EIF HOLDINGS INC, 10KSB, 1998-01-13

EIF HOLDINGS INC
10KSB, 1998-01-13
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 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 September 30, 1997

[ ] Transition Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934

Commission file number 0-22388

EIF HOLDINGS, INC.
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(Exact name of small business issuer as specified in its charter)

Hawaii 99-0273889
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

53 Stiles Road, Suite 101
Salem, NH 03079
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(Address of principal (Zip Code)
executive offices)

(603) 890-3680
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(Issuer's telephone number, including area code)

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

Securities registered under Section 12(g)of the Exchange Act:
Common Stock,
-------------------------------------------------------------
(Title of Class)

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 NO X
------- -------

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

State Issuer's revenues for its most recent fiscal year: $13,434,423

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: December 31, 1997: $7,276,372 (15,818,201 shares held by persons other
than affiliates) at an average of the high and low bid and high and low asked
price $.46 as reported by the National Quotation Bureau, Inc.

The Number of shares of Common Stock outstanding at December 31, 1997:
24,618,201.

Transitional Small Business Disclosure Format (Check one):
YES NO X
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Page 1
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EIF HOLDINGS INC.

Table of Contents

PART I. Page

Item 1. DESCRIPTION OF BUSINESS.......................................... 3

Item 2. DESCRIPTION OF PROPERTY.......................................... 14

Item 3. LEGAL PROCEEDINGS................................................ 15

Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS................ 15

PART II.

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.............................................. 16

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.......................................... 17

Item 7. FINANCIAL STATEMENTS............................................. 21

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE....................................... 37

PART III.

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT............... 37

Item 10. EXECUTIVE COMPENSATION........................................... 37

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 37

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 37

Item 13. EXHIBITS AND REPORTS ON FORM 8-K................................. 38

SIGNATURES....................................................... 42

Page 2
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PART 1
Item 1. DESCRIPTION OF BUSINESS

GENERAL

EIF Holdings, Inc. (the "Company" or "EIF") was formed in the State of Hawaii in
1989. Until May 1997, EIF was primarily engaged in environmental construction
related industries, more specifically, asbestos abatement, both commercial and
residential, lead removal, and soil and groundwater remediation. The Company was
also involved, to a limited extent, in the energy management business. These
activities, in particular the commercial asbestos abatement business, involved a
high percentage of relatively large, fixed-price contracts under which the
Company assumed significant financial risks. Over the past three fiscal years
the Company incurred substantial losses on a number of major contracts.

In May 1997, Frank J. Fradella was elected President and CEO of the Company.
Mr. Fradella had previously served as Vice President and Chief Operating Officer
of American Eco Corporation ("AEC"), an Ontario corporation and a major
shareholder of the Company . Shortly after his appointment, Mr. Fradella began
implementation of a plan intended to stabilize the Company's financial position
and provide it with the financial resources necessary to allow management to
pursue a new strategic direction. This new strategic direction would focus the
Company's activities in the specialized maintenance industry, an industry
characterized by a predominance of cost-plus contracts, credit worthy industrial
customers and significant repeat business. Mr. Fradella's plan included the
elimination of unprofitable operations, reductions in the Company's overhead
costs, recapitalization of the Company's balance sheet and attracting new
capital to support acquisitions in the specialized maintenance industry. As
described further herein, implementation of the plan is well underway.

The primary businesses of EIF have been acquired through a series of
acquisitions. In January 1993, the Company acquired, in a reverse acquisition,
all of the shares of P.W. Stephens Contractors, Inc., ("P.W. Stephens"). P.W.
Stephens was founded as a California corporation in 1982 and was engaged in the
environmental contracting industry, primarily focusing on the removal of
materials containing asbestos, but also offering lead hazard removal, insulation
and other hazardous materials clean-up services. Services were offered to the
commercial, industrial and institutional markets, primarily in the states of
California, Hawaii and Nevada. These operations were conducted out of seven
branch offices located throughout the service area. Services were and still are,
offered to the residential market in California through P.W. Stephens
Residential, Inc. ("Residential"), a California corporation and a wholly-owned
subsidiary of P. W. Stephens. In the fourth quarter of 1996, the Company
acquired the assets of QHI, Inc., a California corporation out of bankruptcy.
QHI provided asbestos abatement services to the commercial, industrial and
institutional markets. The assets of QHI were merged into QHI Stephens, Inc., a
California corporation and a wholly owned subsidiary of P.W. Stephens. P. W.
Stephens also has two other subsidiaries, Environmental Supply, Inc. and P. W.
Stephens Construction, Inc. which are inactive. The Company currently has no
intention of conducting any material activities through these entities.

The Company's commercial asbestos operations generated operating losses over
each of the last three fiscal years. As part of management's efforts to
eliminate unprofitable operations, all of the operations of P. W. Stephens, with
the exception of P.W. Stephens Residential, Inc., were discontinued by the
Company in May 1977.

In August, 1994, as part of a strategy of expanding geographic presence, the
Company acquired VonGuard Holdings, Inc. ("Vonguard"), and its subsidiaries.
VonGuard was formed as a Missouri corporation in 1992, by Kenneth Vonderahe, as
a holding company to acquire FCA Services, Inc. ("FCA") and Remediation
Services, Inc. ("RSI"). FCA had been in business since 1987 and RSI since 1989.
In June 1996, VonGuard and Enstar-North American, Inc., a subsidiary of
VonGuard, were merged into FCA and the name of the entity was changed to P. W.
Stephens Services, Inc., a Missouri corporation. At the same time, Select
Abatement, Inc., a subsidiary of VonGuard, was merged into RSI and the name of
that entity was changed to P. W. Stephens Contractors, Inc., a Missouri
corporation. P.W. Stephens Services, Inc. and P. W. Stephens Contractors, Inc.
(Missouri) are collectively referred to as "P. W. Stephens - St. Louis" or "St.
Louis". P. W. Stephens - St Louis provides industrial cleaning and remediation
services, including soil and groundwater remediation, hazardous materials
management and clean-up, asbestos abatement and lead hazard removal service, to
clients, primarily located in the Midwest.

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In December 1994, the Company acquired Kelar Controls, Inc. ("Kelar"), a
California corporation. Kelar primarily installs new or retrofitted energy
management controls and conservation equipment for large storage and warehouse
facilities. Typically, these projects impact lighting or heating and air
conditioning systems. Kelar also provides intrusion and building security
devices. The projects generally require an initial capital outlay by Kelar and
Kelar typically receives revenues based on a percentage of energy savings
realized. Management of EIF determined that Kelar's operations were not
consistent with the strategic direction of the Company and as a result, Kelar
was sold to Regal Oak Properties, Inc. effective June 30, 1997. In exchange, the
Company accepted a one-year $2,500,000 note bearing interest of 10%.

During late fiscal 1995 and early fiscal 1996, American Eco Corporation ("AEC"),
began purchasing shares of the Company's common stock. AEC provides
construction, management, maintenance, demolition, engineering and environmental
remediation services in the refining, petrochemical, utility, forest products
and offshore manufacturing industries. The common stock of AEC is quoted on the
NASDAQ National Market under the symbol ECGOF and is traded on the Toronto Stock
Exchange under the symbol ECX.

In February 1996, AEC agreed to purchase an additional 10,000,000 shares of the
of the Company's common stock for a purchase price of $1,000,000, subject to
shareholder approval of an increase in the number of authorized shares
outstanding. The Company's shareholders have not yet held a meeting to vote upon
such approval, although it is anticipated that such a meeting will be called in
the second quarter of fiscal 1998. At the same time, AEC agreed to provide a
management team, primarily comprised of AEC managers, to assist in the
management of EIF. In connection therewith, Richard Austin stepped down as
Chairman of the Board and Chief Executive Officer of the Company and Kenneth
Vonderahe resigned as a Director of the Company and President of VonGuard. The
two vacancies on the Board of Directors were filled by Ronald K. Mann who
assumed the position of Chairman of the Company, and Michael E. McGinnis, who
also became President and CEO of the Company. Mr. Mann was a Director of AEC and
Mr. McGinnis is a Director, as well as President and CEO of Eco. In March 1996,
AEC agreed to loan money to the Company pursuant to a Line of Credit Agreement
with a maximum borrowing amount of $5,250,000 and bearing interest at a rate of
2% over the prime rate. In August 1996, David Norris was hired as President and
CEO of the Company, and remained in such positions through April 1997 when he
became Vice President and Chief Financial Officer of AEC. Mr. Norris replaced
Mr. Mann as a Director and Mr. McGinnis became Chairman of the Board. In
November of 1996, AEC acquired 4,000,000 shares of the Company's common stock
from Julbin International, Ltd. ("Julbin"), pursuant to a stock purchase
agreement.

In May 1997, Mr. Fradella succeeded Mr. Norris as President, CEO and Director of
the Company. Shortly after his appointment, with the support of AEC, he began
implementing the new strategic plan to improve the Company's financial position.
In May, the P. W. Stephens commercial asbestos operations were discontinued.
Also in May, substantial reductions were made in administrative staffing levels
and overhead costs of the remaining operations so as to position those
operations to generate positive cash flow. In October 1997, Mr. Fradella was
named Chairman of the Company.

In September, AEC agreed to provide additional capital to EIF Holdings in order
to allow it to meet certain of its existing obligations. AEC extended the
maturity of the Line of Credit Agreement to February 28, 1998 and increased the
Maximum Borrowing Amount to $20,000,000. AEC also agreed, in concept, to
convert, at an appropriate time, the amounts owed to it by EIF to shares of the
Common Stock of the Company. The terms of the conversion are currently being
negotiated, however, prior to any exchange of part or all of the line of credit
to common stock, the terms must be finalized and the Company must receive
shareholder approval to increase its authorized number of outstanding shares.
There is no assurance that these can be achieved.

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At September 30, 1997, AEC owned an aggregate of 8,800,000 shares of the
Company's Common Stock. On December 22, 1997, AEC granted Mr. Fradella the
option to purchase those shares at a price of $.65 per share, excerciseable for
a period of one year from the date of the agreement. See ITEM 11 "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" and ITEM 12 "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."

SERVICES PROVIDED BY SUBSIDIARIES:

P.W. STEPHENS RESIDENTIAL

P.W. Stephens Residential is primarily engaged in the business of asbestos
removal from residential buildings. It also provides lead hazard removal
services and insulation services. The work is generally performed under time and
material contracts and fixed-price contracts. P.W. Stephens Residential provides
these environmental services through its three branch offices located in
California.

P.W. STEPHENS ST. LOUIS

P.W. Stephens St. Louis provides its environmental services through its
subsidiaries P.W. Stephens Services, Inc. and P.W. Stephens Contractors, Inc.
P.W. Stephens Services, Inc. provides asbestos abatement and lead hazard removal
for commercial, industrial, governmental, and residential clients primarily in
the Midwestern states of Illinois, Missouri, Iowa, and Nebraska. P.W. Stephens
Contractors, Inc. provides soil and groundwater remediation and hazardous
material management cleanup for industrial, commercial, and governmental
clients. P.W. Stephens Services, Inc., through its RSI Hydro Services division,
offers industrial cleaning services primarily for industrial, commercial, and
governmental clients utilizing ultra-high pressure water technology. The work of
P.W. Stephens St. Louis is generally performed under cost-plus-fee contracts or
fixed price contracts. P.W. Stephens St. Louis provides services to its clients
through its office in St. Louis, Missouri.

JL MANTA

JL Manta provides industrial maintenance services to Industrial Process
Companies such as Oil Refineries, Nuclear Power Plants, Steel Mills, Paper and
Pulp Plants, Utilities and Food Processing Plants. The services Manta provides
include hydroblasting, coatings/painting, fireproofing, sandblasting and lead
abatement primarily to customers in California, Illinois, Indiana, Kentucky and
Florida. Manta performs under cost-plus-fee contracts or fixed price contracts
and time and material contracts.

ENVIRONMENTAL REMEDIATION SERVICES:

ASBESTOS ABATEMENT

From 1910 until 1978, asbestos was a common ingredient in building materials due
primarily to its ability to retard fire, absorb heat from friction, provide
insulation from heat and cold, resist corrosion and add tensile strength. The
Environmental Protection Agency, ("EPA"), began to ban the use of asbestos in
construction products in 1973, in response to evidence that asbestos causes
certain forms of cancer and poses other health hazards. The first Federal
regulations requiring the removal of asbestos, however, did not appear until
1986 when Congress passed the Asbestos Hazard Emergency Response Act ("AHERA").
This legislation required all public schools to identify materials containing
asbestos and develop management programs. An increase in awareness of asbestos
hazards led to an increased demand for abatement. However, since 1990, there has
been a trend toward management in place rather than removal where possible. The
EPA now recommends abatement only when other options, such as management in
place, will not work, or when renovation will disturb the material and cause a
potential health risk to workers. Although there are currently no laws requiring
the removal of asbestos from buildings, there are numerous federal, state and
local regulations which govern the removal or disturbance of asbestos through
demolition, renovation, remodeling, or repairs.

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The Company's asbestos abatement services include complete removal of
asbestos-containing materials as well as encapsulation and enclosure. The
Company's workers remove asbestos in accordance with the regulations promulgated
by the EPA, the Occupational Safety and Health Administration ("OSHA") and
various state and local agencies.

Before any removal can begin, the work area must be sealed off from other parts
of the building as well as from the outdoor environment. Containment of the work
area requires the construction of barriers on the walls and floors. These
barriers must be made of polyethylene plastic sheeting sealed at the seams or,
in some cases, more permanent materials to provide a continuous isolation that
will prevent fibers from escaping. Once contained the work area can be accessed
only through one entrance and an air filtration system is required to further
prevent escape of any asbestos fibers. The Company constructs a three-stage
worker decontamination chamber which is generally comprised of a clean room
where workers prepare for the work, a shower room and a dirty room where
contaminated clothing is discarded. Signs and barricades are posted around the
work area, positioned so that an individual can take protective steps to avoid
exposure.

The containment areas are equipped with high efficiency negative pressure air
filtration machines. The negative air units, equipped with HEPA filters, ensure
that air is decontaminated before being exhausted outside the building.
Additional pre-filters are used to trap large particles before they reach the
HEPA filter. At certain times during the abatement process, air samples are
taken to indicate the level of airborne fibers both inside and outside the work
area in order to protect the worker and building occupants.

Prior to removal, workers wet the asbestos containing material and then remove
it in small sections before it dries. Gross removal is considered complete only
when no visible clumps of asbestos-containing materials remain on the surface.
All surfaces are then thoroughly scrubbed. After cleaning, the surface is coated
with a penetrating encapsulate to seal off any potential residual fibers
remaining. Plastic sheeting on walls and floors is also covered with a mist of
sealant.

Before the isolation barrier is dismantled, a final air sample is taken. When
the level of airborne fibers is equal to or below 0.01 fibers per cubic
centimeter (f/cc), the isolation barrier can be removed and disposed of in the
same manner as asbestos waste. After removal, the work area is thoroughly
cleaned using high efficiency particulate air filter vacuuming and wet mopping
of all surfaces.

Each asbestos field worker must complete training and safety programs as
required by state and federal regulations. Workers are required to wear a
suitable respirator, a one-piece disposable suit that contains head and foot
covers, and rubber gloves at all times while working in contaminated areas.
Suits and gloves are disposed of and replaced after each exit from the
containment work area.

The Company believes that the asbestos abatement market will continue to offer
business opportunities, driven by factors such as the existence of strict
regulation, building renovation and demolition, catastrophe repairs and
restoration, public awareness and desire for an asbestos free environment,
worker demand for protection, and liability concerns of building owners,
contractors, realtors, lending institutions and insurance companies.

LEAD ABATEMENT

Lead-based paint is considered the most prevalent source of lead poisoning in
the United States, and it poses a risk to occupants and construction workers.
Lead was added to paint used on the interior and exterior of buildings to
shorten drying time and increase the durability of paint. The EPA began to
restrict the use of lead-based paint during the 1970s. The largest initial
market for lead-based paint abatement is public housing. Laws concerning the
disclosure, identification and abatement of lead-based paint already exist in
some states. Federal regulations require the inspection of all Housing and Urban
Development ("HUD") housing built prior to 1978 and abatement of any existing
hazards.

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The Company removes lead from various surfaces using various techniques
including wet sanding, stripping or component replacement and ultra high
pressure water blasting (see "Industrial Cleaning"). The Company also
encapsulates and encloses surfaces of lead based coated products. As with
asbestos removal, dust minimization and control of the environment are required.

Each lead field worker and supervisor must complete training programs required
by state regulations. The training course provider must be licensed by the
appropriate state agencies and the course must meet EPA recommended standards.
The Company believes that it is in compliance these training requirements.

SOIL AND GROUNDWATER REMEDIATION AND HAZARDOUS MATERIALS CLEANUP

The Company performs soil and groundwater remediation and hazardous materials
services. Soil remediation is used to repair or contain environmental damage
caused when hazardous materials have been allowed to leak into the soil. When
hazardous materials are released into the environment, site remediation may be
necessary to eliminate potential health risks and contamination of land, air and
water. Soil and groundwater remediation services offered by the Company include
underground storage tank cleaning, removal and installation; soil sampling and
analysis; excavation and disposal; soil stabilization; bioventing;
bio-remediation; soil vapor extraction/air sparging, groundwater remediation and
soil recycling. The Company also offers system installation/operation and site
restoration.

Before a remediation project begins, an environmental assessment is usually
conducted to identify the type and extent of contamination. The Company
generally performs this assessment through a joint venture with an independent
environmental engineering firm or it is conducted by the client's environmental
consultant. Once the assessment is completed, the Company will then assist in
formulating a remediation solution which meets the client's individual needs.

UNDERGROUND STORAGE TANKS

Growing concern over environmental drainage and associated public health risks
has led to the development of regulations governing underground storage tanks.
The release of tank contents into the environment can contaminate soil, air and
drinking water supplies. Depending upon the product's chemical makeup and the
site geology, contaminants can migrate great distances both laterally and
vertically from a storage tank. In connection with its storage tank removal
services, the Company offers a number of services, including tank and line
removal; tank decontamination; tank disposal; soil sampling and analysis;
bio-remediation; soil excavation, transportation, disposal and recycling; new
tank installation; and storage tank closure/abandonment in place.

Tank removal is generally the most effective method of dealing with the closure
of underground storage tanks. The Company will generally isolate the work area,
remove and decommission the tanks, treat the soil or excavate all accessible
contamination and restore the area for reuse. Special precautions are taken to
minimize the release of any contaminated materials into the environment. If
contaminated materials need to be hauled for disposal, these materials are
transported to an EPA, state, or owner approved disposal site. In certain
circumstances, alternative methods of soil remediation such as soil vapor
extraction and bio-remediation can achieve the required results at a lower cost.
The Company assists in determining and executing projects which provide the
client with the various methods of resolving underground storage tank problems.

PCB CLEANUP

The Company also services sites contaminated with PCB's and other associated
substances. The Company is capable of handling the various phases of PCB
projects, including PCB oil removal, transformer removal, soil removal, concrete
cleaning and removal, facility decontamination, contaminant transportation and
disposal and site restoration.

The removal of PCB contaminated soil from commercial and industrial properties
may range from the removal of several inches of top soil to gross excavations.
In addition, in many instances involving the uncontrolled release of PCB's from
transformers or other oil cooled electrical equipment, surrounding concrete
surfaces are contaminated. The Company addresses this contamination through the
use of special purpose surfactants or, if necessary, the selective removal of
affected material. These projects may require special precautions to eliminate
the migration of contaminated dust particles depending on whether a dry or wet
method is used. In such case, the Company will install containment systems to
prevent the migration of materials ranging from the construction of completely
encapsulated enclosures to the use of dust suppression agents.

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INDUSTRIAL CLEANING

The Company provides industrial cleaning services primarily using hydroblasting
technology. Hydroblasting utilizes high-water pressure ranging from 20,000
pounds per square inch (psi) to 40,000 psi, at a very low flow rate, to remove
protective coatings and product buildup in industrial and commercial settings.
Hydroblasting can remove urethane coatings, fiberglass coatings, rubberized
coatings, and lead-base paint from steel and concrete substrates. Hydroblasting
can also be used to cut steel and concrete through the use of entrained abrasive
without the risk of sparking. Industrial cleanings services are also utilized in
cleaning barges, railroad cars and conveyor systems in manufacturing and
distribution plants.

INSULATION

The Company also provides industrial and commercial insulation services which
include the installation of high and low temperature insulation on pipes, ducts,
furnaces, boilers, and various other types of industrial equipment for
industrial and commercial facilities as well as new construction. Insulation
services also provides maintenance for both existing facilities as well as new
construction.

RAW MATERIALS

The Company obtains its raw materials, supplies and small tools used in its
operations from multiple vendors. Although unforeseen costs and delays could
occur resulting from catastrophic environmental emergencies, the Company
believes that sufficient sources of raw materials exist to cover its operational
needs.

MARKETING

The Company's primary target market is large industrial customers who use a
variety of contract services, on a continuous and/or situational basis, as part
of their ongoing facility repair and maintenance processes. The Company also
markets its services to general and specialty contractors, commercial and large
residential property owners and managers, insurance carriers, environmental
consultants, architects, realtors, mortgage lenders, federal, state and local
governments and agencies, schools, the military and homeowners.

The strategies for generating new business vary among the Company's
subsidiaries. Residential relies heavily on personal selling efforts, referrals
and yellow pages advertising. St. Louis utilizes a combination of personal
selling, bid solicitations and repeat business from existing and prior
customers. Manta markets its services in a manner similar to St. Louis but also
has developed and markets "partnering" arrangements under which it works with
its customers, on a long term basis, to increase efficiency and reduce costs
incurred by those customers.

In general, the Company's subsidiaries do not have personnel dedicated to sales
and marketing, rather they rely on a combination of project mangers, estimators
and senior operating managers to execute its sales efforts. Currently, there is
limited cross-selling of services among subsidiaries. Management expects that
the shift in focus to specialized maintenance services will provide more
opportunities for cross-selling among subsidiaries. As a result, the Company has
begun coordinating its marketing efforts accordingly.

CUSTOMERS

The shift in strategic direction of the Company is resulting in changes in the
Company's customer list. Management expects that there will be a greater
percentage of major industrial customers with significant repeat specialized
maintenance requirements and/or the need for remediation services. Management
also expects that fifty percent (50%) or more of such contracts will be
performed on a time and materials basis. These customers are generally
credit worthy and the nature of the contracts minimizes scope and collection
disputes.

The customer base no longer includes the large real estate and property
management firms which historically were the source of a large portion of the
Company's commercial asbestos abatement business. In addition, the Company
expects to minimize the number of large , competitively-bid, fixed price
contracts which were typically involved with these customers.

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Residential's customer base continues to be made up primarily of residential
property owners and managers. Contracts are typically not large and the Company
has not traditionally encountered significant collection problems.

During the fiscal years ended September 30, 1997 and 1996, the Company had no
customers that accounted for more than ten percent (10%) of revenue.

COMPETITION

The Company provides services throughout the Western, Midwestern and
Southeastern United States, primarily in the states of California, Florida,
Indiana, Illinois, Iowa, Kentucky, Nebraska and Ohio. These markets are all
competitive markets in which numerous other companies compete on the basis of
quality, service and price. Many of the competitive firms have revenues and
capital resources exceeding those of the Company. The Company believes that
competitive pressures will continue but that it will continue to receive a
reasonable share of the contracts awarded based on its ability to meet
competitive pricing levels and to provide high quality service to its customers.

INSURANCE

The Company has obtained primary auto liability, commercial general liability,
pollution liability, worker's compensation and employer's liability policies
with its insurance carrier. The coverage limit per occurance is $1,000,000 and
$5,000,000 in the aggregate for the commercial general liability, the pollution
liability and the employer's liabilities. The coverage limit per occurence for
the auto liability and worker's compensation is $5,000,000. In addition to the
primary insurance policy limits, the Company has obtained an umbrella/excess
insurance per occurence in the amount of $4,000,000 for the commercial general
liability, the pollution liability and the employer's liabilities. Included
under the Company's current insurance program are certain general risks inherent
in the industrial service industry such as the liability from delays, fires or
breaches in the enclosure or "containment" of a work area resulting from its
acts or the acts of subcontractors.

JL Manta has workers compensation, general liability, auto and equipment
insurance coverages through a group captive, along with thirty one other
companies, with United Trades Insurance Company. The coverage limit per
occurance is $1,000,000 and $2,000,000 in the aggregate for general liability.
The coverage limit per occurence for the auto and equipment liability and
worker's compensation is $1,000,000. Each member of the capitve is required to
supply letters of credit in certain amounts. Manta'a current letter of credit is
$1,200,000 and subject to a negotiated increase. Once approximately 28% of the
premiums are paid for fixed costs and taxes, including excess loss reinsurance,
the remainder is applied to insurance claim funds, segregated by each
participant member of the group. These funds will pay claims up to $300,000. For
three years after policy expiration, claims are paid and losses reserved against
the claim funds, after which the remaining balances are refunded to the
members's equity and the deficit member's letter of credit will be drawn upon.
Each policy year stands alone for claims and calculation of refunds.

BONDING

Commercial and industrial projects involving environmental cleanup or demolition
often require contractors to post both performance and payment bonds, or letters
of credit in lieu thereof, at the execution of a contract. These bonds are
required to protect the interests of the general public and private owners in
order to guarantee that the projects will be completed and all subcontractors
and vendors are paid. The Company is currently meeting its bonding needs through
its relationships with Reliance Surety Company, Allied Surety, and American
International Group as projects require.

GOVERNMENT REGULATION

The Company's operations are strictly regulated by statutes and regulations
administered by several federal, state and local agencies. These statutes and
regulations cover all aspects of the environmental health and safety industry as
well as the construction industry in general. The Company's operations and
compliance with statutes and regulations are reviewed by various governmental
agencies and, from time to time, these agencies may make requests for
information or issue citations for noncompliance.

FEDERAL REGULATION

Asbestos abatement operations are subject to regulation by federal, state, and
local governmental authorities, including OSHA, EPA and the United States
Department of Transportation ("DOT"). In general, OSHA regulations set the

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maximum asbestos fiber exposure levels applicable to employees and the EPA
regulations provide asbestos fiber emission control standards. The EPA requires
use of accredited persons for both inspection and abatement. OSHA has
promulgated regulations specifying airborne asbestos fiber exposure standards
for workers, engineering and administrative controls, workplace practices, and
medical surveillance and worker protection requirements. OSHA's construction
standards require companies removing asbestos fibers to conduct air monitoring,
to provide decontamination units and to appropriately supervise the operations.
Transportation and disposal activities are also regulated. The DOT sets
standards for management of the packaging and transportation of asbestos.

Lead hazard removal is currently regulated by OSHA and the EPA. In general, OSHA
regulations set the permissible lead exposure level for construction workers and
EPA regulates emission of lead into the air and soil. Disposal of lead
containing material is regulated under the Resource Conservation Recovery Act
(RCRA). The EPA has been mandated by Title X (the Residential Housing Act of
1992) to have contractor training and certification requirements in place during
1994. These interim training guidelines were implemented on November 1, 1994.

STATE AND LOCAL REGULATIONS

The Company conducts its business primarily in the states of California,
Florida, Indiana, Illinois, Iowa, Kentucky, Nebraska and Ohio. Each state has
its own local laws and regulations to supplement the federal laws. A number of
states have promulgated regulations setting forth such requirements as
registration or licensing of asbestos abatement contractors, training courses
and licensing for workers, notification of intent to undertake abatement
projects and requires approvals from certain state agencies. Management believes
the Company holds all necessary licenses and permits required by these states
for business operation.

Currently, some states where the Company conducts its business have enacted lead
related regulations applicable to the removal or disturbance of lead. The
California counties of San Francisco and Alameda have passed lead-based paint
ordinances which regulate removal practices. States and other counties are
expected to comply with EPA recommended training requirements. Management does
not expect such regulations to have a significant impact on the Companies
operations or financial results.

SOIL AND GROUNDWATER REMEDIATION AND HAZARDOUS WASTE MANAGEMENT

The Company and its customers are subject to extensive and evolving
environmental regulations administered by the EPA, OSHA and various other
federal, state and local environmental and safety and health agencies relating
to its soil and groundwater remediation services as well as its hazardous waste
management services. Although the Company's customers remain responsible by law
for their environmental problems, the Company must itself comply with the
requirements of those laws applicable to its services. Because the field of
environmental protection is both relatively new and rapidly developing, the
Company cannot predict the extent to which its operations may be affected by
future enforcement policies as applied to existing laws or by the enactment of
new environmental laws and regulations. Moreover, any predictions regarding
possible liability are further complicated by the fact that under current
environmental laws the Company could be jointly and severally liable for certain
activities of third parties over whom the Company has little or no control.
Although management believes that the Company is currently in substantial
compliance with all applicable laws and regulations, the Company could be
subject to fines, penalties or other liabilities or otherwise adversely affected
by existing or subsequently enacted laws or regulations. The principal
environmental laws affecting the Company and its customers in these areas are
briefly discussed below.

The Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), and the
regulations promulgated by the EPA thereunder establish a strict and
comprehensive regulatory program governing the handling and treatment of
hazardous waste. The EPA has promulgated regulations under RCRA for new and
existing treatment, storage and disposal facilities including incinerators,
storage and treatments tanks, storage containers, storage and treatment surface
impoundments, waste piles and landfills. RCRA defines solid and hazardous waste,
regulates the preparation of wastes for shipment, record keeping and reporting
requirements. Specific approved disposal methods are also defined for different
waste streams.

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The Safe Drinking Water Act ("SDWA"), was established to protect groundwater and
drinking water sources. Two types of drinking water standards were established
to limit the amount of contamination that may be in drinking water: primary
standards with a maximum contaminant level (MCL) to protect human health, and,
secondary standards that involve the color, taste, smell or other physical
characteristics of a drinking water source.

The Clean Water Act (CWA), controls the discharge of toxic materials discharged
into surface streams and other navigable waters. The EPA has established
effluent standards covering 129 toxic pollutants. Toxic and hazardous waste are
generated primarily from industries and farmlands. Industries discharging
directly into surface streams and other navigable waters are regulated by a
NPDES (National Pollutant Discharge Elimination System) permit. Discharges into
municipal sewer plants are required to meet pretreatment requirements.

The Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA", also referred to as the "Superfund Act"). CERCLA governs the clean-up
of sites at which hazardous substances are located or at which hazardous
substances have been released or are threatened to be released into the
environment. CERCLA authorizes the EPA to compel responsible parties to clean up
sites and provides for punitive damages for noncompliance. CERCLA imposes joint
and several liability for the costs of clean-up and damages to natural
resources.

Health and Safety Regulations. The operation of the Company's environmental
activities are subject to the requirements of the OSHA and comparable state
laws. Regulations promulgated under OSHA by the Department of Labor require
employers of persons in the transportation and environmental industries,
including independent contractors, to implement hazard communications, work
practices and personnel protection programs in order to protect employees from
equipment safety hazards and exposure to hazardous chemicals.

OTHER LAWS

The Company's activities are subject to various federal environmental protection
and similar laws, including, without limitation, the Clean Air Act, the
Hazardous Materials Transportation Act and the Toxic Substances Control Act.
Many states, also have adopted laws for the protection of the environment which
may affect the Company, including laws governing the generation, handling,
transportation and disposition of hazardous substances as well as laws governing
the investigation and clean-up of, and liability for, contaminated sites. Some
of these state provisions are broader and more stringent than existing federal
laws and regulations. The failure of the Company to comply and conform its
operations to the requirements of any of these federal or state laws could
subject the Company to substantial liabilities which could have a material
adverse affect on the Company, its operations and financial condition. The
Company cannot predict the extent to which it may be affected by any law or rule
that may be enacted or enforced in the future, or any new or different
interpretations of existing laws or rules.

COMPLIANCE

The Company believes that it is in substantial compliance with all local, state
and federal regulations relating to its operations. To insure such compliance
the Company has developed and maintains its own quality control program. As one
aspect of this program, the Company's quality control officers perform random
inspections before, during, and after project operations. Categories of
inspection include isolation barriers, decontamination units, protective
equipment, negative pressure, work practices, general housekeeping, air
monitoring, disposal, detail and final clean-up, demobilization and enforcement
of state regulations.

RESEARCH AND DEVELOPMENT

Research and development activities for the fiscal years ended September 30,
1997 and 1996 have not been material and the Company has had no customer
sponsored research activities during each of these periods.

EMPLOYEES

As of December 20, 1997, the Company had approximately 61 full-time personnel
employed as executives, managers, project managers, safety directors, sales and
estimators, as well as administrative and clerical support. In addition, the
Company also employs an hourly direct labor force which totaled approximately
130 employees as of December 20, 1997. The number of direct labor personnel

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employed by the Company varies throughout the year and ranged between 110 and
400 for fiscal year 1997. As of December 20, 1997, approximately 40 of the
Company's employees were represented by unions under collective bargaining
agreements. Such bargaining agreements between the Company and the unions
represent employees based upon geographic region and expire at various times.
All of the employees represented by such agreements are employed in the St.
Louis operations.

In addition to the Company's existing employees, as of December 20, 1997 Manta
had approximately 47 full-time personnel employed as executives, managers,
project managers, safety directors, sales and estimators, as well as
administrative and clerical support. In addition, Manta also employs an hourly
direct labor force which totaled approximately 428 employees. The number of
direct labor personnel employed by Manta varies throughout the year and ranged
between 200 and 700 for fiscal year 1997. As of September 29, 1997,
approximately 40 of Manta's employees were represented by unions under
collective bargaining agreements. Such bargaining agreements between the Company
and the unions represent employees based upon geographic region and expire at
various times.

The Company believes that its relations with its employees are satisfactory and
has not experienced any work stoppages or slowdowns.

SEASONALITY

The Company's business is subject to variations in revenues and results of
operations for interim periods and from year to year. Increased revenues may not
always result in a corresponding increase in results of operations. These
conditions are due to a number of characteristics shared by the Company to
varying degrees with most other members of the industry, including the
following: (1) its business is seasonal ( typically less activity in the winter
months) and is affected by the scheduling of work at commercial properties and
outages at utilities and other industrial facilities; (2) its business is labor
intensive; (3) its performance on a given project is often dependent on the
performance of other contractors, who are working on the same job, over which
the Company has no control; and (4) costs ultimately incurred by the Company on
a job may be materially affected by such risks as technical problems, labor
shortages and disputes, time extensions, weather, delays caused by external
timing of large contracts, especially if all or a substantial part of the
performance of such contracts occurs within one or two quarters. Accordingly,
quarterly results or other interim results should not be considered indicative
of results to be expected for any other quarter or for the full fiscal year.

ROYALTIES, PATENTS AND TRADEMARKS

The Company does not currently own any patents, royalties, trademarks, licenses,
franchises or concessions which are material to its business.

GLOSSARY
Amended water: Water which has had a detergent compound added for the purpose of
lowering surface tension to allow more liquid to come in contact with the
surface.

Air sparging: Forcing air through groundwater to essentially strip volatile
hydrocarbons from liquid phase to gaseous phase.

Bio-remediation: Utilizing aerobic and facultative metabolic pathways that are
available through a microbial consortium. Capable of biologically degrading a
myriad of organic compounds. (Example - Petroleum)

Bioventing: Using a vacuum system to ventilate soils in order to augment
biodegration of petroleum contaminant in soil.

Contaminate plume: The zone of contamination as it migrates through soil and/or
groundwater.

DOT: Refers to the Department of Transportation.

EPA: Refers to the Environmental Protection Agency.

Groundwater remediation: Refers to numerous technologies used to decontaminate
groundwater.

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HEPA Filter: High Efficient Particulate Air filter.

Manifesting: The act of documenting pathways of waste transportation.

OSHA: Refers to the Occupational Safety and Health Administration.

PCB: Polychloronated biphenyls.

RCRA: Refers to the Resource Conservation and Recovery Act of 1976, as amended.

Soil excavation: Removing soil with heavy equipment.

Soil stabilization: Amending soil with a fixative that binds a contaminant
minimizing the leachability of a constituent.

Soil vapor extraction: Removing volatile organic constituents from soil by
vacuum and vertical or horizontal well systems.

Substrates: A general term denoting what a chemical, i.e. asbestos, coal tar,
etc., is attached to.

Surfactants: Chemicals which reduce the surface tension of water enabling it to
saturate materials more easily.

Tank decontamination: Removing residual tank contents through mechanical
chemical or hydro-mechanical methods.

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ITEM 2. DESCRIPTION OF PROPERTY

The Company currently leases 7 properties in four states to support its
operations. One of the leased facilities located in California is not being
utilized but has been sublet effective January 1, 1998. The Company believes
that the remaining facilities are sufficient to meet the needs of its current
operations and that substitute and or additional space will be available as
needed to accomodate expansion of operations and growth through acquisitions.
The following discussion summarizes the Company's leased properties.

EIF Holdings, Inc. (EIFH)

EIFH currently leases property in two states to support its corporate functions.
The Company's principal office is located at 53 Stiles Road, Suite 101, Salem,
NH which consists of approximately 1,100 square feet with a monthly rent of
$1,200 expiring in September 1998. EIFH also leases 1,000 square feet located at
616FM 1960 West, Suite 630, Houston, TX with a monthly rent of $1,200 expiring
in April 1998.

P.W. Stephens Residential, Inc. (Residential)

Residential currently leases three facilities in California to support its
operations. All facilities include office and warehouse space. Residential's
principal location is located at 15210 Pipeline Lane, Unit B, Huntington Beach,
CA which consists of approximately 5,100 square feet with a monthly rent of
$2,800 expiring in November 1999. The other two Residential properties are
located at 3475 Investment Blvd.,#1, Hayward,CA and 7955 Silverton St., San
Diego, CA which consist respectively of 700 and 550 square feet, a monthly rent
of $1,000 and $800 and expire in January 2000 and June 2000.

In June 1997, Residential vacated its Carmichael, CA facility, under a tenancy
at will agreement, and supported those ongoing operations out of the Hayward, CA
facility.

P.W. Stephens St. Louis (St. Louis)

St. Louis leases one principal facilty located at 1525 S. 8th Street, St. Louis,
Missouri which has both office and warehouse space in support of its operations.
The leased property consists of approximately 7,000 square feet and has a
monthly rent of $2,950 and expires in April 1999.

Discontinued Operations

In the third quarter of 1997, the Company discontinued its commercial asbestos
operations. As a result of the discontinued operations the Company closed all of
its associated facilities. The following is a list of facilities that were
vacated under tenancy at will agreements:

SAN FRANCISCO/ SAN DIEGO:
Oakland Bay Area: 8130 Commercial St.
14676 Doolittle Drive La Mesa, CA
San Leandro, CA

LAS VEGAS: HONOLULU, HAWAII:
4215 Bertos 2959 Koapaka Street
Las Vegas, NV Honolulu, Hawaii

The Company also closed the facility located at 475 N. Muller Street, Anaheim,
CA. The Anaheim facility carries a monthly lease payment of $8,500 and expires
in July 2002. The Company has sublet the Anaheim location effective January 1998
for a monthly payment of $7,400 with the same term as the existing lease.

On June 30, 1997 the Company divested its interest in Kelar Controls, Inc. As a
result, the Company has sold and assigned the lease obligation of Kelar's
facility in San Jose, CA.

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ITEM 3. LEGAL PROCEEDINGS

On October 31, 1996, a supplier of the Company filed a lawsuit in Los Angeles
County Superior Court naming both the Company and P.W. Stephens as defendants.
The complaint seeks damages for unpaid invoices in the amount of $706,000, plus
interest charges and legal costs. The Company has responded to the lawsuit and
on June 12, 1997 reached a settlement with the supplier in the amount of
$590,000. The terms of the settlement called for a payment a $150,000 due upon
the execution of the settlement and the balance to be distributed in ten equal
monthly installments of $44,000 commencing July 15, 1997. The Company is in
compliance with the terms of the settlement.

The nature and scope of the Company's business operations bring it into regular
contact with the general public, a variety of businesses and government
agencies. These activities inherently subject the Company to the hazards of
litigation, which are defended in the normal course of business. The Company is
currently involved in several litigations and investigations including
regulatory compliance. Although the outcome of these claims is not clearly
determinable at the present time, Management believes that such proceedings are
either adequately covered by insurance, or if uninsured, by the estimated losses
it has recorded to date. The resolution of such claims, however, could have a
material effect on the Company's results of operations or cash flows. The
reserves for litigation and contingencies recorded by the Company as of
September 30, 1997 amounted to $1,349,000.

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

Not applicable.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock of the Company is traded in the over-the-counter market.
Quotations are published in the National Quotation Bureau "Pink Sheets" and the
NASDAQ OTC Bulletin Board. The following table sets forth, for the fiscal
quarters indicated, the range of high and low bid quotations for the Company's
Common Stock as reported by the National Quotation Bureau, Inc. The bid
quotations presented are between broker-dealers and do not retail mark-ups,
mark-downs or other fees and commissions. As a result, the following quotations
may not reflect actual transactions.

Fiscal Year ended September 30, 1997: High/Ask Low/Bid
--------- ---------
Quarter ended September 30, 1997 23/32 11/32
Quarter ended June 30, 1997 13/16 5/16
Quarter ended March 31, 1997 31/32 9/32
Quarter ended December 31, 1996 5/8 9/32

Fiscal Year ended September 30, 1996: High/Ask Low/Bid
--------- ---------
Quarter ended September 30, 1996 1/2 1/2
Quarter ended June 30, 1996 5/8 1/2
Quarter ended March 31, 1996 15/16 11/16
Quarter ended December 31, 1995 5/32 1/32

Stockholders

As of December 31, 1998, the Company had approximately 197 record holders of its
Common Stock, as reflected on the books of the Company's transfer agent.
Significant number of shares are held in street name and as such the Company
believes the actual number of beneficial owners is higher.

Dividends

The Company has not established a policy concerning payment of regular dividends
nor has it paid any dividends on its Common Stock to date. Any payment of
dividends in the future will be determined by the Board of Directors in light of
conditions then existing, including the Company's earnings, financial condition,
capital requirements and debt covenants.

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ITEM 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The Company has included on this Form 10-KSB certain forward-looking statements.
Forward-looking statements are statements relating to the Company's plans,
goals, objectives, strategies, future performance and events as well as any
other statements or representations other than those relating to historical
data. Forward-looking statements inherently possess risks and uncertainties. As
a result, although the Company's forward-looking statements are expressed in
good faith, the Company's actual results could differ materially.

General

The Company has been engaged in the business of asbestos abatement, lead
abatement, soil and hazardous waste remediation and industrial cleaning. The
Company services commercial, industrial and residential customers primarily
located in the western, midwestern and southeastern areas of the United States.
The Company's objective is to become a full service industrial maintenance and
remediation provider to customers throughout the United States. The Company
expects to achieve its objective by expanding the service territories of its
existing operations and to obtain additional geographic presence through
acquisitions.

Shortly after the May 1997 appointment of Frank Fradella as the President and
CEO of the Company, Mr. Fradella and American Eco Corporation (AEC) began
implementing a plan to stablize the Company's operations and financial position
and to provide it with the resources necessary to allow management to pursue its
new strategic direction. Several steps of the plan were completed during the
third and fourth quarters of 1997. The first step taken was to discontinue the
Company's commercial asbestos operations (P.W. Stephens Contractors, Inc. and
QHI Stephens, Inc.) which consistently generated losses and had been a drain on
capital resources. Administrative staffing levels and overhead costs of the
remaining operations were then reduced approximately 35% in order to position
those operations to generate positive cash flows. AEC increased the Company's
Line of Credit by $14,750,000 to $20,000,000 in order to allow the Company to
meet certain of its existing obligations. As part of the increase in the Line of
Credit, an agreement was made between AEC and the Company allowing AEC to
convert its obligation from the Company into common stock subject to shareholder
approval of an increase in authorized shares of the Company's common stock. No
assurance can be made that the shareholders will approve such an increase. In
line with the Company's strategy to focus in the specialized maintenance
services industry, the Company acquired all of the issued and outstanding shares
of JL Manta, Inc. on November 19, 1997. In addition the Company divested its
interest in Kelar Controls which did not fit the Company's strategic direction.
Pursuant to the Aquisition Agreement dated June 30, 1997, the Company sold Kelar
to Regal Oak Properties, Inc.

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Results of Operations
1997 vs 1996
Continuing Operations
Revenue:

Revenue for the year ended September 30, 1997 increased 3.3% to $13,434,000 from
$13,001,000 for the same period in 1996. The increase in revenue was the
combined result of an increase in revenue of 14.8% from St.Louis to $7,293,000
offset by a decrease in revenue of (7.1%) to $6,141,000 from Residential.

The increase in revenue from St. Louis in the current year was the result of
factors which occurred in fiscal 1996. In June 1996, VonGuard and Enstar-North
American, Inc. were merged into FCA and the named was changed to P.W. Stephens
Services, Inc. Select Abatement, Inc., a subsidiary of VonGuard, was merged into
RSI and the name was changed to P.W. Stephens Contractors, Inc. P.W. Stephens
Services, Inc. and P.W. Stephens Contractors, Inc. are collectively referred to
as P.W. Stephens St. Louis ("St. Louis"). The reorganization of these companies,
as well as the name changes, impacted the marketing efforts of the Company. Time
and resources traditionally dedicated to marketing were required to assist with
the organizational changes of the Companies for a certain period of time. In
addition, the change in name to P.W. Stephens, which provided a consistent
identity among the Company's operating entities, had a short-term negative brand
recognition impact for St. Louis in its existing markets. To overcome the
short-term decline in revenue experienced in fiscal 1996, St. Louis allocated
additional resources in order to increase its sales efforts. The benefits of
these additional marketing efforts resulted in the current year increase in
revenue.

The decrease in Residential's revenue for the year ended September 30, 1997 was
also the result of a reorganzation of its operations that occurred over the past
fifteen months. In the quarter ended September 30, 1996, Residential
consolidated three of its branch offices into one. The office consolidation
occurred to recognize long-term operational efficiencies by servicing the same
geographic region from one office. This office consolidation had a negative
impact on residential's revenue in the first six months of fiscal 1997. In
addition, in July of 1997, Residential closed one of its operating facilities
due to inconsistent financial performance.

Gross Profit:

Gross Profit as a percentage of revenue for the year ended September 30, 1997
was 36.7% compared to 37.2% for the same period in 1996. The decrease in the
gross profit margin was the combined result of a 2.1% decrease in St. Louis'
gross profit margin to 21.5% offset by a 4.6% increase in Residential's gross
profit margin to 54.8%. The decrease in St. Louis' gross profit margin was
primarily due to variations in the profitabiltiy from its Department of Energy
contracts and increased competitiveness which was partially offset by the
recognition of efficiencies resulting from its operational restructuring. The
increase in Residential's gross profit margin was the result of cost
efficiencies realized from the closing of one of its branch offices in July
1997.

Selling, general and administrative expenses:

Selling, general and administrative expenses (SG&A) for the year ended September
30, 1997 were $6,739,000 compared to $6,099,000 for the same period in 1996. The
increase in SG&A expenses is due to several factors. The Company incurred
$2,300,000 of management fees in the current year pursuant to a management
agreement with American Eco Corporation ("AEC") effective October 1, 1996. AEC
agreed to suppply the Company with management guidance and guaranteed certain of
the Company's obligations in return for a quarterly management fee. See NOTE 15
- - RELATED PARTY TRANSACTIONS of the financial statements for additional
disclosure. The Company increased its litigation and contingency reserves by
$600,000 based on management's assessment of existing contingencies. The Company
also increased its reserve for trade receivables in the amount of $220,000.
Without the impact of these items, the Company's SG&A decreased approximately
42% from fiscal 1996. The following reflects SG&A net of the special charges
noted above.

The Company's corporate administrative expenses for the year ended September 30,
1997 were $1,017,000 compared to $1,260,000 for the same period in 1996.
Corporate's sg&a expenses in the current year are consistent with historical
levels. In 1996, the Company's corporate SG&A included approximately $200,000 of
legal expenses relating to a dispute and litigation with a former officer and
director.

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Residential's SG&A as a percent of revenue for the year ended September 30, 1997
was 29% compared to 36% for the same period in 1996. St. Louis' SG&A as a
percentage of revenue for the current year was 22% compared to 32% in fiscal
1996. The decrease in both Residential and St. Louis' sg&a was the result of
efficiencies recognized from their respective operational restructurings.

Other Expenses:

Interest expense for the years ended September 30, 1997 and 1996 were $1,435,000
and $256,000 respectively. The increase was primarily due to increased
outstanding borrowings under the line of credit from its shareholder, AEC and
the utilization of certain factoring arrangements. Additional interest expense
was recognized in the current year under promissory notes from two investor
groups.

Loss from Continuing Operations

The loss from continuing operations for the year ended September 30, 1997
increased to $3,129,000 compared to a net loss of $1,434,000 during the same
period in 1996. Losses during the current period reflect the combined result of
an increase in interest expense, the management fees incurred and the increase
in contingency and receivable reserves recognized in the current year.

Discontinued Operations

Revenue from the discontinued commercial asbestos operations of P. W. Stephens
Contractors, Inc. and QHI Stephens, Inc. (collectively referred to as
"Commercial") for the year ended September 30, 1997 was $7,060,000 compared to
$13,877,000 in the prior year. The decline in revenue was the result of the
Company's decision not to accept new jobs for several months while the
commercial asbestos operations were evaluated. As a result, current year revenue
represents approximately seven months of activity. The total net loss, including
loss on disposal of assets, for the discontinued operations for the year ended
September 30, 1997 was $5,923,000 $0.24 per share compared to $3,312,000 or
$0.16 for the same period in 1996. The increased loss was the combined result of
ongoing losses on several large jobs, an increase in reserves for accounts
receivable, recording of certain contingencies associated with the disposition
and a provision of $300,000 for operating losses expected through the phase out
period.

Revenue from Kelar's operations for the year ended September 30, 1997 was
$1,089,000, which represents nine months of activity, compared to $661,000 for
the same period in 1996. The increase in Kelar's revenue was primarily the
result of an increase in the current year from a large ongoing energy savings
contract compared to the same period in 1996. Kelar recognized a loss of $87,000
for the current year compared to a loss of $469,000 for fiscal 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Company utilized factoring arrangements as another significant source of
funds during the 1997 fiscal year. The Company factored in excess of $4,800,000
of accounts receivable during the current year compared to $200,000 in fiscal
1996. Under the terms of the factoring arrangement, the Company received 65% of
the factored receivables at an annual effective interest rate of approximately

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28% and was required to repurchase the receivables if collection does not occur
within 90 days of the invoice date. On September 3, 1997 the Company paid the
factor $1,580,000 which represented the total outstanding obligations under the
existing arrangements. Management does not intend to utilize factoring
arrangements as a significant source of funds on an ongoing basis.

The Company received additional funds during the year ended September 30, 1997
under an existing line of credit with an investor group in the amount of
$805,000. On September 30, 1996 the Company obtained a line of credit facility
with a maximum borrowing amount of $1,300,000, bears interest of 10% per annum
and matures on March 1, 1998. The outstanding balance under the facility as of
September 30, 1997 was $1,030,000 compared to $225,000 for the same period in
1996.

The Company also received funds under a promissory note from a different
investor group. The face value of the original note was $300,000 with an
interest rate of 12% and a maturity date of March 13, 1997. On April 17, 1997,
the note was extended to July 31, 1997 and amended to allow the Company to
borrow an additional $100,000. As part of the original note and subsequent
amendments and extensions, the Company committed to issue 480,000 warrants to
purchase the Company's common stock. These warrants are subject to shareholder
approval of an increase in the authorized number of outstanding shares. The
conversion price of the warrants will equal to the market value on the date of
issue. On September 19, 1997, the Company paid the investor group the total
amount outstanding under the note including accrued interest in the amount of
$410,800.

On June 30, 1997, the Company sold its interest in Kelar Controls for $2,500,000
to Regal Oak Properties Inc. Regal Oak financed the transaction by issuing the
Company a Promissory Note with an interest rate of 10%, due and payable in one
(1) installment on June 30, 1998 and is secured by performance bonds.

In November 1997, EIF completed the acquisition of J.L. Manta, Inc. ("Manta"),
an Illinois corporation, which provides specialty coatings and industrial
maintenance services. (See FORM 8K dated November 29, 1997.) Consideration paid
by the EIF included $4,725,321 of cash and $2,235,312 of convertible promissory
notes, payable in installments, with the final payment due on November 18, 2000.
The Company also entered into Retention Bonus Agreements with key Manta managers
providing for bonus payments aggregating $900,000 over a three-year period and
committed to provide 500,000 options to purchase EIF stock to Manta employees.
The cash portion of the acquisition was funded through a $6.5 million
convertible note payable to Deere Park Capital. The Deere Park Capital note is
convertible, first to preferred stock at a price of $1.00 per share, and then to
common stock on a share for share basis. In order for the conversion(s) to take
place, the Company must receive shareholder approval to increase the number of
authorized outstanding shares and complete certain filing requirements. While no
assure can be made that the note will be converted, the Company expects that the
note will be converted to equity. Deere Park also issued Manta a $2.5 million
revolving note in order to allow Manta to pay off the long-term portion of its
existing credit facility with Harris Bank.

Manta currently has a revolving line of credit facility with Harris Bank
("Harris") and has financed certain equipment through Mercantile Bank of Indiana
("Mercantile"). The Company and Manta are in the process of completing a Credit
Agreement with LaSalle National Bank ("LaSalle") which would replace the
existing Harris and Mercantile facilities as well as the Deere Park Revolving
Note. Although the LaSalle facility can not be guaranteed, it is expected to be
a one year renewable facility which will include a term loan, revolving loans
and letters of credit and the total to be in excess of $10 million. The facility
will be secured by the assets of Manta and guaranteed by the Company. It is
anticipated that the facility will include typical financial covenants and will
allow, with certain restrictions, distributions of excess cash generated by
Manta to the Company. The Company believes that the cash generated by Manta's
operations will be sufficient to meet Manta ongoing operational needs as well as
meet the debt service obligations under the LaSalle credit facility, the Deere
Park Note and the Seller's Notes.

The Company believes, that the additional funds available under the AEC line of
credit, the proceeds from the sale of Kelar, the cash flows resulting from the
ongoing operations coupled with the financing arrangements the Company expects
to finalize will be sufficient throughout the next twelve months to finance its
working capital needs, planned capital expenditures, debt service and the
outstanding obligations from the discontinued operations.

Page 20
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

EIF HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS

September 30,
----------------------------
1997 1996
------------ ------------
ASSETS
Current assets:
Cash........................................... $ 304,678 $ 178,231
Accounts receivable, net....................... 3,807,367 7,299,059
Securities available for sale.................. 5,562,697 --
Note Receivable................................ 2,562,500 --
Receivable, Officer............................ 70,000 --
Costs and estimated earnings on contracts
in progress in excess of billings............. 52,003 326,343
Supplies inventory............................. 165,079 478,370
Prepaid and other current assets............... 561,605 85,816
------------ ------------
Total current assets...................... 13,085,929 8,367,819

Machinery and equipment, net...................... 603,940 1,275,087

Other noncurrent assets:
Goodwill, net of accumulated amortization
of $455,164 and $413,921 respectively......... 755,597 881,680
Receivable, officer............................ 210,000 --
Other assets................................... 20,520 50,917
------------ ------------
986,117 932,597
------------ ------------
Total assets................................... $ 14,675,986 $ 10,575,503
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued liabilities........ $ 2,408,077 $ 6,428,112
Notes payable................................... 1,695,120 1,825,538
Billings in excess of costs and estimated
earnings on contracts in progress.............. 178,921 737,476
Note payable due to shareholder................. 17,609,424 4,908,317
Reserve for contingencies....................... 1,349,000 --
Net liabilities of discontinued operations...... 1,776,041 --
Current maturities of long-term debt............ -- 175,524
------------ ------------
Total current liabilities................. 25,016,583 14,074,967

Long term debt................................... -- 73,882
------------ ------------
Total liabilities.............................. 25,016,583 14,148,849
------------ ------------

Stockholders' deficit
Common stock, no par value, 25,000,000
shares authorized, 24,618,201 issued and
outstanding at September 30, 1997 and
1996, respectively............................ 3,019,246 3,019,246
Additional paid-in capital..................... 804,696 804,696
Accumulated deficit............................ (14,164,539) (7,397,288)
------------ ------------
Total stockholders' deficit.............. (10,340,597) (3,573,346)
------------ ------------
Total liabilities and stockholders'
equity (deficit)............................ $ 14,675,986 $ 10,575,503
============ ============

The accompanying notes are an integral part of these consolidated financial
statements.

Page 21
<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended September 30,
----------------------------
1997 1996
------------ ------------

Revenue........................................... $ 13,434,423 $ 13,001,341

Cost of revenue................................... 8,399,561 8,140,622
------------ ------------
Gross profit..................................... 5,034,862 4,860,719

Selling, general and administrative expenses...... 6,738,610 6,098,897
------------ ------------
(1,703,748) (1,238,178)
Other:
Other (income)expense............................ (10,189) (59,413)
Interest Expense................................. 1,434,992 256,445
------------ ------------
Loss before provision for income taxes............ (3,128,551) (1,435,210)

Provision for income taxes........................ -- --
------------ ------------
Loss from continuing operations.................. (3,128,551) (1,435,210)

Discontinued operations, net of income taxes:
Loss from operations on discontinued commercial
asbestos operations including provision of
$300,000, for operating loss during phase
out.......................................... (5,765,745) (3,305,164)
Loss on disposal of assets from
discontinued commercial asbestos operations.. (156,863) --
Loss from operations on discontinued operations
of Kelar Controls, Inc....................... (86,672) (469,346)
Gain on sale of Kelar Controls, Inc.............. 2,370,580 --
------------ ------------
(3,638,700) (3,774,510)
------------ ------------
Net loss.......................................... $ (6,767,251) $ (5,209,720)
============ ============

Net loss per share:
Continuing operations............................ $ (0.13) $ (0.07)
Discontinued operations.......................... (0.14) (0.18)
------------ ------------
Net loss per share................................ $ (0.27) $ (0.25)
============ ============

Weighted average number of common
shares outstanding.............................. 24,618,201 20,692,130
============ ============

The accompanying notes are an integral part of these consolidated financial
statements.

Page 22
<PAGE>
<TABLE>
<CAPTION>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

Common Stock
---------------------------- Retained
Shares Dollar Additional Earnings
outstanding amount paid-in capital (Deficit) Total
------------ ------------ --------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance September 30, 1995......... 14,618,201 $ 2,019,246 $ 804,696 $ (2,187,568) $ 636,374

Issuance of common stock........... 10,000,000 1,000,000 - - 1,000,000

Net loss........................... - - (5,209,720) (5,209,720)
------------ ------------ --------------- ------------ ----------------

Balance September 30, 1996......... 24,618,201 3,019,246 804,696 (7,397,288) (3,573,346)

Net Loss........................... - - (6,767,251) (6,767,251)
------------ ------------ --------------- ------------ ----------------

Balance September 30, 1997......... 24,618,201 $ 3,019,246 $ 804,696 $(14,164,539) $(10,340,597)
============ ============ =============== ============ ================

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

Page 23
<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS

Years Ended September 30,
-----------------------------
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $ (6,767,251) $ (5,209,720)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on sale of Kelar Controls, Inc............ (2,370,580) --
Depreciation and amortization.................. 472,058 584,016
Loss on disposal of machinery and equipment.... 156,863 46,332
Changes in assets and liabilities:
Accounts receivable.............................. 2,413,415 (1,719,552)
Costs and estimated earnings in excess
of billings on jobs in progress................ 274,340 23,169
Inventory........................................ 152,305 51,584
Refundable income taxes.......................... -- 265,916
Prepaid expenses and other current assets........ 122,574 615,669
Other assets..................................... 26,098 (16,225)
Accounts payable and accrued liabilities......... 4,568,189 2,381,974
Billings in excess of costs and estimated
earnings on jobs in process.................... (558,555) 220,605
Reserve for contingencies........................ 1,349,000 --
------------ ------------
Net cash used in operating activities...... (161,544) (2,756,232)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash divested upon sale of Kelar Controls, Inc... (53,750) --
Proceeds from sale of machinery and equipment.... 99,500 184,799
Capital expenditures............................. (198,228) (358,464)
------------ ------------
Net cash used in investing activities...... (152,478) (173,665)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft................................... -- (478,696)
Net proceeds from notes payable.................. 2,795,333 115,034
Principal payments on notes payable.............. (3,280,400) (43,788)
Principal payments on long-term debt............. (195,264) (2,463,514)
Proceeds from stockholder line of credit......... 1,120,800 4,908,317
Issuance of common stock......................... -- 1,000,000
------------ ------------
Net cash provided by financing activities.. 440,469 3,037,353
------------ ------------
Net increase in cash.............................. 126,447 107,456

Cash at beginning of period....................... 178,231 70,775
------------ ------------
Cash at end of period............................. $ 304,678 $ 178,231
============ ============

The accompanying notes are an integral part of these consolidated financial
statements.

Page 24
<PAGE>
EIF HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996

Note 1 Summary of Significant Accounting Policies

Organization and Basis for Presentation: EIF Holdings, Inc. (the"Company" or
"EIF"), is a Hawaii corporation incorporated on July 25, 1989. The accompanying
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries; P.W. Stephens Services, Inc. and P.W. Stephens
Contractors, Inc. collectively referred to as "P.W. Stephens St. Louis"("St.
Louis"), and P.W. Stephens Residential, Inc.("Residential"), (which was formerly
combined with P.W. Stephens Contractors, Inc. and QHI Stephens Inc. and referred
to as "P.W. Stephens"). The P.W. Stephens Contractors, Inc. and QHI Stephens
Contractors, Inc. subsidiaries were discontinued in May 1997 and have been
accounted for as discontinued operations for all current periods reported under
this Form 10-KSB. Kelar Controls, Inc. was divested on June 30, 1997,
accordingly their operations are reflected through that date in the consolidated
financial statements. On November 19, 1997, the Company completed its
acquisition of JL Manta, Inc. ("Manta"), an Illinois corporation. Pursuant to
the terms of a Stock Purchase Agreement, dated as of September 30, 1997, the
Company acquired all of the issued and outstanding common stock, no par value
per share, of Manta from the stockholders of Manta. The audited financial
statements of Manta as well as the pro forma financial information showing the
effect of the acquisition will be filed within 60 days of December 4, 1997,
pursuant to the provisions in paragraph (a)(4) of FORM 8-K. All intercompany
transactions and balances have been eliminated in consolidation.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
the accompanying notes. Actual results could differ from these estimates and
such differences may or may not be material.

Revenue and Cost Recognition: The Company recognizes revenues from its
industrial maintenance services under time and material and fixed price
contracts. The Company recognizes revenues and related profit from its time and
material contracts based on costs incurred. Contracts using the
percentage-of-completion method recognize revenues by comparing the costs
incurred to date to the total estimated costs. The percentage-of-completion
method of accounting can result in the recognition of either costs and estimated
earnings in excess of billings or billings in excess of costs and estimated
earnings on uncompleted contracts, which are classified as assets and
liabilities, respectively, in the accompanying consolidated balance sheet. The
asset represents costs incurred and revenue earned but not yet billed to the
customer on uncompleted contracts. The liability represents billings to the
customer in excess of revenues earned on uncompleted contracts.

Inventory: Inventory consists primarily of operating supplies and is stated at
the lower of cost, determined using the first-in, first-out (FIFO) method, or
market.

Machinery and Equipment: Machinery and equipment are stated at cost.
Depreciation of machinery and equipment is provided over the estimated useful
lives of the respective assets using the straight-line method, generally from
three to five years.

Expenditures for additions, major renewals and betterments are capitalized and
expenditures for maintenance and repairs are charged to earnings as incurred.

When machinery and equipment are retired or otherwise disposed of, the cost
thereof and the applicable accumulated depreciation are removed from the
respective accounts and the resulting gain or loss is reflected in earnings.

Goodwill: Goodwill is amortized on a straight-line basis over 20 years.
Management reviews, on an annual basis, the carrying value of goodwill in order
to determine whether an impairment has occurred. Impairment is based on several
factors including the Company's projection of future undiscounted operating cash
flows. If an impairment of the carrying value were to be indicated by this
review, the Company would adjust the carrying value of goodwill to its estimated
fair value.

Long-Lived Assets: In 1996 the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the impairment of Long-Lived Assets
and Assets to be Disposed Of" which requires that long-lived assets and certain
intangibles to be held and used by the Company be reviewed for impairment. The
adoption of SFAS 121 did not have a material affect on the Company's
consolidated financial statements.

Page 25
<PAGE>
Income Taxes: The Company utilizes SFAS No. 109, Accounting for Income Taxes,
which requires an asset and liability approach to financial accounting and
reporting for income taxes. The difference between the financial statement and
tax bases of assets and liabilities is determined annually. Deferred income tax
assets and liabilities are computed for those differences that have future tax
consequences using the currently enacted tax laws and rates that apply to the
periods in which they are expected to affect taxable income. Valuation
allowances are established, if necessary, to reduce the deferred tax asset to
the amount that will more likely than not be realized. Income tax expense is the
current tax payable or refundable for the period plus or minus the net change in
the deferred tax assets and liabilities.

Income tax expense includes federal and state taxes currently payable and the
change in deferred taxes arising from temporary differences between income for
financial reporting and income tax purposes.

Net Loss Per Share: The net loss per share amounts for 1997 and 1996 have been
computed by dividing net loss by the weighted average number of shares
outstanding during the respective periods.

Major Customers: For the years ended September 30, 1997 and 1996, no customer
accounted for more than 10% of revenue.

Surety Bonds: The Company has purchased a surety bond for a job totaling
approximately $450,000 as of September 30, 1997. The bond is collateralized by
account receivables.

In February 1997, The Financial Accounting Standards Board Issued Statement No.
128, Earnings Per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of statement 128 on the calculation
of fully diluted earnings per share is not expected to be material.

Stock Based Compensation: The disclosure requirements of SFAS No. 123
"Accounting for Stock-Based Compensation", became effective January 1, 1996 for
all stock based compensation plans. SFAS No. 123 requires the recognition of, or
disclosure of, compensation expense for grants of stock options or other equity
instruments issued to employees based on the fair value at the date of grant.
However the statement also allows an entity to continue to measure compensation
costs for those plans using the method prescribed in APB Opinion No. 25,
"Accounting for Stock Issued to Employees". Those entities which elect to remain
with the accounting in APB No.25 are required to include pro forma disclosures
of net income and earnings per share as if the fair value-based method of
accounting had been applied. The Company has elected to account for such plans
under the provisions of APB No. 25. There has been no effect on the Company's
financial position as a result of this pronouncement.

Fair Value of Financial Instruments: The Company's financial instruments consist
of cash and cash equivalents, accounts receivable, accounts payable and notes
payable. The Company believes that the carrying value of these instruments on
the accompanying balance sheet approximates their fair value.

Reclassifications: Certain reclassifications have been made to prior year
financial statements to conform with the current year presentation.

Page 26
<PAGE>
NOTE 2 - ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

1997 1996
------------ ------------
Billed completed contracts............ $ 2,719,737 $ 4,861,695
Billed contracts in progress.......... 1,273,515 3,022,206
Unbilled retention.................... 39,115 202,481
------------ ------------
4,032,367 8,086,382
Less allowance for doubtful accounts.. (225,000) (787,323)
------------ ------------
$ 3,807,367 $ 7,299,059
============ ============
NOTE 3 - SECURITIES AVAILABLE FOR SALE

Securities available for sale consist of 570,333 common shares of American Eco
Corporation ("AEC"). These shares were issued to the Company by AEC in lieu of
cash in conjunction with the Amendment dated September 30, 1997, to the existing
line of credit which increased the maximum borrowing amount under the line to
$20,000,000. These securities reflect a value of $9.75 per share on the
consolidated balance sheet, which was the market value on the date of issue. The
Company intends to sell these securities to settle certain of the Company's
existing obligations. Subsequent to September 30, 1997, the Company has received
proceeds of approximately $3,000,000 from the sale of a portion of these
securities. See NOTE 9 - NOTE PAYABLE DUE TO SHAREHOLDER and NOTE 15 - RELATED
PARTY TRANSACTIONS for additional disclosures.

NOTE 4 - NOTE RECEIVABLE

On June 30, 1997, the Company sold all of the issued and outstanding shares of
stock in its wholly owned subsidiary, Kelar Controls, Inc. to Regal Oak
Properties, Inc. for $2,500,000. Pursuant to the aquisition agreement, the
Company received a Promissory Note for the full amount of the purchase price.
The note matures on June 30, 1998, bears interest at 10% and is secured by
performance bonds. See NOTE - 18 DISCONTINUED OPERATIONS for additional
disclosure.

NOTE 5 - COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

Costs and estimated earnings on uncompleted contracts consist of the following:

1997 1996
------------ ------------
Costs incurred on contracts in
progress........................... $ 2,188,031 $ 6,841,353
Estimated earnings.................. 413,922 514,020
------------ ------------
2,601,953 7,355,373
Less: billings to date.............. 2,728,871 7,766,506
------------ ------------
$ (126,918) $ (411,133)
============ ============

The amounts above are included in the accompanying consolidated balance sheet
under the following captions:

Costs and estimated earnings in
excess of billings on contracts
in progress......................... $ 52,003 $ 326,343

Billings in excess of costs and
estimated earnings on contracts
in progress......................... (178,921) (737,476)
------------ ------------
$ (126,918) $ (411,133)
============ ============

NOTE 6 - RECEIVABLE, OFFICER

The receivable, officer is an amount due from Frank Fradella, President of the
Company. The receivable was transferred from AEC when Mr. Fradella assumed his
position as President of the Company. This amount represents the remaining
balance of a five year forgiveable loan made to Mr. Fradella upon his employment
with AEC in September 1996. The balance is forgiven in annual installments of
$70,000 upon Mr. Fradella's continued employment with the Company. The amount
due bears no interest and is unsecured.

Page 27
<PAGE>
NOTE 7 - MACHINERY AND EQUIPMENT

Machinery and equipment consisted of the following:
1997 1996
------------ ------------

Equipment............................ $ 814,199 $ 2,283,788
Leasehold improvements............... 97,439 647,696
Furniture, fixtures and
office equipment.................... 196,244 888,228
Vehicles............................. 514,944 238,477
Vehicles and equipment
under capitalized leases............ -- 1,260,447
------------ ------------
1,622,827 5,318,636
Accumulated depreciation
(including $0 and $1,076,435
at September 30, 1997 and 1996,
respectively, attributable to
capitalized leases)............... 1,018,887 4,043,549
------------ ------------
$ 603,940 $ 1,275,087
============ ============

The cost fully depreciated assets still in service amounted to $531,127 at
September 30, 1997 and $2,655,341 at September 30, 1996.

NOTE 8 - Notes Payable

Notes payable consists of the following:
1997 1996
------------ ------------

Note payable, due to a party related through
common ownership, due March 1, 1998, at 10%
rate of interest, unsecured................... $ 1,030,000 $ 225,000

Notes payable, finance company for insurance
premiums, due August 31, 1998. Payable $59,208
monthly including interest at 7.64%, secured
by unearned premiums........................... 598,364 --

Bank line of credit secured by certain
contracts, receivables, inventory and
equipment. The note matured on February 10,
1996 and was in default as of September 30,
1996. Interest is payable at the rate of
prime plus .75%. The note was guaranteed by
a major shareholder............................ -- 130,162

Notes payable, secured by certain accounts
receivable pledged as collateral. The Company
may borrow up to 65% of the accounts receivable.
The Note must be repaid to the extent the
account receivable is collected or is no
longer eligible. The annual interest rate is
28%. The note was guaranteed by a major
shareholder.................................... -- 130,000

Note payable, bank, payable on April 2, 1997.
Interest payable monthly at prime plus 2%.
The Company may borrow up to 70% of its
eligible contracts receivables with a
maximum availability of $1,200,000 at
September 30, 1996. Maximum availablity
decreases by $200,000 each month until the
line of credit is paid off. Secured by
accounts receivables, inventory and
guarantee of major shareholder................. -- 1,200,000

Notes payable, due to related party, due
December 1996, at 10% rate of interest......... -- 60,000

Miscellaneous notes payable.................. 66,713 80,376
------------ ------------
$ 1,695,120 $ 1,825,538
============ ============
Page 28
<PAGE>
NOTE 9 - Note Payable Due to Stockholder

During the fiscal year ended September 30, 1996, the Company entered into a line
of credit agreement with a major stockholder, American Eco Corporation ("AEC")
The original terms of the AEC facility carried a maximum borrowing amount of
$5,250,000, interest at the prime rate plus 2% per annum, was unsecured and
matured on July 31, 1997. Effective July 31, 1997 the line of credit facility
with AEC was renewed, extended and modified to increase the maximum borrowing
amount to $15,000,000 and extend the maturity to February 18, 1998. All other
terms under the original line of credit agreement remained unchanged. On
September 30, 1997, AEC executed another amendment to the line of credit
facility increasing the maximum borrowing amount to $20,000,000. For the years
ended September 30, 1997 and 1996, the total amounts outstanding under the AEC
facility were $17,609,424 and $4,908,317 respectively. Included in these amounts
are accrued interest of $835,311 and $160,326 respectively. The renewal of the
line of credit facility also provides AEC an option to convert the entire
outstanding principal amount of the line of credit plus any accrued interest
outstanding at the time of conversion, into common shares of EIF Holdings, Inc.
subject to stockholder approval to increase the number of authorized shares. No
guarantee can be made that stockholder approval will be obtained. The conversion
price for each common share is equal to 85% of the five day weighted average
closing price of the common shares as quoted in the over-the-counter "pink
sheets" immediately prior to the conversion date.

NOTE 10 - Long-Term Debt
1997 1996
------------ ------------

Note payable, bank, due in monthly
installments of $2,333 plus interest at
prime plus 1% per annum........................ $ -- $ 16,344

Notes payable, bank for transportation
equipment, interest varying from 7.25% to
9.00%, secured by transportation equipment..... -- 37,808

Various capital leases......................... -- 50,953
------------ ------------
-- 105,105
Less current portion........................... -- 31,213
------------ ------------
Long-term debt................................. $ -- $ 73,882
============ ============

NOTE 11 - Leases

As Lessee:

The Company leases office and warehouse space under operating leases that expire
at various times through 2002.

Future minimum payments, by year and in the aggregate, under these operating
leases, consisted of the following at September 30, 1997:

1998................................ $ 213,546
1999................................ 177,790
2000................................ 131,316
2001................................ 114,420
2002................................ 66,745
------------
Total minimum lease payments......... $ 703,817
============

Rent expense for the years ended September 30, 1997 and 1996 amounted to
$300,778 and $521,500, respectively. See NOTE 14 - RELATED PARTY TRANSACTIONS
for additional disclosures.

As Lessor:

Subsequent to September 30, 1997, the Company entered into an agreement to
sub-lease an office and warehouse facility to a third party from January 1, 1998
to July 31, 2002. Future minimum rents receivable under noncancelable leases
are:

1998................................ $ 67,330
1999................................ 89,800
2000................................ 101,000
2001................................ 102,100
2002................................ 59,558
------------
Total minimum rents receivable....... $ 419,788
============
Page 29
<PAGE>
NOTE 12 - CASH FLOW INFORMATION

For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.

1997 1996
------------ ------------

Supplemental disclosures of cash flow
information:
Cash paid (refunded) for:
Interest.................................. $ 613,260 $ 225,523
Income taxes.............................. $ -- $ (163,322)

Supplemental schedule of noncash investing
and financing activities:
Machinery and equipment acquired
through capitalized lease
obligations............................. $ -- $ 150,212
Machinery and equipment acquired
through long term-debt.................. $ 22,565 $ --

See NOTE-3 SECURITIES AVAILABLE FOR SALE and NOTE-18 DISCONTINUED OPERATIONS for
additional disclosures.

NOTE 13 - PROVISION FOR INCOME TAXES

A provision for income taxes has not been recorded due to the Company's current
year losses and net operating loss carryforwards. The components of the deferred
income tax provision are as follows:

1997 1996
------------ ------------
Deferred income tax expense components:
Allowance for doubtful accounts.............. $ 376,500 $ 176,000
Contingent liabilities....................... 501,000 --
Loss on construction in process.............. (139,000) 139,000
Net operating loss, current year............. 1,339,000 1,052,000
Other........................................ (7,500) 50,000
Valuation allowance.......................... (2,070,000) (1,417,000)
------------ ------------
$ -- $ --
============ ============
A reconciliation of income tax at the statutory rate to the Company's effective
rate is as follows:
1997 1996
------------ ------------
% %
Statutory federal income tax rate............ (34) (34)
State income taxes........................... (1) (1)
Net operating loss carryforward.............. 35 35
------------ ------------
-- --
============ ============
The components of deferred income taxes are as follows:
1997 1996
------------ ------------
Current:
Allowance for doubtful accounts.............. $ 552,500 $ 176,000
Accelerated depreciation..................... 20,500 5,000
Accrued vacation pay......................... -- 28,000
Loss on construction in process.............. -- 139,000
Contingent liabilities....................... 501,000 --
Net operating loss carry forward............. 2,894,000 1,550,000
Valuation allowance.......................... (3,968,000) (1,898,000)
------------ ------------
$ -- $ --
============ ============

The liability method of accounting for deferred income taxes requires a
valuation allowance against deferred tax assets if, based on the weight of
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized. The Company established a valuation allowance
against deferred tax assets of $3,968,000 and $1,898,000 at September 30, 1997
and 1996, respectively.

The Company has net operating loss carryforwards of approximately $8,500,000 and
$4,500,000 at September 30, 1997 and 1996 respectively, for federal income tax
purposes available to offset future financial income, expiring, if not used,
periodically through the year 2012. A portion of the net operating loss carry
forwards are subject to an annual limitation of approximately $350,000.

Page 30
<PAGE>
NOTE 14 - LITIGATION, COMMITMENTS AND CONTINGENCIES

Borrowings from American Eco Corporation (AEC) were the Company's primary source
of funding for fiscal 1997. The balance due to AEC as of September 30, 1997 was
$17,609,424 compared to $4,908,000 for the same period in fiscal 1996. The
original terms of the AEC facility carried a maximum borrowing amount of
$5,250,000, interest at the prime rate plus 2% per annum, was unsecured and
matured on July 31, 1997. Effective July 31, 1997 the line of credit facility
with AEC was renewed, extended and modified to increase the maximum borrowing
amount to $15,000,000 and extend the maturity to February 18, 1998. On September
30, 1997 the borrowing amount was increased further to $20,000,000. All other
terms under the original line of credit agreement remained unchanged. The
renewal of the line of credit also provides AEC an option to convert the entire
outstanding principal amount of the line of credit plus any accrued and unpaid
interest outstanding at the time of conversion, into common shares of the
Company, subject to shareholder approval to increase the number of authorized
shares. The conversion price for each common share is equal to 85% of the five
day weighted average closing price of the common shares as quoted in the
over-the-counter "pink sheets" immediately prior to the conversion date.
The nature and scope of the Company's business operations bring it into regular
contact with the general public, a variety of businesses and government
agencies. These activities inherently subject the Company to the hazards of
litigation, which are defended in the normal course of business. The Company is
currently involved in several lawsuits and investigations including regulatory
compliance. Although the outcome of these claims is not clearly determinable at
the present time, Management believes that such proceedings are either
adequately covered by insurance, or if uninsured, by the estimated losses it has
recorded to date. The resolution of such claims, however, could have a material
effect on the Company's results of operations or cash flows. The reserves for
litigation and other contingencies recorded by the Company as of September 30,
1997 amounted to $1,349,000.

NOTE 15 - RELATED PARTY TRANSACTIONS

The Company is involved in various related party transactions. These
transactions are summarized as follows:

Pursuant to a Management Services Agreement effective October 1, 1996 between
AEC and the Company, AEC had agreed to provide certain services to the Company
in exchange for a management fee to be paid on a quarterly basis. The services
include providing the Company with management guidance as well as guaranteeing
certain of the Company's obligations with its creditors, in order to allow the
Company to receive favorable terms with its creditors. The agreement provides
for a quarterly payment of $1,000,000. AEC stopped providing management services
to the Company shortly after the appointment of Frank Fradella as President and
CEO of the Company in May 1997. Therefore the management fee was pro-rated for
the third quarter and amounted to $300,000. For the year ended September 30,
1997, total management fees were $2,300,000.

During 1996 the Company leased equipment under capitalized leases from an entity
that is 100% owned by a stockholder with interest rates of approximately 13% per
annum. The Company incurred interest expense to this related party of
approximately $116,675 for the year ended September 30, 1996. At September 30,
1996, this leased equipment was reflected on the Company's financial records as
follows: (a) cost $1,203,303, (b) accumulated depreciation $1,022,476 and (c)
capital lease obligation $93,782. During the year ended September 30, 1997, the
lease obligation was paid off.

The Company also leased warehouse and office facilities under an operating lease
from an entity that is owned by this same stockholder. The Company incurred rent
expense of $55,000 and $156,313 for the years ended September 30, 1997 and
1996, respectively.

NOTE 16 - WARRANTS AND OPTIONS

In connection with funds advanced to the Company under a promissory note, and
subsequent amendments and extensions to the note issued by an investor group,
the Company committed to issue 480,000 warrants, to purchase the Company's
common stock. These warrants are subject to shareholder approval of an increase
in the authorized number of outstanding shares. The exercise price of the
warrants will be equal to the market value on the date of issue.

In connection with a non-registered offering of the Company's common stock in
1994, 714,286 warrants were issued. The warrants had an exercise price of $1.40
per share and expired in June 1997.

NOTE 17 - RETIREMENT PLAN

The Company, through its collective bargaining agreements with various unions,
contributes to the unions' retirement plans. For the years ended September 30,
1997 and 1996, an expense of $151,005 and $151,396 was incurred for these
retirement plans, respectively.

Effective November 1, 1996 the Company adopted a tax-deferred retirement plan
under Section 401(k) of the Internal Revenue Code. The Company may, at its
discretion, make profit-sharing contributions to the plan out of its profits for
the plan year. No matching contributions were made for the year ended
September 30, 1997.

Page 31
<PAGE>

NOTE 18 - DISCONTINUED OPERATIONS

Commercial Asbestos

In May 1997, the Company decided to discontinue the commercial asbestos
operations of P. W. Stephens Contractors, Inc. ("PWSC") and QHI Stephens, Inc.
("QHI"). The results of operations for the respective periods presented are
reported as a component of discontinued operations in the current year of the
consolidated statements of operations. The net loss of these operations
subsequent to September 30, 1997 are included in the statements of operations
under discontinued operations and therefore revenues, cost of revenue, selling,
general and administrative expenses associated with the discontinued operations.

The following tables summarizes results of operations for PWSC and QHI for the
years ended:
1997 1996
------------ ------------
Net sales............................ $ 7,059,949 $ 13,876,959
Operating loss....................... (5,765,745) (3,305,164)
Loss from discontinued
operations.......................... (5,765,745) (3,305,164)

The following table summarizes the net liabilities related to the discontinued
operations of PWSC and QHI for the year ended:
September 30,
1997
------------
Net working capital deficit........... $ (1,930,988)
Machinery and equipment, net.......... 154,947
------------
Net liabilities related to
discontinued operations.............. $ (1,776,041)
============

Included in the current liabilities at September 30, 1997 is a provision for
loss on discontinued operations of $300,000 which consists of estimated costs
associated with the disposal and operating losses expected through February 28,
1998, the phase out period. During the current year, the Company sold certain
machinery and equipment with a net book value of $258,933 related to the
discontinued operations that could not be used in the existing businesses. The
Company received proceeds of $99,950 for the sale of those assets resulting in a
loss on disposition of assets in the amount of $156,863. The remaining machinery
and equipment consists of vehicles that will be utilized in the Company's
ongoing operations.

Sale of Kelar

As of June 30, 1997, the Company completed the sale of all of the issued and
outstanding shares of Kelar Controls, Inc. ("Kelar") to Regal Oak Properties,
Inc. ("Regal Oak") for $2,500,000. Pursuant to the Acquisition Agreement, the
Company received a Promissory Note for the full purchase price. The note is
payable in one (1) installment due June 30, 1998, accrues interest at 10% per
annum and is secured by performance bonds totaling $2,500,000. The results of
operations for the respective periods presented are reported as a component of
discontinued operations in the current year of the consolidated statement of
operations.

Page 32
<PAGE>

The following are the summarized results of operations for Kelar for the years
ended September 30,:

1997 1996
------------ ------------
Net sales............................ $ 1,089,277 $ 660,983
Operating loss....................... (86,672) (469,346)
Loss from discontinued operations.... (86,672) (469,346)

NOTE 19 - SUBSEQUENT EVENTS

JL Manta, Inc.

On November 19, 1997, the Company completed its acquisition of JL Manta, Inc.
("Manta"), an Illinois corporation which provides specialized maintenance
services for clients in the industrial, environmental and low-level nuclear
sectors. Pursuant to the terms of a Stock Purchase Agreement, the Company
acquired all of the issued and outstanding common stock, no par value per share,
of Manta (the "Manta Stock") from the stockholders of Manta (the "Manta
Stockholders")for consideration of $4,725,321 in cash and $2,235,312 in
convertible promissory notes of the Company, payable in installments with a
final payment due on November 18, 2000 (the "Stockholder Notes"). Subject to the
approval by the Company's stockholders of an amendment to EIF's charter
authorizing the requisite amount of stock, at any time after June 30, 1998 the
holders of the Stockholder Notes may convert any principal payment due under the
Stockholder Notes into shares of EIF's common stock, no par value per share (the
"EIF Stock"), at a conversion price equal to the closing transaction price of
the EIF Stock on the date a conversion notice is received by EIF (the
"Conversion Price"). Concurrent with the closing of the Acquisition, certain
Manta Stockholders and key employees entered into Retention Bonus Agreements
with EIF providing for bonus payments in the aggregate amount of $900,000 to be
made by the Company over a three year period.

Also concurrently with the Acquisition, in connection with financing provided to
the Company, the Company issued a $6,500,000 Convertible Promissory Note. The
Note bears interest at the rate of 5 1/4% per annum, becomes due on May 18, 1999
and is secured by a pledge of all of the Manta Stock. Subject to approval of the
Company's Stockholders of an amendment to EIF's charter authorizing the
requisite amount of preferred and common stock, the Note is convertible into 5
1/4% preferred convertible stock at a conversion price of One Dollar $1.00 per
share, with such preferred convertible stock convertible into EIF common stock.

Page 33
<PAGE>
Also in connection with the acquisition, the Company issued $2,500,000
Promissory Note. The note bears interest at the rate of Nine Percent (9%) per
annum and becomes due on February 16, 1998. The loan amount represented by the
note was used by the Company to refinance certain indebtedness of Manta.

Manta has working capital and fixed asset based credit facilities which it
utilizes in the normal course of business. Essentially all of the assets of
Manta are pledged as security under one or more of these facilities. The loan
agreements which govern these facilities contain typical covenants, including
financial covenants, with which the Company must comply.

Debt.

In December 1997, the Company, through its Manta subsidiary has received a
credit facility commitment with LaSalle Bank, which tentatively provides for a
$4,000,000 secured revolver for working capital financing, a $1,300,000 secured
standby letter of credit for workers compensation and a $5,500,000 secured
installment loan to refinance the existing term debt. Principal on the revolver
is payable on demand up to one year from the date of closing. The principal due
on the standby letter of credit is two years from the closing date and five
years from closing on the installment loan. The note is secured by substantially
all of the assets of Manta and requires the maintenance of normal financial
covenants and performance ratios.

NOTE - 20 INDUSTRY SEGMENT DATA

The Company operates in two principal industries; (a.) Industrial, commercial
and governmental Environmental Remediation Services and (b.) residential
asbestos abatement. It is the Company's policy to price intersegment contracts
on an equivalent basis to that used for pricing external contracts. The
following is a summary of selected financial data for these business segments:

Years Ended September 30,
----------------------------
1997 1996
------------ ------------

Revenue
Environmental remediation services.............. $ 7,293,082 $ 6,353,658
Residential asbestos abatement.................. 6,141,341 6,647,683
------------ ------------
Total revenue................................. $ 13,434,423 $ 13,001,341
============ ============
Operating income (loss)
Environmental remediation services.............. $ (57,247) $ (504,704)
Residential asbestos abatement.................. 1,579,985 570,607
------------ ------------
Total operating income........................ 1,522,738 65,902
Corporate Expenses................................ (3,226,486) (1,185,251)
Interest Expense.................................. (1,434,992) (256,448)
Other............................................. 10,189 (59,413)
------------ ------------
Loss before provision for income taxes........ $ (3,128,551) $ (1,435,210)
============ ============
Depreciation and amortization
Environmental remediation services.............. $ 213,328 $ 269,465
Residential asbestos abatement.................. 97,772 33,627
Corporate....................................... 3,856 312
------------ ------------
Total depreciation and amortization........... $ 314,956 $ 303,404
============ ============
Page 34
<PAGE>

Capital expenditures
Environmental remediation services.............. $ 10,692 $ 230,141
Residential asbestos abatement.................. 135,616 21,553
Corporate....................................... 31,388 2,679
------------ ------------
Total capital expenditures.................... $ 177,696 $ 254,373
============ ============
Identifiable Assets
Environmental remediation services.............. $ 3,955,112 $ 1,581,330
Residential asbestos abatement.................. 1,538,278 4,655,635
Corporate....................................... 9,182,596 4,338,538
------------ ------------
Total capital expenditures.................... $ 14,675,986 $ 10,575,503
============ ============

NOTE 21 - FOURTH QUARTER ADJUSTMENTS

During the fourth quarter of fiscal 1996, the Company recorded the following
adjustments:

Recognized approximately $400,000 of legal fees associated with a former
stockholder and officer.

Recorded additional reserves for allowance for doubtful accounts in the
amount of approximately $600,000.

Recognized approximately $400,000 for losses incurred on work in progress.

Page 35
<PAGE>

[letterhead of Karlins, Fuller Arnold & Klodosky P.C.]

To the Stockholders and Directors of
EIF HOLDINGS, INC.

Independent Auditor's Report
----------------------------

We have audited the accompanying consolidated balance sheet of EIF HOLDINGS,
INC. as of September 30, 1997 and 1996 and the related consolidated statements
of operations, stockholders' equity and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EIF HOLDINGS, INC. at September
30, 1997 and 1996, and the results of its operations and cash flows for the
years then ended in conformity with generally accepted accounting principles.

/s/ Karlins, Fuller, Arnold & Klodosky, P.C.
- --------------------------------------------

Houston, Texas
December 18 1997

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<PAGE>

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

Not applicable

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 set forth in the section entitled
"Information Concerning Directors and Nominees" contained in the Company's
definitive Proxy Statement to be filed with Securities and Exchange Commission
("the Proxy Statement") in connection with the Company's 1998 Annual Meeting of
Stockholders, and such information is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

Remuneration of the directors and officers and information related thereto is
included in the section entitled "Executive Compensation and Other Information"
contained in the Proxy Statement, and said information is incorporated herein by
reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security ownership of management and certain beneficial owners and information
related thereto is included in the section entitled "Voting Securities and
Principal Holders Thereof" contained in the Proxy Statement, and said
information is incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with management and related parties and information related thereto
is included in the section entitled "Certain Relationships and Related
Transactions" contained in the Proxy Statement, and said information is
incorporated herein by reference.

Page 37
<PAGE>

ITEM 13. EXHIBIT AND REPORTS ON FORM 8-K

(a) Exhibits
The following documents are filed (separately) as exhibits to this report:

Regulation S-B
Exhibit Number

2.1 Exchange of Stock Agreement and Plan of Reorganization between
EIF Holdings, Inc. ("EIF") and P.W. Stephens Contractors, Inc.
[filed as an Exhibit to the Current Report of the Company on Form
8-K for the Date of Event January 31, 1993 and incorporated
herein by reference].

2.2 Acquisition Agreement between EIF and Von Guard Holdings, Inc.
and its subsidiaries [filed as an Exhibit to the Current Report
of the Company on Form 8-K for the Date of Event August 2, 1994
and incorporated herein by reference].

2.3 Sale of Stock Agreement by and between EIF, Kelar Controls, Inc.
and its shareholders [filed as an Exhibit to the Annual Report of
the Company on Form 10-KSB for the fiscal year ended December 31,
1994 and incorporated herein by reference].

3.1 Certificate of Incorporation, as amended to date [filed as an
Exhibit to the Annual Report of the Company on Form 10-KSB for
the fiscal year ended December 31, 1992 and incorporated herein
by reference].

3.2 Bylaws [filed as an Exhibit to the Annual Report of the Company
on Form 10-KSB for the fiscal year ended December 31, 1992 and
incorporated herein by reference].

4.1 Specimen Common Stock certificate [filed as an Exhibit to the
Annual Report of the Company on Form 10-KSB for the fiscal year
ended December 31, 1992 and incorporated herein by reference.

4.2 Certificate for Specimen "B", "C" and "D" Warrants [filed as an
Exhibit to the Annual Report of the Company on Form 10-KSB for
the fiscal year ended December 31, 1992 and incorporated herein
by reference].

4.3 Extension of Class B Warrants [filed as an Exhibit to the Current
Report of the Company on Form 8-K for the Date of Event October
15, 1994 and incorporated herein by reference].

10.1 Amended Employment Contract of Andreas O. Tobler [filed as an
Exhibit to the Current Report of the Company on Form 8-K for the
Date of Event September 7, 1994 and incorporated herein by
reference].

10.2 NY-STAR Purchase Agreement between EIF Holdings, Inc. ("EIF") and
Andreas O. Tobler [filed as an Exhibit to the Annual Report of
the Company on Form 10-KSB for the fiscal year ended December 31,
1992 and incorporated herein by reference].

10.3 Agreements relating to Gertino/Block stock issuance [filed as an
Exhibit to the quarterly report of the Company on Form 10-QSB for
the quarter ended September 30, 1993 and incorporated herein by
reference].

10.4 Promissory Note Line of Credit Agreement, dated March 1, 1996,
with American Eco Corporation ("American Eco") [filed as an
Exhibit to the Annual Report of the Company on Form 10-kSB for
the year ended September 30, 1996 and incorporated herein by
reference].

Page 38
<PAGE>

10.5 Agreement, dated February 2, 1996, between EIF and American Eco
[filed as an Exhibit to the Current Report of the Company on Form
8-K for the Date of Event February 2, 1996 and incorporated
herein by reference].

10.6 Settlement Agreement and Mutual Release, dated April 4, 1996,
among Kelar, Kelly McMahon, and Larry Thomas (as plaintiffs) and
EIF and the other defendants [filed as an Exhibit to the Annual
Report of the Company on Form 10-kSB for the year ended September
30, 1996 and incorporated herein by reference].

10.7 Agreement and General Release, dated as of November 8, 1996,
among Richard Austin, EIF, PW Stephens and American Eco [filed as
an Exhibit to the Annual Report of the Company on Form 10-kSB for
the year ended September 30, 1996 and incorporated herein by
reference].

10.8 Lease Agreement, dated January 9, 1997, between Aetna Life
Insurance Company and EIF, for premises in Anaheim, California
[filed as an Exhibit to the Annual Report of the Company on Form
10-kSB for the year ended September 30, 1996 and incorporated
herein by reference].

10.9 Management Agreement effective October 1, 1996 between the
Company and American Eco Corp. [incoporated by reference to
Exhibit 10.1 to the Registrant's Form 10-QSB for the quarter
ended December 31, 1996].

10.10 Promissory Note dated December 13, 1996 between the Company and
Truman Harty. [incoporated by reference to Exhibit 10.2 to the
Registrant's Form 10-QSB for the quarter ended December 31,
1996].

10.11 Revolving Line of Credit dated September 1, 1996 between the
Company and Turner Holdings, Inc. [incoporated by reference to
Exhibit 10.3 to the Registrant's Form 10-QSB for the quarter
ended December 31, 1996].

10.12 Acquisition Agreement by and between the Company and Regal Oak
Properties, Inc. dated June 30, 1997 for the sale of Kelar
Controls, Inc. [incoporated by reference to Exhibit 10.1 to the
Registrant's Form 10-QSB for the quarter ended June 30, 1997].

10.13 Secured Promissory Note between the Company and Regal Oak
Properties, Inc. dated June 30, 1997. [incoporated by reference
to Exhibit 10.2 to the Registrant's Form 10-QSB for the quarter
ended June 30, 1997].

10.14 Security Agreement Pledge between the Company and Regal Oak
Properties, Inc. dated June 30, 1997. [incoporated by reference
to Exhibit 10.3 to the Registrant's Form 10-QSB for the quarter
ended June 30, 1997].

10.15 Renewal, Extension and Enlargement Promissory Note between the
Company and Truman Harty dated April 4, 1997. [incoporated by
reference to Exhibit 10.4 to the Registrant's Form 10-QSB for the
quarter ended June 30, 1997].

10.16 Stock Purchase Agreement, dated September 30, 1997, among EIF
Holdings, Inc. ("EIF") and each of the stockholders of JL Manta,
Inc.[incoporated by reference to Exhibit 10.1 to the Registrant's
Form 8-K for the date of event November 19, 1997].

Page 39
<PAGE>

10.17 $6.5 Million Convertible Promissory Note issued by EIF to Deere
Park Capital Management, Inc., as nominee for EIFH Joint Venture,
L.L.C. and Certain Reg. D Hedge Funds. [incoporated by reference
to Exhibit 10.2 to the Registrant's Form 8-K for the date of
event November 19, 1997].

10.18 $2.5 Million Convertible Promissory Note from EIF to Deere Park
Capital Management, Inc. ("Deere Park"). [incoporated by
reference to Exhibit 10.3 to the Registrant's Form 8-K for the
date of event November 19, 1997].

10.19 Convertible Promissory Note of EIF, issued to Leo J. Manta.
[incoporated by reference to Exhibit 10.4 to the Registrant's
Form 8-K for the date of event November 19, 1997].

10.20 Convertible Promissory Note of EIF, issued to Steven A. Manta.
[incoporated by reference to Exhibit 10.5 to the Registrant's
Form 8-K for the date of event November 19, 1997].

10.21 Convertible Promissory Note of EIF, issued to Michael J. Chakos.
[incoporated by reference to Exhibit 10.6 to the Registrant's
Form 8-K for the date of event November 19, 1997].

10.22 Convertible Promissory Note of EIF, issued to John L. Manta.
[incoporated by reference to Exhibit 10.7 to the Registrant's
Form 8-K for the date of event November 19, 1997].

10.23 Convertible Promissory Note of EIF, issued to the Alexander Manta
Trust. [incoporated by reference to Exhibit 10.8 to the
Registrant's Form 8-K for the date of event November 19, 1997].

10.24 Convertible Promissory Note of EIF, issued to the Erica Manta
Trust. [incoporated by reference to Exhibit 10.9 to the
Registrant's Form 8-K for the date of event November 19, 1997].

10.25 Convertible Promissory Note of EIF, issued to the Zachary Manta
Trust. [incoporated by reference to Exhibit 10.10 to the
Registrant's Form 8-K for the date of event November 19, 1997].

10.26 Convertible Promissory Note of EIF, issued to Allen DeLange.
[incoporated by reference to Exhibit 10.11 to the Registrant's
Form 8-K for the date of event November 19, 1997].

10.27 Convertible Promissory Note of EIF, issued to Jon S. Claypool.
[incoporated by reference to Exhibit 10.12 to the Registrant's
Form 8-K for the date of event November 19, 1997].

10.28 Pledge Agreement by and among EIF, Deere Park Equities, L.L.C.
and Deere Park Capital Management, Inc., as nominee for EIFH
Joint Venture, L.L.C. and certain Reg. D Hedge Funds, regarding
$6.5 Million Promissory Note from EIF. [incoporated by reference
to Exhibit 10.13 to the Registrant's Form 8-K for the date of
event November 19, 1997].

10.29 Security Agreement executed by the Company in favor of Harris
[incoporated by reference to Exhibit 10.14 to the Registrant's
Form 8-K for the date of event November 19, 1997].

Page 40
<PAGE>

10.30 Subordination Agreement between Harris and Deere Park Capital
Management, Inc. [incoporated by reference to Exhibit 10.15 to
the Registrant's Form 8-K for the date of event November 19,
1997].

10.31 Subordination Agreement between Harris and EIF. [incoporated by
reference to Exhibit 10.16 to the Registrant's Form 8-K for the
date of event November 19, 1997].

10.32 Security Agreement between Deere Park and the Company.
[incoporated by reference to Exhibit 10.17 to the Registrant's
Form 8-K for the date of event November 19, 1997].

10.33 Registration Rights Agreement between EIF and each of the
Sellers. [incoporated by reference to Exhibit 10.18 to the
Registrant's Form 8-K for the date of event November 19, 1997].

10.34 Employment Agreement between the Company and Michael J. Chakos.
[incoporated by reference to Exhibit 10.19 to the Registrant's
Form 8-K for the date of event November 19, 1997].

10.35 Form of Registration Rights Agreement. [incoporated by reference
to Exhibit 10.20 to the Registrant's Form 8-K for the date of
event November 19, 1997].

10.36 Form of Guaranty. [incoporated by reference to Exhibit 10.21 to
the Registrant's Form 8-K for the date of event November 19,
1997].

* 10.37 Renewal, Extension and Modification Revolving Line of Credit Note
effective July 1, 1997 between the Company and American Eco
Corporation

* 10.38 Second Amendment Revolving Line of Credit Note effective
September 30, 1997 between the Company and American Eco
Corporation.

* 21 Subsidiaries of the Registrant

* 27 Financial Data Schedule

- -----------------------------
* Filed herewith

(b) Reports on Form 8-K

The Company did not file any Current Reports on Form 8-K during the three month
period ended September 30, 1997

Page 41
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, EIF Holdings Inc.
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

EIF HOLDINGS, INC.
(Registrant)

By: /s/J. Drennan Lowell
----------------------------------
/s/J. Drennan Lowell,
Vice President, Chief Financial
Officer and Treasurer
(Principal financial officer)

Dated: January 13, 1997

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By: /s/Frank J. Fradella
---------------------------------- Dated: January 12, 1998
Frank J. Fradella,
President, Chief Executive Officer
and Director

By: /s/Michael E. McGinnis Dated: January 12, 1998
---------------------------------
Michael E. McGinnis,
Chairman of the Board and Director

By: /s/J. Drennan Lowell Dated: January 12, 1998
----------------------------------
J. Drennan Lowell,
Vice President, Chief Financial
Officer and Treasurer
(Principal financial officer)

By: /s/Joseph L. Vaillancourt Dated: January 12, 1998
----------------------------------
Joseph L. Vaillancourt,
Corporate Controller (Principal
Accounting Officer)

By: /s/ Andreas O. Tobler Dated: January 12, 1998
---------------------------------
Andreas O. Tobler,
Director

Page 42
<PAGE>

EXHIBIT INDEX
--------------
Exhibit
Number Description Page

10.2 Renewal, Extension and Modification Revolving
Line of Credit Note effective July 1, 1997 between
the Company and American Eco Corporation................... 44

10.2 Second Amendment Revolving Line of Credit Note
effective September 30, 1997 between the Company
and American Eco Corporation................................ 48

21 Subsidiaries of the Registrant.............................. 49

27 Financial Data Schedule..................................... 50

Page 43

RENEWAL, EXTENSION AND MODIFICATION
REVOLING LINE OF CREDIT NOTE

$15,000,000 Houston, Texas July 31 1997

WHEREAS, EIF HOLDINGS, INC., Hawaii corporation ("Maker") heretofore executed
and delivered to AMERICAN ECO CORPORATION, an Ontario, Canada corporation (The
"Payee") a certain promissory note (the "note"), dated March 1, 1996, in the
original principal amount of Five Million Two Hundred Fifty Thousand Dollars
($5,250,000); and

WHEREAS, the original Note matures as of the date hereof;

WHEREAS, the parties desire to renew and extend the unpaid principal balance of
the note including the accrued interest on the unpaid principal balance,
calculated from the date of each advance through date hereof.

NOW THEREFORE, IN CONSIDERATION OF THE PREMISES DESCRIBED ABOVE AND FOR VALUE
RECEIVED, the Maker hereby promises to pay to the order of Payee in lawful money
of the United States, up to the principal sum of Fifteen Mllion and no/100s
(U.S. $15,000,000), with interest at the rate of two (2%) percent in excess of
the Prime Rate (as defined in the Note) per annum on the unpaid and advanced
principal balance hereof from the date hereof until maturity.

Maker shall have right, but shall not be required, to from time to time make
partial repayment of the outstanding principal balance hereof prior to maturity,
and in such event, Maker shall have the right to request re-advancement of such
partial repayments in accordance with the terms hereof.

The principal amount hereof and all accrued interest shall be due and payable as
follows:

On or before February 18, 1998.

Past due payments hereunder shall bear interest at the rate of 12% per annum.

Both principal and interest are payable in lawful money of the United States of
America and in immediately available funds to Payee at Houston, Texas, or at
such other places Payee may designate in writing.

If this note is placed in the hands of an atorney for collection, or if it is
collected through any legal proceedings, the Maker agrees to pay reasonable
attorneys' fees and other costs of the collection, including but not limited to
court costs, ofthe holder hereof.

The Maker waives presentment and demand for payment, protest, and notice of
protest, nonpayment and acceleration, and agrees that its liability on this Note
shall not be affected by any renewal or extension in the time of payment hereof,
by any indulgences, releases or changes.

Conversion Upon Closing of Stock Purchase Agreement
---------------------------------------------------
The Maker and Payee entered into a Stock Purchase Agreement on February 2, 1996,
pursuant to which the Payee will purchase 10,000,000 shares of Maker's Common
Stock for $1,000,000. The closing of the Stock Purchase Agreement is contingent
upon Maker's shareholders approving an increase in the number of auhorized
shares of Maker's Common Stock.

Page 44
<PAGE>

In the event that the Stock Purchase Agreement is consummated, on the date of
its closing the outstanding principal balance of the Line of Credit shall be
reduced by $1,000,000, as payment of the Payee's purchase price for the
10,000,000 shares of Maker's Common Stock pursuant to the Stock Purchase
Agreement. The maker shall be entitled to a re-advance of the $1,000,000
reduction in principal of the Line of Credit.

Conversion at the Option of the Payee
-------------------------------------

1. Conversion Priviledge.
----------------------

(a.) The Payee is entitled, at its option, at any time after the execution
of this Line of Credit, to convert any of or all of the then-outstanding
principal amount of the Line of Credit into Common Shares of the Maker (the
"Common Shares") at the conversion price set forth in subsection (b) below. The
number of Common Shares issuable upon the conversion of the Line of Credit shall
be determined by dividing the outstanding principal amount by the conversion
Price (as hereinafter defined) and rounding the result down to the nearest whole
share.

(b.) The conversion price for each Common Share (the "Conversion Price")
shall be equal to 85% of the five-day weighted average closing price of the
Common Shares as quoted in the over-the-counter "pink sheets" or applicable
exchange immediately prior to the conversion date (defined below).

(c.) If the Payee elects to convert the Line of Credit into Common Shares,
the entire outstanding principal amount of the Line of Credit at the Conversion
Date must be converted. All accrued and unpaid interest on the Line of Credit
through the Conversion Date shall be treated as oustanding principal and
converted into Common Shares.

2. Conversion Procedure.
---------------------

(a.) The conversion described in Section 1. shall be effectuated by the
Payee delivering to the Maker an executed Notice Conversion, a form of which is
attached hereto, which will communicate the Payee's intention to convert the
Line of Credit. No fractional shares of scrip representing fractions of Common
Shares will be issued upon conversion, but the number of shares issuable shall
be rounded down to the nearest whole share. The date on which notice of
conversion is effective (the "Conversion Date") shall be deemed to be the date
on which the Payee has delivered to the Maker a facsimile or original of the
signed Notice of Conversion, and the Common Shares will be delivered in
accordance with subsection (b) below.

(b.) Within five trading days after receipt of the documentation referred
to in (A.) above, the Maker shall deliver a certificate for the number of Common
Shares issuable upon the conversion and a check for any fraction of a share. It
shall be the Maker's responsibility to take all necessary actions and to bear
all such costs to issue the Common Shares as provided herein, including but not
limited to seeking shareholder approval for additional authorized shares of
Common Stock, if necessary. The person in whose name the certificate of Common
Shares is to be registered shall be treated as a shareholder of record on and
after the Conversion Date.

3. Fractional Shares.
------------------
The Maker shall not issue fractional Common Shares upon conversion of the Line
of Credit.

4. Taxes on Conversion.
--------------------
The Maker shall pay any documentary, stamp or similar issue of Common Shares
upon the conversion of the Line of Credit. However, the Payee shall pay any such
tax which is due because of the Common Shares are issued in a name other than
its name.

2
Page 45
<PAGE>

5. Company to Reserve Common Shares.
---------------------------------
The Maker shall use its best efforts to reserve out of its authorized but
unissued Common Shares enough Common Shares to permit the conversion of the Line
of Credit. All Common Shares which may be issued upon the conversion hereof
shall be fully paid and non assessable.

6. Mergers, Etc.
-------------

If the Maker merges or consolidates with another corporation or sells or
transfers all of its assets to anoher person and the holders of its Common
Shares are entitled to receive shares, securities or property in respect of or
in exchange for Common Shares, then as a condition of merger, consolidation,
sale or transfer, the Maker and any such successor, purchaser or transferee
shall amend the Line of Credit to provide that it may be thereafter be converted
on the terms and subject to the conditions set forth above into the kind and
amount of shares, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of Common Shares into
which the Line of Credit might have been converted immediately before such
merger, consolidation, sale or transfer, subject to adjustments which shall be
as nearly equivalent as may be practicable to adjustments provided for in this
agreement.

This Note is given in renewal, extension, enlargement and modification, but not
in cancellation, discharge or extinguishment of the Note (described above), the
terms and provisions of which are incorporated herein by reference for all
purposes, except where in conflict with the provisions herein, which event the
terms of this renwal note shall control.

MAKER:

EIF HOLDINGS, INC.

By: /s/ Frank J. Fradella
-------------------------
Name: Frank Fradella
-------------------------
Title: President
-------------------------

ACCEPTED AND AGREED TO:

PAYEE:

AMERICAN ECO CORPORATION

By: /s/ Michael E. McGinnis
-------------------------
Name: Michael E. McGinnis
-------------------------
Title: President/CEO
-------------------------

3
Page 46
<PAGE>

NOTICE OF CONVERSION
--------------------

(To be executed by the Payee in order to convert the Line of Credit)

The undersigned hereby irrevocably elects, as of , to converts $ constituting
the entire outstanding principal amount of the Line of Credit plus accrued and
unpaid interest through the date specified above, intoCommon Shares of EIF
HOLDINGS, INC. according to the conditions set forth in the Renewal, Extension
and Modification of the Revolving Line of Credit Note dated July 31, 1997.

Date of Conversion:
-----------------------------------------
Applicable Conversion Price:
--------------------------------
Amount of Shares to be Issued:
-------------------------------

PAYEE:

AMERICAN ECO CORPORATION

BY:
-------------------------------------
NAME:
-------------------------------------
TITLE:
-------------------------------------

4
Page 47

SECOND AMENDMENT
REVOLING LINE OF CREDIT NOTE

$20,000,000 Houston, Texas September 30, 1997

WHEREAS, the original Note matured as of July 31, 1997, and a renewal, extension
and modification of the Note (the "First Amendment") was executed September 22,
1997;

WHEREAS, the parties desire to increase the maximum line of credit available
under the Note from $15,000,000 to $20,000,000.

NOW THEREFORE, IN CONSIDERATION OF THE PREMISES DESCRIBED ABOVE AND FOR VALUE
RECEIVED, the Maker hereby promises to pay to the order of Payee in lawful money
of the United States, up to the principal sum of twenty Mllion and no/100s (U.S.
$20,000,000), with interest at the rate set forth in the Note and First
Amendment.

The Note is given in enlargement and modification, but not in cancellation,
discharge or extinguishment of the Note or First Amendment Note (described
above), the terms and provisions of which are incorporated herein by reference
for all purposes, except where in conflict with the provisions herein, which
event the terms of this second Amendment shall control.

MAKER:

EIF HOLDINGS, INC.

By: /s/ Frank J. Fradella
-------------------------
Name: Frank Fradella
-------------------------
Title: President, CEO
-------------------------

ACCEPTED AND AGREED TO:

PAYEE:

AMERICAN ECO CORPORATION

By: /s/ Michael E. McGinnis
-------------------------
Name: Michael E. McGinnis
-------------------------
Title: President, CEO
-------------------------

Page 48

Exhibit 21
Subsidiaries

Subsidiary Jurisdiction of Incorporation

P.W. Stephens Residential, Inc............................ California
P.W. Stephens Contractors, Inc............................ Missouri
P.W. Stephens Services, Inc............................... Missouri
J.L. Manta, Inc........................................... Illinois

This list does not include inactive, sold or discontinued subsidiaries.

Page 49

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EIF HOLDINGS,
INC. FORM 10-KSB FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

Page 50
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-END> Sep-30-1997
<CASH> 304,678
<SECURITIES> 5,562,697
<RECEIVABLES> 6,664,867
<ALLOWANCES> 225,000
<INVENTORY> 165,079
<CURRENT-ASSETS> 13,085,929
<PP&E> 1,622,827
<DEPRECIATION> 1,018,887
<TOTAL-ASSETS> 14,675,986
<CURRENT-LIABILITIES> 25,016,583
<BONDS> 0
0
0
<COMMON> 3,019,246
<OTHER-SE> (13,359,843)
<TOTAL-LIABILITY-AND-EQUITY> 14,675,986
<SALES> 13,434,423
<TOTAL-REVENUES> 13,434,423
<CGS> 8,399,561
<TOTAL-COSTS> 8,399,561
<OTHER-EXPENSES> 6,738,610
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,434,992
<INCOME-PRETAX> (3,128,551)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,128,551)
<DISCONTINUED> (3,638,700)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,767,251)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)

</TABLE>