      F-14
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


8.   STOCKHOLDERS'  EQUITY,  CONTINUED
     ---------------------------------

     STOCK  OPTIONS
     --------------

     The  Black-Scholes  option  valuation  model  was  developed  for  use  in
     estimating  fair value of traded options which have no vesting restrictions
     and  are  fully  transferable. In addition, option valuation models require
     the  input  of  highly  subjective assumptions including the expected stock
     price  volatility.  Because  the  Company's  employee  stock  options  have
     characteristics  significantly  different from those of traded options, and
     because  changes  in the subjective input assumptions can materially affect
     the  fair  value  estimate, in management's opinion, the existing models do
     not  necessarily provide a reliable single measure of the fair value of its
     employee  stock  options.

     PROFORMA  DISCLOSURES
     ---------------------

     For  purposes  of  proforma  disclosures,  the  estimated fair value of the
     options is included in expense over the option's vesting period or expected
     life.

     During  the  year  ended  December  31, 2003, 492,500 of stock options were
     granted  at  prices  ranging  from  $0.18 to $0.20 per share. The Company's
     proforma  information  follows  (in  thousands  except  per share amounts):

<TABLE>
<CAPTION>
                                                  2003       2002
                                                ---------  --------
<S>                                             <C>        <C>
       Proforma net income (loss)               $ (2,079)  $(3,043)
       Proforma net income (loss) available
         to common stockholders                 $ (2,307)  $(3,296)
       Proforma basic income (loss) per share   $  (0.21)  $ (0.33)
       Dilutive income (loss) per share         $  (0.21)  $ (0.33)

     Option Pricing Assumptions

       Dividend yield                                  0%        -
       Expected volatility                            70%        -
       Risk free interest                            3.0%        -
       Expected lives                            5 years         -
</TABLE>

     STOCK  OPTION  PLAN
     -------------------

     The  Company  has  adopted  the  1998 Stock Option Plan (the "Option Plan")
     under  which  incentive  stock  options  for  up  to  800,000 shares of the
     Company's  common  stock  may  be  awarded  to  officers, directors and key
     employees.  The Option Plan is designed to attract and reward key executive
     personnel.  At  December  31,  2003,  the  Company  had granted options for
     792,500  of a total of 800,000 shares of common stock reserved for issuance
     under  the  Option  Plan.

     Stock  options granted pursuant to the Option Plan expire not more than ten
     years  from  the  date of grant and typically vest within one to two years.
     All  of  the options granted by the Company were granted at an option price
     equal  to  the  fair market value of the common stock at the date of grant.


                                      F-15
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


8.   STOCKHOLDERS'  EQUITY,  CONTINUED
     ---------------------------------


     A  summary  of  the Company's stock option activity and related information
     for  the  years  ended  December  31,  2003  follows:

<TABLE>
<CAPTION>
                                                 NUMBER OF
                                                   SHARES
                                                   UNDER     WEIGHTED-AVERAGE
                                                  OPTIONS     EXERCISE PRICE
                                                ----------  -----------------
<S>                                              <C>         <C>
       Outstanding - December 31, 2002 and 2001  4,788,662                1.38

       Granted                                     492,500                0.19
       Exercised                                         -                   -
       Forfeited during 2003                        (7,500)               0.21
                                                 ----------

       Outstanding - December 31, 2003           5,273,662   $            1.27
                                                 ==========
</TABLE>

     A summary of outstanding stock options at December 31, 2003, follows:

<TABLE>
<CAPTION>
                                          REMAINING
     NUMBER OF COMMON                    CONTRACTUAL
     STOCK EQUIVALENTS  EXPIRATION DATE  LIFE (YEARS)  EXERCISE PRICE
     -----------------  ---------------  ------------  ---------------
<S>                     <C>              <C>           <C>
             2,470,300  November 2005             1.9  $          0.60
               112,500  March 2007                3.2             1.44
               480,000  March 2007                3.2             2.50
                35,000  November 2007             3.9             1.44
               356,813  December 2007             4.0             1.44
               613,831  December 2007             4.0             3.00
                 1,053  January 2008              4.1             2.38
                   800  January 2008              4.1             3.12
                   770  January 2008              4.1             3.25
                   625  January 2008              4.1             4.00
                47,053  April 2008                4.7             5.00
               122,417  April 2008                4.7             1.44
               547,500  December 2008             7.0             1.69
               192,500  March 2013                9.2             0.21
                52,500  May 2013                  9.4             0.18
               240,000  July 2013                 9.5             0.18
     -----------------

             5,273,662
     =================
</TABLE>

     All  outstanding  stock options are exercisable at December 31, 2003 except
     for  the  following:

<TABLE>
<CAPTION>
     NUMBER OF COMMON   INITIAL        EXERCISE
     STOCK EQUIVALENTS  EXERCISE DATE    PRICE
     -----------------  -------------  ---------
<S>                     <C>            <C>
                92,500  March 6, 2004  $    0.21
                26,250  May  22, 2004       0.18
               120,000  July  2, 2004       0.18
</TABLE>


                                      F-16
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


8.   STOCKHOLDERS'  EQUITY,  CONTINUED
     ---------------------------------


     STOCK  WARRANTS
     ---------------

     Following is a summary of stock warrant activity:

<TABLE>
<CAPTION>
                                 NUMBER OF   EXERCISE      WEIGHTED
                                   SHARES      PRICE    AVERAGE PRICE
                                 ----------  ---------  --------------
<S>                              <C>         <C>        <C>
     Warrants outstanding as of
       December 31, 2001         1,312,780   $    0.01  $         0.01

       Issued                            -           -               -
       Canceled                          -           -               -
       Exercised                         -           -               -
                                 ----------

     Warrants outstanding as of
       December 31, 2002         1,312,780   $    0.01  $         0.01

       Issued                    1,500,000   $    0.01  $         0.01
       Canceled                          -           -               -
       Exercised                  (632,947)  $    0.01  $         0.01
                                 ----------

     Warrants outstanding as of
       December 31, 2003         2,179,833   $    0.01  $         0.01
                                 ==========
</TABLE>

     The  warrants  outstanding  were  issued  in connection with the funding of
     certain notes payable that were repaid in 2001 and a note payable issued in
     2003.  All  warrants  bear  an  exercise  price  of $0.01 per share and are
     currently  exercisable.  The  warrants  expire  as  follows:

      SHARES        EXPIRATION DATE
     -------        ---------------

       582,180     February 16, 2010
        97,653     December 16, 2011
     1,500,000     April 30, 2005
     ---------

     2,179,833
     =========


9.   EARNINGS  PER  SHARE
     --------------------

     Basic earnings per common share are based on the weighted average number of
     common  shares  outstanding in each year and after preferred stock dividend
     requirements.  Diluted  earnings  per common share assume that any dilutive
     convertible  debentures and convertible preferred shares outstanding at the
     beginning  of  each  year  were  converted  at  those  dates,  with related
     interest,  preferred  stock  dividend  requirements  and outstanding common
     shares adjusted accordingly. It also assumes that outstanding common shares
     were  increased by shares issuable upon exercise of those stock options for
     which  market  price  exceeds  exercise price, less shares which could have
     been  purchased  by  the  Company  with  related  proceeds. The convertible
     preferred  stock  and  outstanding  stock  options  and  warrants  were not
     included  in  the computation of diluted earnings per common share for 2003
     or  2002.


                                      F-17
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


9.   EARNINGS  PER  SHARE,  CONTINUED
     --------------------------------

     The  following  table  sets  forth  the reconciliation of net income to net
     income  applicable  to  common  stockholders  (in  thousands):

<TABLE>
<CAPTION>
                                                                2003      2002
                                                              --------  --------
<S>                                                           <C>       <C>
       Net income (loss)                                      $(2,079)  $(3,043)

       Less: Series D Preferred stock dividends                  (228)     (253)
                                                              --------  --------

       Net income (loss) applicable to common stockholders-
         numerator for basic and diluted earnings per share   $(2,307)  $(3,296)
                                                              ========  ========
</TABLE>

10.  401(k)  SALARY  DEFERRAL  PLAN
      ------------------------------

     The  Company  has  a  401(k) salary deferral plan (the "Plan") which became
     effective  on  January 1, 1998, for eligible employees who have met certain
     service  requirements.  The  Plan  does not provide for Company matching or
     discretionary  contributions  and,  accordingly,  the Company recognized no
     expense  under  the  Plan  in  2003  or  2002.

11.  LITIGATION
     ----------

     In  July  2002,  OnSite  filed  a  lawsuit  styled OnSite Technology LLC v.
     Duratherm,  Inc.,  Duratherm  Group,  Inc.,  Steven  R. Heuer and Victor R.
     Reynolds;  Civil  Action No. H-02-2624; in the United States District Court
     for  the  Southern  District of Texas against Duratherm, Inc. and Duratherm
     Group,  Inc.,  Steven  R. Heuer and Victor R. Reynolds. OnSite alleges that
     Duratherm's  remediation operations at its Galveston County, Texas facility
     infringe  on  OnSite's U.S. Patent No. 5,738,031 and requests a declaratory
     judgment  that  OnSite's  operation  of  its  remediation  process does not
     infringe  either  of  Heuer  and  Reynolds'  U.S. Patent Nos. 4,990,237 and
     5,269,906  over  which Duratherm alleges control. OnSite also seeks damages
     for  patent  infringement,  injunctive  relief  to  prevent  further patent
     infringement, and other relief that the courts find appropriate. Defendants
     have filed an answer asserting that they do not infringe on OnSite's patent
     or alternatively, that such patent is invalid. Defendants denial that there
     is  any  controversy  between the parties regarding the Heuer and Reynolds'
     patents  has  been  rejected  by  the court. Defendants have now alleged in
     their  pleadings that OnSite infringes on the above patents along with U.S.
     Patent  No.  5,523,060,  all  of  which OnSite denies. Defendants, although
     originally  asserting  that  OnSite  infringed each of the patents in suit,
     have  announced in open court that they are no longer claiming infringement
     of  U.S.  Patent No. 4,990,237 against OnSite. Discovery is closed, and the
     case  is  now  set  for trial on the May/June, 2004 trial docket. After the
     close  of  discovery,  the  District  Court  heard  argument  regarding the
     interpretation  of  the  claims of each of the patents in suit. A ruling on
     this  issue  is  expected  before  trial.  The  District  Court  has  set a
     scheduling  conference  on  April  23,  2004.

     In  July  2002,  OnSite also initiated litigation styled OnSite Technology,
     LLC  v.  Duratherm,  Inc.  et al.; Cause No. 02CV0801; In the 56th Judicial
     District  Court  of  Galveston  County,  Texas,  against  Duratherm,  Inc.,
     Duratherm Group, Inc., Barry Hogan and Jim Hogan. This lawsuit alleges that
     in  November  1999,  OnSite  and  Waste Control Specialists, L.L.C. ("WCS")
     entered  into  a contract wherein OnSite would, among other things, provide
     the  necessary  services,  supplies  and equipment to perform recycling and
     remediation  services  utilizing  an  indirect  thermal  desorption unit as
     specified  therein. OnSite alleges that, in late July or early August 2000,
     Defendants, acting in concert through Duratherm, Inc., sent or caused to be
     sent a letter(s) and/or other communication(s) to WCS, which OnSite alleges
     contained


                                      F-18
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


11.  LITIGATION,  CONTINUED
     ----------------------

     statements  that  were  false and intended to deceive WCS, as to OnSite and
     OnSite's  technology  and  indirect  thermal  desorption  unit. OnSite also
     alleges  that  a  suit  filed  by  Duratherm  in  August  2000  for  patent
     infringement against OnSite and WCS in the United States District Court for
     the Southern District of Texas under Civil Action No. H-00-2727, which suit
     was  subsequently  dismissed  with  prejudice by the United States District
     Judge,  was  malicious and contained false statements and allegations about
     OnSite and OnSite's technology and indirect thermal desorption unit. OnSite
     alleges that as a result of such false, deceptive and malicious statements,
     WCS  terminated  its contract with OnSite. In February, 2003 OnSite amended
     its  petition  to add John C. Hilliard as a defendant and to add as a claim
     against the defendants, the loss of a prospective contract with ExxonMobil.
     OnSite  has also amended its petition to include as a defendant Duratherm's
     counsel,  Conley  Rose  P.C. The causes of action alleged by OnSite against
     the  Defendants are (i) interference with contract and prospective business
     relations; (ii) unfair competition and business disparagement; (iii) unjust
     enrichment;  and  (iv)  injury  to  OnSite's business reputation. OnSite is
     seeking  actual,  consequential,  incidental  and  compensatory  damages,
     including,  but  not  limited  to,  disgorgement,  pre-  and  post-judgment
     interest,  attorney's  fees  and  costs and exemplary and punitive damages.
     OnSite  is also seeking to enjoin these defendants and Duratherm's counsel,
     Conley  Rose  P.C.,  from  interfering  with  the  current  and prospective
     business  relationships  of  OnSite  with  regard to the thermal desorption
     units.  The  Defendants in this litigation have filed an answer denying the
     allegations  contained  in OnSite's petition. This case is in the discovery
     stage  and  is  set  for  trial  in  July  2004.


12.  RELATED  PARTY  TRANSACTIONS
     ----------------------------

     In July 2002, the Company obtained uncollateralized loans totaling $250,000
     from  certain  stockholders (See Note 4). In March 2001 and September 2000,
     the Company entered into agreements with its primary lenders and holders of
     its  outstanding  preferred  stock  to defer various principal and interest
     payments  on  its senior debt. The senior debt was fully repaid in December
     2001.

     In  March 2003, the Company obtained a loan of $1,500,000 (See Note 8). The
     Company issued 1,500,000 warrants to purchase shares of its common stock at
     an  exercise  price  of  $0.01 per share in connection with this loan. This
     transaction  resulted  in  the  lender  becoming  a  related  party and the
     beneficial owner of 12% of the Company's common stock, although none of the
     warrants  have  been  exercised  as  of  February  1,  2004.

     In  January  2003,  the  Company signed a contract to process various waste
     streams with an entity affiliated with the lender described in the previous
     paragraph.


13.  SEGMENT  AND  GEOGRAPHIC  INFORMATION
     -------------------------------------

     The  Company  currently  operates  in  the  environmental  remediation  and
     hydrocarbon  reclamation/recycling  services.  Substantially  all  revenues
     result  from  the  sale  of  services  using  the  Company's ITD units. The
     Company's  reportable  segments  are  based  upon  geographic  area and all
     intercompany  revenue and expenses are eliminated in computing revenues and
     operating  income  (loss).

     All  foreign  subsidiaries  of  the Company operate with the U.S. dollar as
     their  functional  currency  and,  accordingly,  no  cumulative translation
     adjustment  is  presented  in  the  accompanying  balance  sheet.

     The  Company  and  OnSite  share  office  facilities and certain employees.
     Shared  costs  are  generally  specifically identified by company; however,
     certain  costs  must  be  allocated  based  upon  management's  estimates.

     The  corporate  component  of  operating income (loss) represents corporate
     general and administrative expenses. Corporate assets include cash and cash
     equivalents,  and  restricted  cash  investments.


                                      F-19
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   __________


13.  SEGMENT  AND  GEOGRAPHIC  INFORMATION,  CONTINUED
     -------------------------------------------------

     Following is a summary of segment information (in thousands):

<TABLE>
<CAPTION>
                                           2003      2002
                                         --------  --------
<S>                                      <C>       <C>
Revenue:
  United States                          $ 1,723   $    49
  Latin America                                -       894
                                         --------  --------

    Total revenue                        $ 1,723   $   943
                                         ========  ========


 Depreciation and Amortization:
  United States                          $   873   $ 1,624
  Latin America                                -         -
                                         --------  --------

    Total depreciation and amortization  $   873   $ 1,624
                                         ========  ========

Loss From Operations:
  United States                          $(1,674)  $(2,887)
  Latin America                             (120)      (94)
  Middle East                                (62)     (194)
  Corporate                                    -        (1)
                                         --------  --------

    Total loss from operations           $(1,856)  $(3,176)
                                         ========  ========


Interest Expense:
  Corporate                              $   254   $    42
                                         --------  --------

    Total interest expense               $   254   $    42
                                         ========  ========


Benefit For Income Taxes:
  United States                          $     -   $    79
                                         --------  --------

    Total benefit for income taxes       $     -   $    79
                                         ========  ========


Assets:
  United States                          $ 3,202   $ 3,400
  Latin America                               88       228
  Middle East                              3,393     3,397
  Corporate                                   14        54
                                         --------  --------

    Total assets                         $ 6,697   $ 7,079
                                         ========  ========


Long Lived Assets:
  United States                          $ 2,458   $ 3,320
  Latin America                                2         2
  Middle East                              3,390     3,390
                                         --------  --------

    Total long lived assets              $ 5,850   $ 6,712
                                         ========  ========


Capital Expenditures:
  United States                          $    18   $   185
                                         --------  --------

    Total capital expenditures           $    18   $   185
                                         ========  ========
</TABLE>


                                      F-20
<PAGE>
                         ENVIRONMENTAL SAFEGUARDS, INC.
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  -  (CONTINUED)
                                   __________


14.  MAJOR  CUSTOMER  INFORMATION
     ----------------------------

     During  each  of  the  years  ended December 31, 2003 and 2002, the Company
     provided  services  to  a limited customer base geographically dispersed as
     follows:

<TABLE>
<CAPTION>
                                   2003  2002
                                   ----  ----
<S>                                <C>   <C>
     Number of Customers:
       United States                  2     1
       Latin America                  -     1
                                   ----  ----

                                      2     2
                                   ====  ====
</TABLE>


     During  the  year  ended  December 31, 2003, the Company's largest customer
     accounted  for 97% of revenue, and during the year ended December 31, 2002,
     a  different  customer  accounted  for  95%  of  revenue.


15.  NON-CASH  INVESTING  AND  FINANCING  ACTIVITIES
     -----------------------------------------------

     The  Company engaged in certain non-cash investing and financing activities
     as  follows  (in  thousands):

<TABLE>
<CAPTION>
                                                     2003   2002
                                                     -----  -----
<S>                                                  <C>    <C>
     Dividends declared but not yet paid             $ 228  $ 253

     Stock warrants issued in connection
       with the funding of long-term debt              345      -
</TABLE>


                                      F-21
<PAGE>
(B)  EXHIBITS

       Exhibit
       Number                       Description
       -------                      -----------

 3.1*          --   Certificate of Incorporation of the Registrant, as amended.
 3.2*          --   Bylaws  of  the  Registrant.
 4.1*          --   See  Exhibits 3.1 and 3.2. for provisions of the Articles of
                    Incorporation  and  Bylaws of the Registrant defining rights
                    of  holders  of  common  stock  of  the  Registrant.
 4.2*          --   Common  Stock  specimen.
 4.3.1**       --   Certificate  of  Designation,  Preferences,  Rights  and
                    Limitations  of  Series  B  Convertible  Preferred  Stock.
 4.3.2**       --   Certificate  of  Designation,  Preferences,  Rights  and
                    Limitations  of  Series  C  Preferred  Stock.
 4.3.3*****         Certificate  of  Designation,  Preferences,  Rights  and
                    Limitations  of  Series  D  Convertible  Preferred  Stock.
 4.4*          --   Form  of  Warrant  Certificate  dated  December  17,  1997
                    (Included  in  Exhibit  4.8).
 4.5*          --   Form  of  Registration  Rights Agreement pursuant to Private
                    Placement  Memorandum  dated  September  18,  1996.
 4.6*          --   Form of Registration Rights Agreement dated December 17,
                    1997,  between  the  Company  and  Cahill, Warnock Strategic
                    Partners  Fund,  L.P.,  Strategic  Associates, L.P., Newpark
                    Resources,  Inc.  and  James  H.  Stone.
 4.7*          --   Form  of  Warrant Agreement dated December 17, 1997, between
                    the  Company  and  Cahill,  Warnock Strategic Partners Fund,
                    L.P.,  Strategic  Associates,  L.P., Newpark Resources, Inc.
                    and  James  H.  Stone.
 4.8***        --   Form  of  Registration  Rights  Agreement  dated December 7,
                    1998.
 10.1.1*****        Agreement  in  Principal  dated  August  17,  2000.
 10.1.2******       Agreement  dated  March  1,  2001.
 10.2*         --   Loan  and  Security Agreement dated December 17, 1997 by and
                    among  the  Company,  National  Fuel  &  Energy,  and OnSite
                    Technology,  L.L.C.  as  Borrowers  and  Cahill,  Warnock
                    Strategic  Partners  Fund, L.P., Strategic Associates, L.P.,
                    Newpark  Resources,  Inc.  and  James  H. Stone, as Lenders.
 10.3*         --   Form  of  Registration  Rights Agreement pursuant to Private
                    Placement  Memorandum  dated  September  18,  1996.
 10.4*         --   Form  of  Registration  Rights  Agreement dated December 17,
                    1997,  between  the  Company  and  Cahill, Warnock Strategic
                    Partners  Fund,  L.P.,  Strategic  Associates, L.P., Newpark
                    Resources,  Inc.  and  James  H.  Stone.
 10.5*         --   Form  of  Warrant Agreement dated December 17, 1997, between
                    the  Company  and  Cahill,  Warnock Strategic Partners Fund,
                    L.P.,  Strategic  Associates,  L.P., Newpark Resources, Inc.
                    and  James  H.  Stone.
 10.6*         --   Employment  Agreement  of  James  S.  Percell.
 10.7****      --   1998  Stock  Option  Plan
 14.1          --   Code  of  Ethics
 21.1*         --   Subsidiaries
31.1           --   Certification  of  Chief  Executive Officer of Environmental
                    Safeguards,  Inc.  required  by  Rule  13a-14(l)  or  Rule
                    15d-14(a) of the Securities Exchange Act of 1934, as adopted
                    pursuant  to  Section 302 of the Sarbanes-Oxley Act of 2002.
31.2           --   Certification  of  Chief  Financial Officer of Environmental
                    Safeguards,  Inc.  required  by  Rule  13a-14(l)  or  Rule
                    15d-14(a) of the Securities Exchange Act of 1934, as adopted
                    pursuant  to  Section 302 of the Sarbanes-Oxley Act of 2002.
32.1           --   Certification  of  Chief  Executive Officer of Environmental
                    Safeguards,  Inc.  pursuant  to  Section  906  of  the
                    Sarbanes-Oxley Act of 2002 and Section 1350 of 19 U.S.C. 63.
32.2           --   Certification  of  Chief  Financial Officer of Environmental
                    Safeguards,  Inc.  pursuant  to  Section  906  of  the
                    Sarbanes-Oxley Act of 2002 and Section 1350 of 19 U.S.C. 63.
---------------

    *               Previously  filed  as  an  exhibit  to  the Company's Annual
                    Report  on  Form 10-KSB as amended for the fiscal year ended
                    December  31,  1997,  and incorporated by reference thereto.


                                       15
<PAGE>
    **              Previously  filed  as  an  exhibit  to the Company's Current
                    Report  on  Form  8-K  dated  December  17,  1997  and filed
                    December  30,  1997,  and  incorporated  herein by reference
                    thereto.

    ***             Previously  filed  with Form S-3 as amended effective Feb 8,
                    1999.

    ****            Previously  filed  as  an  exhibit  to  the Company's Annual
                    Report  on  Form 10-KSB as amended for the fiscal year ended
                    December  31,  1998,  and incorporated by reference thereto.

    *****           Previously  filed  as  an exhibit to the Company's Current
                    Report  on  Form 8-K dated August 17, 2000, and filed August
                    28,  2000,  and  incorporated  herein  by reference thereto.

    ******          Previously  filed  as an exhibit to the Company's Current
                    Report  on  Form 8-K dated March 1, 2001, and filed March 6,
                    2001,  and  incorporated  herein  by  reference  thereto.


( C )  REPORTS  ON  FORM  8-K

          None filed in the fourth quarter of 2003.



ITEM 14.    PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

The  information  required  by  this  item  is  incorporated by reference to our
definitive  proxy  statement,  which  is  to  be  filed  with the Securities and
Exchange  Commission  (the "Commission") pursuant to the Securities Exchange Act
of  1934  (the "Exchange Act") within 120 days of our fiscal year ended December
31,  2003.


                                       16
<PAGE>
                                   SIGNATURES

     In  accordance with the requirements of Section 13 of 15(d) of the Exchange
Act,  the  Registrant  has  caused this report to be signed on its behalf by the
undersigned,  thereunto  duly  authorized,  on  March  29,  2004

                                   ENVIRONMENTAL  SAFEGUARDS,  INC.



                                   By:  /s/  JAMES  S.  PERCELL
                                        ------------------------------------
                                             James  S.  Percell

                                        Director, Chairman of the Board,
                                        Chief Executive Officer and President

     Pursuant  to  the  requirements  of  the Exchange Act, this report has been
signed  below  by  the  following  persons  in  the  capacities and on the dates
indicated:

          Signature                       Title                      Date
          ---------                       -----                      ----

  /s/  JAMES S. PERCELL       Director, Chairman of the Board,    March 29, 2004
---------------------------       Chief Executive Officer
                                  and President

  /s/  THOMAS  R.  BRAY       Director                            March 29, 2004
---------------------------


  /s/  BRYAN  SHARP           Director                            March 29, 2004
---------------------------


  /s/  ALBERT WOLFORD         Director                            March 29, 2004
---------------------------


  /s/  DAVID L. WARNOCK       Director                            March 29, 2004
---------------------------


  /s/  MICHAEL D. THOMPSON    Chief Financial Officer             March 29, 2004
---------------------------       and Secretary


                                       17
<PAGE>