ELECTRIC & GAS TECHNOLOGY INC - 10-K Annual Report

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

FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended July 31, 1996

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period from to

Commission File Number 014754

ELECTRIC & GAS TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Charter)

Texas 75-2059193
State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization Identification No.

13636 Neutron Road, Dallas, Texas 75244-4410
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number: (972) 934-8797

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
None None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $0.01 Par Value
(Title of Class)

Indicate by check mark whether Registrant has (i) filed all
reports required by Section 13 or 15(d)of the Securities Exchange
Act of 1934 during the preceding twelve months, and (ii) been
subject to such filings requirements for the past ninety (90)
days. Yes X No.

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )

At October 29, 1996, the aggregate market value of the shares of
Common Stock held by non-affiliates of the registrant was
approximately $3,500,000. At such date there were 8,250,416
shares of the registrant's Common Stock outstanding.

PART I

Item 1. Business

General

Electric & Gas Technology, Inc.("the Company"or "ELGT") was
organized under the laws of the State of Texas on March 18, 1985,
to serve as a holding company for operating subsidiary
corporations. In April, 1985, the Company (i) acquired from
Commercial Technology, Inc. ("COMTEC"), an affiliated company,
all of the stock of Reynolds Equipment Company ("Reynolds") for
stock of the Company and (ii) acquired from a subsidiary of
COMTEC all of the stock of Retech, Inc. ("Retech") [formerly
Test Switch Technology, Inc.("Test Switch"), formerly Superior
Technology, Inc. ("Superior")] for stock of the Company. In
1988, the Company acquired 85% (and subsequently 100%) of the
stock of Data Automation Company, Inc. ("DAC") from Video Science
Technology, Inc., formerly an affiliate of COMTEC and of the
Company; DAC owned 100% of Domac Plastics, Inc. ("Domac") and
Logic Design Metals, Inc. ("Logic"). Domac was subsequently
sold. During 1992 Logic merged into DAC, its parent, and DAC
changed its name to Logic Design Metals, Inc. and is referred to
herein as "Logic". In June 1986 Superior acquired from Petro
Imperial Corp. (A subsidiary of COMTEC) its ownership in American
Brass, Inc. ("ABI"). Fridcorp Plastics, Inc. ("Fridcorp") was
acquired by the Company in January, 1992, in exchange for 162,000
shares of Company Common Stock. Hydel Enterprises, Inc.
("Hydel") [formerly Stelpro Limited ("Stelpro")] was acquired by
the Company in April, 1992, in exchange for 166,474 shares of
Company Common Stock and $1,100,000 (Cdn. funds)(April 30, 1992,
exchange rate: .8370). On August 1, 1992, Hydel acquired all of
the outstanding capital stock of Hydel Engineering Limited
("Hydel Engineering") for cash and notes payable of approximately
$719,000 ($850,000 Cdn.). Hydel Engineering was merged into
Hydel effective August 1, 1995. The number of shares of Company
Common Stock issued in the acquisitions of Fridcorp and Hydel
was, in each case, determined through arms-length negotiations.
Superior Magnetics, Inc. ("SMI") was formed by the Company to
acquire the operating assets of the business operations of
Denison Magnetics of Texas Instruments Incorporated on November
30, 1992 for cash and deferred payments of approximately
$2,900,000.

The Company presently is the owner of 100% of Retech, which
currently owns 80% of ABI and the Company owns 100% of Logic,
Reynolds, Fridcorp, Hydel and SMI, and, through such
subsidiaries, operates in five distinct business segments: (1)
the manufacture and sale of electric meter enclosures and pole-
line hardware for the electric utility industry and the general
public (Hydel and Retech); (2) the design and manufacture of
defense electronic components (SMI); (3) the manufacture and sale
of natural gas measurement, metering and odorization equipment
(Reynolds); (4) the manufacture and sale of precision metal
enclosures for telecommunication and computer equipment (Logic);
and (5) the manufacture of vacuum-form and injection-mold
products (Fridcorp). Effective January 31, 1993, the Company
discontinued the operations of its 80% owned ABI which previously
was engaged in the manufacture and sale of brass and bronze
ingots. The Company sold its Canadian heating division and its
U.S. meter socket and Test Switch divisions during fiscal 1996
and 1995. These operations were part of the electric segment.
The Company's Headquarters is located at 13636 Neutron Road,
Dallas, Texas 75244. Its telephone number is (972) 934-8797 and
its facsimile number is (972) 991-3265.

2

Financial Information by Segment

The following table depicts revenues, operating income
(loss) and identifiable assets of the Company by segment, for the
fiscal years ended July 31,:

Year Ended Year Ended Year Ended
July 31, 1996 July 31, 1995 July 31, 1994

Revenue
Electric $ 7,575,126 $16,167,174 $19,438,285
Defense electronics 7,013,706 6,577,333 7,374,479
Gas 2,935,326 3,143,711 3,420,071
Metal fabrication 15,168,121 14,105,717 14,955,581
Plastics 1,275,673 1,369,693 1,260,582

Operating Income (Loss):

Electric $ 324,602 $ 659,788 $ (762,785)
Defense electronics (279,348) (95,196) (71,322)
Gas (646,568) 75,643 208,493
Metal fabrication 234,116 818,645 400,288
Plastics 48,451 (25,483) 66,544

Identifiable Assets:

Electric $ 4,648,198 $ 8,596,181 $12,857,150
Defense electronics 3,581,838 3,974,844 3,523,317
Gas 2,198,034 2,493,657 2,275,869
Metal fabrication 9,301,349 9,877,149 9,299,649
Plastics 665,493 788,769 805,919
Corporate 2,694,693 2,503,133 1,597,414

Geographic information

Financial data by geographic area for the fiscal year ended
July 31, 1996 are as follows:

Operating
(loss) Identifiable
Sales Profit Assets

United States $26,965,367 $(684,510) $16,442,797
Canada 7,002,585 365,763 3,952,115
Total $33,967,952 $(318,747) $20,394,912

3

Electric (Hydel and Retech)

History

Hydel. Hydel (formerly Stelpro) was incorporated in 1977
under the laws of the Province of Ontario, Canada, and has
operated as a manufacturer of electrical equipment for use in the
electric utility industry since its inception. In 1982, Hydel
purchased a baseboard heater manufacturing business from
Westinghouse. Stelpro changed its name to Hydel in January 1995
upon the sale of its heating manufacturing business. Hydel
Engineering which was merged into Hydel effective August 1, 1995,
was incorporated in November 1969 under the Laws of the province
of Ontario, Canada, and as in the case of Hydel operated as a
manufacturer of electric equipment for use in the electric
utility industry since its inception. Hydel operates primarily
within Canadian markets, though some sales of electric heaters
were made in the Northeastern United States. Hydel maintains its
executive office at 49 Howden Road, Scarborough, Ontario M1R 3C9
and a manufacturing facility at 566 Ridge Road, Welland, Ontario
L3B 5R4.

Retech. Retech (formerly Test Switch, formerly Superior) was
incorporated in Texas in May, 1984. It purchased the assets of
Superior Switchboard & Devices, Inc., an Ohio corporation
("SSDI"), in 1984. SSDI was an old-line manufacturer of
electrical testing equipment, organized in 1920 by a group of
electrical utility employees. In about 1929, electric utility
companies began using meters on the outside of residences to
measure electricity consumption, creating a need for metal
enclosures to protect the meters. SSDI undertook the manufacture
of such enclosures, and (in 1943) was acquired by a national
company and operated as a division. In 1980, this division was
sold to the officers and employees of the division in a leveraged
buy-out. The business was not successfully operated under its
then current management, and the organizers of Retech arranged
for the purchase of the assets of SSDI by Retech in 1984.
Effective April 30, 1995, Superior changed its name to Test
Switch upon the sale of its meter socket division which was
located in the Paris, Texas plant and effective, October 31, 1995
Test Switch changed it name to Retech upon the sale of its
remaining operating division in Canton, Ohio. Retech a non-
operating entity maintains its office at 13636 Neutron Road,
Dallas, Texas 75244-4410.

Products

Hydel. Hydel operated two industrial facilities located
within metropolitan Toronto, Ontario until January 1995 when one
operation was sold. The business which was sold, manufactured
and assembled a line of proprietary electric heating products,
including baseboard heaters and fan-driven heaters. Hydel
Engineering which was merged and operations consolidate with
Hydel, operated out of two industrial facilities: Scarborough,
which was shared with Hydel, and Welland. The Welland facility
continues to be used primarily to manufacture the pole line
hardware with assembly and finished goods storage in the
Scarborough plant. The "Murray Jansen" line is produced at the
Scarborough plant. The Scarborough plant manufactures a full
line of proprietary metal cabinets and other metal enclosures,
electric meter sockets and industrial safety switches. All of
Hydel's products have been approved by the Canadian Standards
Association which is the Canadian equivalent of U. L.

Retech. Retech operated two industrial facilities, one in
Canton, Ohio, the other in Paris, Texas during most of fiscal
1995 and only its Canton facility during the first quarter of
fiscal 1996. The Canton, Ohio, facility produced a line of
proprietary products approved by Underwriters' Laboratory
("U.L."), an independent testing organization; a line of test
switches. The Paris, Texas, facility produced a full line of
metal cabinets, transformer boxes, meter pedestals and other
metal enclosures for the electric utility industry, marketed
under various trade names. Products included a combination of
test switches and phasing transformers marketed under the trade
name "Reactiformer" and a voltage surge and transient suppressor,
which protects against overloads, marketed under the trade name
"Linegard". In addition, to U.L. approval of Retech's products,
they were also approved by the National Electrical Manufacturers
Association for residential and industrial usage.

4

Industry, Customers and Competition

Industry-Hydel. Hydel operates within the electric
equipment supply industry and manufacturing equipment for use in
the electric utility industry. Hydel competes primarily within
Canadian markets.

Industry-Retech. Retech until October 1995, operated in an
industry consisting of suppliers of equipment and accessories to
the public utility industry. The customers for Retech's products
were spread nationwide.

Customers-Hydel. Hydel sells its electric utility supply
products to utilities and others in Canada. Hydel sold its
electric heaters to distributors throughout Canada, as well as in
parts of the Northeastern United States.

Customers-Retech. Retech sold its products to major
electric utilities across the nation.

Competition-Hydel. Hydel faces extreme Canadian competition
for sales of its electric utility supply products primarily from
two electric utility supply manufacturers, Microelectric and
Commander. Pole line hardware's main competitors are Salcan and
Almet.

Competition-Retech. Retech faced competition from numerous
competitors. There was no single dominant competitor in the
industry. Retech's chief competitors are Milbank Manufacturing
Co., Inc., Meter Devices, Inc. and States Electric, Inc.

Marketing

Hydel. Hydel employs a general sales manager who is
responsible for coordinating company-wide sales, as well as
directing sales in the Province of Ontario. Hydel utilizes
independent manufacturers representatives to promote sales in the
remainder of Canada.

Retech. Retech employed a general sales manager, one
outside salesman and twelve sales representatives to market its
products throughout the United States.

Raw Materials

Hydel. Hydel uses sheet aluminum and sheet steel of various
gauges in its manufacturing processes and two vendors to
galvanize their pole line hardware products. Bar materials are
purchased directly from mills. Hydel purchases products directly
from the mills or distributors. There are adequate sources of
such materials, though price fluctuations have occurred in the
past.

Retech. Retech purchased copper, brass, aluminum and
plastic which are all readily available through numerous vendors.

Employees

Hydel. Hydel currently employs 60 persons, including 14 in
administrative and sales positions. None of the employees is
represented by a labor union or other labor organization. Hydel
enjoys good relations with its employees and has never
experienced a strike or work stoppage. The jobs encompassed in
Hydel's manufacturing operations do not require highly skilled
workers, except in a few positions.

Retech. Retech currently has no employees. In prior years
the work force ranged from 150 to 20 persons, including
administrative and sales positions. The hourly paid employees
were represented by a local of the International Brotherhood of
Electrical Works (A.F.L.-C.I.O.).

5

Defense electronics (SMI)

History

Superior Magnetics, Inc. ("SMI") was incorporated in the
state of Texas on August 31, 1992 for the purpose of acquiring
the magnetics operations from Texas Instruments Incorporated
(TI). SMI began business on December 1, 1992 with an already
established reputation as a major producer of magnetics-based
transformers, inductors, radar modulators and high density
devices for the defense and commercial clientele. SMI maintains
its manufacturing and executive offices at 3401 Texoma Drive,
Denison, Texas 75020.

Products

SMI operates a single manufacturing facility in Denison,
Texas in which their design expertise and exacting manufacturing
standards have made their custom product lines of magnetic based
transformers, inductor, radar modulators and high density devices
a significant part of the modern-worlds defense and industrial
electronics. Adherence to stringent international ISO 9001
standards and the ability to meet the requirements of MIL-I-45208
and MIL-I-9858 insures achieving product excellence.

Industry, Customers and Competition

Industry. SMI specializes in the custom design and
manufacturing of unique or special magnetics products. It
currently sells almost exclusively in defense related products,
including missiles, avionics, night-vision and control systems
for the military. There are numerous competitors producing
magnetic products for defense and civilian uses.

Customers. SMI's principal customer is TI. SMI has been
successful in broadening its customer base to include other
defense contractors, such as Boeing and others.

Competition. SMI's current market is principally with TI
where it must compete with other vendors for the sale of magnetic
products to TI. SMI is a certified supplier to TI. SMI has an
active marketing program underway to broaden its customer base.
Such efforts are resulting in new orders from other defense
contractors. The market is highly competitive. SMI is believed
to have one of the best design capabilities and exacting
manufacturing standards (ISO 9001), including the latest in
design and manufacturing processes (6-Sigma reliability
standards).

Marketing

SMI has an in-house sales staff which works closely with the
design engineering in submitting proposals to potential
customers. SMI also engages 18 manufacturing representatives
throughout the United States.

Raw Materials

Metal cores, wire and compounds comprise the bulk of primary
raw materials for SMI'S products. There is a readily available
supply of such materials and SMI doesn't foresee any difficulty
in procuring such materials in the future.

Employees

SMI employs approximately 105 full-time employees, including
43 clerical, engineering and administrative employees and
approximately 62 hourly-paid plant workers. None of its
employees is represented by a union or other labor organization
and relations with employees are considered good. SMI has never
experienced nor anticipates a strike or other work stoppage.

6

Gas (Reynolds)

History

Reynolds Equipment Company ("Reynolds") was incorporated
March 31, 1967 under laws of the State of Texas. In 1982, all of
the stock of Reynolds was acquired by COMTEC, an affiliate of the
Company. Subsequently, the stock of Reynolds was sold to Test
Switch in exchange for common stock of the Company and later
transferred direct ownership to the Company. Reynolds maintains
its principal offices at 410 Kirby Street, Garland, Texas 75042.

Products

Reynolds manufactures equipment used in the natural gas
industry. Its principal products known as "RECOR" are electronic
pressure, temperature and volumetric instrumentation and
accessories peripheral to gas measurement. Reynolds continues to
produce its traditional line of mechanical instrumentation
including pressure, temperature and volumetric recording and
indicating devices. In addition, Reynolds provides engineering
and equipment used to accomplish the odorization of natural gas.
Reynolds operated a manufacturers representative company which
generated sales commission derived from unaffiliated
manufacturers. This business was sold to its employees.

Industry, Customers and Competition

Industry. Reynolds operates in the industry which supplies
equipment to the natural gas industry. This equipment is used to
measure, control and monitor the flow of natural gas in
pipelines. Reynolds estimates that its industry develops annuals
sales of approximately $100,000,000. Odorization of natural gas
is important and Reynolds is a recognized provider to the
industry with its expertise and service.

Customers. Reynolds sells to natural gas utilities,
pipeline and production companies domestically and worldwide.
Products are marketed through commissioned manufacturers
representatives, resale distributors and contract engineering
firms.

Competition. Reynolds operates in a competitive industry
that is not dominated by one or a few large companies. It is a
major factor in the sale of chart drives and in the field of
natural gas odorization. Its principal competitors are Mercury
Instruments, Inc., American Meter Company, Equimeter
Incorporated, YZ Industries and others.

Employees

Reynolds employs approximately 22 persons, including 2
company officers and 12 administrative clerical personnel. None
of the employees is represented by a labor union or other labor
association, and relations with its employees are considered
excellent. Reynolds has never experienced nor anticipates a
strike or other work stoppage.

Metal fabrication (Logic)

History

Logic Design Metals, Inc.("Logic") was incorporated in Texas
on March 16, 1977, and was acquired by Data Automation Company,
Inc. ("DAC"), in 1979. Retech acquired DAC in 1988 from Video
Science Technology, Inc., an affiliate of the Company, in
exchange for shares of the Stock of the Company. In April, 1992,
Logic merged into DAC, its parent, and DAC changed its name to
"Logic Design Metals, Inc." and is now held directly by the
Company. Logic's manufacturing and administrative offices are at
3233 West Kingsley, Garland, Texas 75041.

7

Products

Logic creates customized, precision-formed metal enclosures
for the telecommunications and computer industries. These
enclosures vary in size from 1 x 4 x 6 for small switches, to
7 x 2 x 2 for housing telephone switching devices and computer
racks. Logic is equipped with computerized production equipment
which cuts, shapes, welds and finishes enclosure products. The
finished products bear the distinguishing marks of the purchaser
of the products, e.g., trade-names, trademarks, color
combinations and proprietary configurations. Logic has
successfully completed its ISO 9002 certification.

Industry, Customers and Competition

Industry. Logic operates in an industry which is not
dominated by any single company or a small group of companies,
but consists of numerous small specialty sheet metal products
fabricators. Logic has maintained its place in the market by
keeping abreast of technological advances in machine
computerization and stressing quality control in its production.
Logic has received numerous awards for quality from its
customers, including AT&T, Siecor (division of Siemens Electric)
and Rockwell International.

Customers. Logic's principal customers are nationally and
internationally known communications companies.

Competition. Logic's market is in the southwestern United
States, where its principal competitors are Specialty Products
Company, Rockwall, Texas; Karlee Company, Garland, Texas and AA
Manufacturing, Garland, Texas. Competition is strong as it is
relatively easy to enter the business due to financing assistance
from equipment manufacturers who desire to sell equipment.

Marketing

Logic engages the firm of Ammon & Rizos, Richardson, Texas,
as its exclusive sales and marketing representative.

Raw Materials

Sheet steel and sheet aluminum comprise the primary raw
materials for Logic's production of customized enclosures. There
is a ready supply of such materials and Logic foresees no
difficulty in procurement in the future, although shortages could
occur.

Employees

Logic employs 210 full-time employees, including 15 clerical
and administrative employees and approximately 195 hourly-paid
plant workers. None of its employees is represented by a union
or other labor organization and relations with employees are
considered good. Logic has never experienced nor anticipates a
strike or other work stoppage.

Plastics (Fridcorp)

History

Fridcorp Plastics, Inc. ("Fridcorp") was incorporated under
the laws of the State of Texas in April, 1988, under the name
"Century Enterprises, Inc." The name change to Fridcorp occurred
in February, 1992. The Company acquired all of the stock of
Fridcorp in exchange for shares of common stock of the Company in
January, 1992. Fridcorp maintains its manufacturing and
corporate office at 4809 Century Drive, Fort Worth, Texas 76140.

8

Products

Fridcorp has two divisions, one of which manufactures
injection-mold plastic products ("Molding") and the other of
which manufactures vacuum-form plastic products ("Forming"), as
well as tooling utilized in such operations. Molding's primary
products are plastic bases for boat seats. Such product is
proprietary in nature. Only one other company is known to
compete against Fridcorp for sales to boat manufacturers.
Forming provides customer tooling for a particular customer's
requirements and vacuum-mold manufacturing of various products.
The primary products of Forming are display cases and accessories
for express optical products retailers and parts sold in the air
conditioning and automobile parts aftermarket.

All of the products manufactured by Molding are comprised
primarily of recycled plastic material, such as plastic milk
cartons, plastic soft drink cases and the like. Also, the scrap
plastic generated in the manufacturing process of both Molding
and Forming is reused in later production runs or sold back to
waste recycling firms.

Industry, Customers and Competition

Industry. Fridcorp operates in two distinct industries, the
injection mold plastic product manufacturing industry and the
vacuum-form plastic product manufacturing industry. Fridcorp is
not a significant factor in either of such industries.

Customers. Fridcorp sells its injection mold products,
primarily plastic bases for boat seats, to boat seat
manufacturers and directly to boat manufacturers. It sells its
vacuum-form plastic products, primarily jobbed products, to a
wide range of customers.

Competition. Fridcorp's two divisions, Molding and Forming,
are subject to differing competitive pressures. Molding's
primary product, plastic bases for boat seats, is proprietary and
Molding faces competition from one other firm for sales of such
product. Fridcorp has undertaken expansion of its Molding
product lines in an attempt to increase productivity.

Forming completes in an industry in which customer relations
and product quality play an important part. Forming maintains a
good reputation in the industry but faces strong competition for
customers from local companies.

Marketing

Fridcorp has an aggressive marketing plan in an effort to
increase sales and achieve greater product diversification and
attempting to rely less on its primary business of sales of boat
seat bases and optical display cases. The potential for success
in such marketing plans appears good, however, there is no
assurance that such marketing plan will yield higher sales or
operating income.

Raw Materials

Both Molding and Forming utilize recycled plastic products
as well as new plastic materials in manufacturing its products.
Fridcorp does not foresee any shortage in supplies of such
materials.

Employees

Fridcorp employs approximately 19 persons on a full-time
basis, of which 5 work in the Forming division, 10 persons are in
the Molding division and 4 perform administrative functions.
None of its employees is represented by a union or other labor
organization and relations with employees are considered good.
Fridcorp has never experienced nor anticipates a strike or other
work stoppage.

9

Discontinued operations-Metal extraction (ABI)

American Brass, Inc. ("ABI") was incorporated in the State
of Alabama in 1978. Until December 16, 1992, ABI operated a
brass and bronze ingot smelter in Headland, Alabama. Principal
raw materials for this operation consisted of various forms of
scrap metal materials containing high copper and other base
materials utilized in the production process. This process
produces "Slag", which is refuse or dross separated from the
brass and bronze in the smelting process. Inasmuch as the slag
contains trace elements of lead, it is an environmentally
hazardous substance in view of the Environmental Protection
Agency (EPA). ABI processes its slag through a ball mill which
reduces the slag to a powdered saleable product used in
fertilizer. The ABI site is located on approximately 134 acres
including a number of special purpose buildings all under a long-
term lease with the Headland Industrial Development Foundation.
ABI has defaulted under this lease obligation. This operation is
treated as a discontinued operation. The Company on January 29,
1993 entered into an agreement with an unaffiliated corporation,
Trans Metals, Inc. (TMI), to restart the smelting operation.
Such agreement assigned ABI's leasehold interest together with
150,000 shares of the Company's common stock to TMI in exchange
for 850,000 shares of $5.00 par value preferred stock, a $950,000
4% note payable due January 25, 1995 and $25,000 in cash.

Based on current economic conditions in the scrap, cooper
and brass markets and the estimated operating margins needed, a
restart of the facility under these conditions with similar
manufacturing processes would require an estimated $5,000,000
investment with anticipated marginal returns. TMI has been
unsuccessful to-date in re-starting, seeking joint venture
partners or selling the Alabama operation. The Company has
written off its investment in TMI (ABI).

ITEM 2. Properties

The Company maintains executive offices at 13636 Neutron
Road, Dallas, Texas 75244-4410 in a 7,800 sq. ft. one story
building (owned in fee) and is fully adequate to serve its needs.

Hydel leases one industrial building in metropolitan
Toronto, Ontario. The Scarborough facility is leased until May
1997 and contains approximately 67,000 square feet, including
approximately 7,000 square feet of office space. In addition,
Hydel owns a 22,000 square foot manufacturing and office space on
approximately 7 acres of land located in Welland, Ontario. Such
facility provides 20,000 square feet of manufacturing and 2,000
square feet of office space.

SMI conducts its manufacturing and administrative functions
through a 86,000 square feet concrete leased building in Denison,
Texas. The lease expires on October 31, 1997. Approximately
48,000 square feet are used for manufacturing, testing and
inventory storage and 16,000 square feet are used as engineering,
sales and administration. There is approximately 22,000 square
feet under lease available for expansion and is currently sublet.

Reynolds carries on its manufacturing and sales activities
in a building owned by it situated on 40,000 square feet of land
in Garland, Texas. The plant is a one story, concrete building
containing approximately 15,500 square feet of floor space, which
includes approximately 2,000 feet of office space.

Logic owns its office and plant facility at 3233 West
Kingsley, Garland, Texas which consists of approximately 136,000
square feet of manufacturing and 8,000 square feet of connected
office space located on approximately 7 acres of land. Logic
acquired a paint facility located in leased property near its
plant. Such leased facility consists of approximately 18,900
square feet of office, storage and production areas.

10

Fridcorp carries on its manufacturing and sales activities
in two buildings owned by it, located on 8 acres of land in Fort
Worth, Texas. One of such buildings provides 2,000 square feet
of space for Fridcorp's offices, 1,200 square feet for a pattern
shop, 10,000 square feet for the Forming operations and a 5,000
square foot warehouse. The other of such buildings houses the
entire operations of Molding and contains approximately 15,000
square feet and contains a small office (300 square feet). The
remainder of the building is divided among the actual injection-
mold manufacturing (7,500 square feet), a storage area for
finished goods (3,600 square feet) and a storage area for raw
materials (plastic chips) used in the manufacturing process
(3,600 square feet).

Retech had occupied an industrial building in Canton, Ohio
(leased) which was assumed by the purchaser of Test Switch
operations. The Paris, Texas facility (owned) was vacated as
result of the sale of the meter socket division in April 1995.
This facility, consists of a vacant industrial building
containing approximately 80,000 square feet of space, including
approximately 3,000 square feet of office space. The facility is
currently for sale or lease.

Item 3. Legal Proceedings.

ABI discontinued its operation in January 1993 and is
involved in several lawsuits arising principally out of secured
and unsecured creditors' claims against ABI. Under most of these
cases the courts have awarded judgements against ABI for the
amounts owed such creditors plus costs. Although ABI has not
declared bankruptcy, there are insufficient assets to satisfy any
of the unsecured creditor claims. The principal secured creditor
currently has a deficiency of approximately $1,500,000; however
there are remaining assets which could be sufficient to satisfy
their claims. Superior had guaranteed this secured creditor.
Accordingly, if there were insufficient assets to satisfy this
claims, the Company could be liable for this deficiency.
Management does not believe that the Company will ultimately have
any liability with respect to this guarantee.

The Company and its subsidiaries are involved in various
routine litigation incident to its business operations.
Management and Legal Counsel do not believe that any of such
litigation will have a material adverse effect on the
consolidated financial position of the Company.

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

(a) Annual meeting of stockholders, March 29, 1996.

(b) Not applicable.

(c) Not applicable.

11

PART II

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

(a) Principal Market

The Common Stock of the Registrant is traded in the Over-
the-Counter Market and quoted on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) under the
symbol ELGT.

(b) Stock Prices and Dividend Information

The following table sets forth the range of "Bid" and "Ask"
prices, by quarters, since July 31, 1993, as compiled by NASDAQ
and representing prices between dealers which does not include
retail markups or commissions, thus, such prices may not
represent actual transactions.

Fiscal year ended July 31, 1996:
High Low

First Quarter 2-7/8 2-1/4
Second Quarter 3-5/32 2-3/4
Third Quarter 3 2-1/2
Fourth Quarter 2 1

Fiscal year ended July 31, 1995:
High Low

First Quarter 2-9/16 1-1/2
Second Quarter 2-5/8 1-13-16
Third Quarter 3-7/16 2-1/8
Fourth Quarter 3-1/8 2-5/16

Fiscal year ended July 31, 1994:
High Low

First Quarter 6 5-1/16
Second Quarter 4-15/16 3-5/16
Third Quarter 3-15/16 2-7/16
Fourth Quarter 2-7/16 1-9/16

No dividend has been paid on the Common Stock by the Company
and payment of dividends in the foreseeable future is not
anticipated. Cumulative and unpaid dividends of $39,353 as of
July 31, 1996 must be paid on preferred stock before any
dividends can be paid on Common Stock.

As of July 31, 1996 there were 490 holders of record of the
Common Stock of the Company, exclusive of beneficial ownership
through brokerage firm nominee name.

UNITS OF COMMON STOCK AND WARRANTS

In connection with the Company's financing agreement with
The CIT Group/Credit Finance, Inc. in 1994, the Company issued
warrants to purchase 25,000 shares of common stock of the Company
at $4.25 per share. Such warrants are exercisable in whole or
part on or before November 24, 1998 and have piggy-back rights
with respect to any shares to be registered by the Company.

12

Item 6. Selected Financial Data.

STATEMENT OF OPERATIONS DATA:

(In dollars, except shares outstanding)
Fiscal Years Ended July 31,
1996 1995 1994 1993 1992

Revenues $33,967,952 $41,363,628 $46,448,998 $42,822,400 $27,898,721
Gross Profit 7,632,575 10,448,022 9,957,441 12,742,943 6,673,944
Selling, G&A Expense 8,849,955 10,082,034 10,887,521 10,348,156 6,139,014
Other Income (Expense) (3,815,171) 429,693 (1,518,022) (989,448) 185,719
Earnings (Loss) from
Continuing Operations (5,032,551) 850,577 (2,106,377) 1,234,138 649,150
Net Earnings (loss) (5,032,551) 850,577 (6,106,377) 981,189 404,030
Net Earnings (loss)
per Share (.66) .11 (.80) .13 .05
Weighted Average
Number of Shares
Outstanding 7,635,624 7,615,474 7,634,432 7,353,489 6,920,223

BALANCE SHEET DATA:
As of July 31,
1996 1995 1994 1993 1992

Total Assets $23,089,605 $28,233,733 $30,359,318 $36,334,255 $26,315,227
Long-Term Obligations 5,555,954 6,379,001 6,014,513 6,372,631 1,961,608
Shareholders' Equity 6,720,930 10,427,861 9,289,393 15,301,380 14,526,111

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.

Background

The Company, through its subsidiaries, operates within five
separate industries. These are (i) the manufacture and sale of
metal enclosures and other electrical equipment for use in the
electric utility industry; (ii) the manufacture and sale of
defense electronic components; (iii) the manufacture of natural
gas measurement equipment and gas odorization products; (iv) the
manufacture and sale of precision customized metal enclosures for
telecommunications and electrical equipment; and (v) the
manufacture of vacuum-form and injection-mold products.

13

Results of Operations

The discussion below relates to the Company's operations
during the fiscal years ended July 31, 1996, 1995 and 1994.

Summary. The Company reported net earnings (loss) from
continuing operations of $(5,326,751), $850,577 and $(2,106,377)
and net earnings (loss) of $(5,326,751), $850,577 and
$(6,106,377) for fiscal years 1996, 1995 and 1994, respectively.
The 1996 losses are primarily related to the following events:
(i) a default on obligations owed the Company by the purchaser of
the U.S. meter socket division of approximately $1,800,000; (ii)
obsolescence on certain inventories of approximately $600,000;
(iii) write-off of the remaining Trans Metals, Inc. assets of
approximately $391,000; (iv) and investment losses of
approximately $1,000,000. Also see discussion of individual
segments for items which adversely affected those operations
during fiscal 1996. The increase in earnings between 1994 and
1995 from continuing operations before income tax was $3,243,783
or 132.5% which is attributable to the Electric and Metal
fabrication segments offset by decreases in Defense, Gas and
Plastic segments. The increases in operating profits were
$1,422,573 and $418,357, respectively and decreases of $(23,874),
$(132,850) and $(92,027), respectively. Earnings (loss) per
common share were $(.70), $.11 and $(.80) in fiscal 1996, 1995
and 1994, respectively.

For the Years Ended July 31,

1996 1995

Increase Percent Increase Percent
(Decrease) Change (Decrease) Change

Operating Revenues $(7,395,676) (17.88) $(5,085,370) (10.95)
Operating Income (1,752,144) (122.24) 1,296,068 139.35
Earnings (Loss) from
continuing operations
before income taxes (5,828,232) (732.48) 3,243,783 132.50
Net Earnings Per Share (.77) (700.00) .91 113.75

The following table represents the changes
[increase/(decrease)] in operating revenues, operating income and
earnings from continuing operations before income taxes by the
respective industry segments when compared to the previous
period:

For the Years Ended July 31,
1996 1995
Increase Increase
(Decrease) Percent (Decrease) Percent

Operating Revenues:

Electric $(8,592,048) (116.18) $(3,271,111) (64.32)
Defense electronics 436,373 5.90 (797,146) (15.68)
Gas (208,385) (2.82) (276,360) (5.43)
Metal fabrication 1,062,404 14.37 (849,864) (16.71)
Plastics (94,020) (1.27) 109,111 2.14

$(7,395,676) 100.00 $(5,085,370) 100.00

14

For the Years Ended July 31,
1996 1995

Increase Increase
(Decrease) Percent (Decrease) Percent
Operating Income (Loss):

Electric $ (335,186) (19.13) $ 1,422,573 89.34
Defense electronics (184,152) (10.51) (23,874) (1.50)
Gas (722,211) (41.22) (132,850) (8.34)
Metal fabrication (584,529) (33.36) 418,357 26.28
Plastics 73,934 4.22 (92,027) (5.78)

(1,752,144) 100.00 1,592,179 100.00

General Corporate 168,776 (296,111)
Other Income (Expense) (4,244,864) 1,947,715

Earnings from Continuing
Operations Before Income
Taxes $(5,828,232) $ 3,243,783

Electric revenues declined by $8,592,048 during fiscal 1996
to $7,575,126 the result of the sales of the meter socket
business in April 1995 and the test switch business in October
1995 for the U.S. operations and the sale of the heating business
in the Canadian operations in January 1995. The 1995 revenues
decreased by $(3,271,111) or decreases in the Canadian operations
of $(2,278,154) and U.S. operations of $(992,957). Operating
income for 1996 decreased by $(335,186) the net effect of
increased operating income of $965,015 for the Canadian
operations and a decrease of $(1,300,201) in U.S. operations, the
result of the aforementioned sales during fiscal 1996 and 1995.
Operating income for 1995 increased for Retech by $674,869 and
$747,704 in the Canadian operations or a total increase of
$1,422,573. The decline in revenues is attributed primarily to
the sale in January 1995 of the heating division of Hydel and the
sale in April 1995 of the meter socket division of Retech.
Operating profits, however, improved substantially on these lower
sales, returning this segment to a positive contributor to the
Company's profits. During 1994 the revenues also decreased by
$(1,090,240), such decrease was $(596,417) in the Canadian
operations and $(493,823) in the U.S. operations. Operating
profits decreased by $(1,767,786) the net effect of an increase
in the U.S. operating profits of $369,437 and a decrease of
$(2,137,223) in the Canadian operations after restatement of the
1994 inventories of $720,790. The Canadian operations were
affected by price competition, increases in the cost of raw
materials and the continuing slow Canadian economy.

Gross profit margins were 24.51%, 22.59% and 14.47% for
fiscal 1996, 1995 and 1994, with selling, general and
administrative expenses as a percentage of sales for the same
period of 20.22%, 18.51% and 18.40%, respectively. Gross profit
margins regained part of what was lost during 1994, i.e. margins
after decreasing by 12.27% recovered by 8.12% in fiscal 1995 and
another 1.92% in fiscal 1996. Selling, general and
administrative expenses have increased as a percentage of sales
due to lower sales from sold operations and carrying cost
associated with the physical plant building which was not sold
with the meter socket business. This property is currently
listed for sale.

15

Defense electronics sales increased by $436,373 to
$7,013,706 during fiscal 1996 after declining by $(797,146) due
to cutbacks in defense spending and the older defense programs
completing production. The current years increase is due to new
customers and the F22 tactical fighter program increasing greater
than decreases in older programs slowly terminating. Sales
increased by $1,070,497 during 1994, however, 1993 included only
eight months of sales since the inception of this segment on
December 1, 1992. Annualized sales would have amounted to
approximately $9,500,000 based on the eight month results during
1993. With this real decline in sales levels, operating profits
were significantly affected resulting in a loss of $(71,322) when
compared to profits of $1,819,249 or a $(1,890,571) in 1994
negative swing. The operating losses between 1996, 1995 and 1994
increased by $(184,152) and $(23,874) to $(279,348), primarily
the result of obsolescence reserves against certain inventory
which was acquired in the original acquisition from Texas
Instruments.

Gross margins for fiscal 1996, 1995 and 1994 were 33.19%,
42.78% and 42.03%. Current margins reflect the additional
reserves charged against cost of sales and lower margins normally
associated with new programs. Selling, general and
administrative expenses were 37.17% in 1996, 44.22% in 1995 and
43.00% in 1994 as a percentage of sales with fiscal 1996
reflecting cost cutting and reductions in overhead expenses.

Gas revenues decreased by $(208,385) and $(276,360) or
(6.63%) and (8.08%) in fiscal 1996 and 1995, respectively. Sales
of this segment's main product, "Recor" was relatively unchanged
with most of the sales decline occurring in the odorization
systems due to increased industry competition. Revenues
increased by $815,342 during 1994 a year of transition from
representing another company's product to the development during
1993 and marketing and selling efforts during 1994 of this
segment's proprietary product "Recor", a gas electronic volume
corrector, replacing the older and less versatile imported "In-
Line" product. Odorization remained stable in 1994 but as
previously mentioned declined in 1996 and 1995. Operating income
(loss) was $(646,568), $75,643 and $208,493 for fiscal 1996, 1995
and 1994, respectively. The 1996 loss resulted from inventory
obsolescence of approximately $385,000 and declining revenues
with staffing levels anticipating higher demand for the Company's
Recor product which did not materialize. The consolidations and
mergers currently taking place in the utility industry and the
warmer than average winters have also contributed to the lower
product demand.

Metal fabrication revenues were $15,168,121, $14,105,717 and
$14,955,581 for fiscal 1996, 1995 and 1994, respectively. In
spite of the revenue increase of $1,062,404, operating profits
declined by $(584,529) to just $234,116. Overhead and
operational problems at the painting facility contributed
significantly to the reduced operating profits. This situation
has now been corrected. Further, during the spring and summer
revenues were from contracts with generally lower margins as the
principal customers were holding orders awaiting the implications
of the recently passed telecommunications legislation. While
revenues declined by $(849,864) during fiscal 1995, operating
profits increased by $418,357 to $818,645 or a 104.53% increase.
During fiscal 1995 we were reasonably successful in turning down
some business with lower margin sales thereby increasing our
operating profits. Operating profits were $234,116, $818,645 and
$400,288 for fiscal years 1996, 1995 and 1994, respectively.
During 1994 all the manufacturing operations were consolidated
into a new single building. Although there were additional costs
associated with this move, the long-term benefits will accrue and
provide room for sales growth and capacity.

Plastics revenues declined by $(94,020) during fiscal 1996,
however, operating profits increased by $73,934 to a positive
$48,451. Revenues increased slightly by $109,111 and $111,650 or
8.66% and 9.72% in 1995 and 1994, respectively. Operating
profits after having improved to $66,544 in 1994, declined to a
loss of $(25,483) in 1995. Both the increase and decline in
operating profits were directly related to manufacturing problems
occurring during fiscal 1995 which required replacement and
additional maintenance on key injection molding equipment.

16

Expense relationship to the various changes in revenues and
divestment effecting cost of sales and selling, general and
administrative expenses are as follows. Cost of sales as a
percentage of revenues amounted to 77.53%, 74.74% and 78.56% for
the years ended July 31, 1996, 1995 and 1994, respectively. The
1996 margins were impacted by inventory obsolescence and 1994
margins were impacted by poor Canadian and lower Defense margins.
Selling, general and administrative expenses as a percentage of
revenues were 23.41%, 21.79% and 21.78% for the years ended July
31, 1996, 1995 and 1994, respectively. Fiscal 1996 increases in
selling, general and administrative expenses were the net result
of a reduction in the Defense segment offset by increases in all
other segments as discussed above.

Discontinued operations of ABI and the subsequent
transaction with TMI, resulted in earnings decreasing by
$(4,000,000) in fiscal 1994.

Liquidity and Capital Resources

Liquidity. Cash flow from operating activities amounted to
$(145,001), $(709,772) and $502,785 for fiscal years 1996, 1995
and 1994, respectively. Operating cash flow has been
supplemented by cash made available from the proceeds on the sale
of the various operating divisions. The Company is presently in
the process of refinancing certain of it obligations to provide
needed liquidity and to improve upon its current payment history.

Current assets of the Company totaled $11,697,173 at July
31, 1996, down from current assets of $15,331,633 at July 31,
1995. Current liabilities decreased from fiscal 1995 to fiscal
1996 by $(614,150), resulting in a decrease in working capital
(current assets less current liabilities) to $884,452 at July 31,
1996, from $3,904,762, a decrease of (77.35%). This decrease was
the result of the default on amounts owed on the sale of the
meter socket business, inventory obsolescence, and investment and
advances made to certain affiliates. The Company believes it
will generate cash or raise funds sufficient to meet its working
capital requirements and debt obligations.

Capital Resources. Hydel has a working capital line-of-
credit with a Canadian bank in the amount of $2,036,720. The
Canadian credit facility is secured by receivables, inventories
and equipment of Hydel. Hydel is currently in the process of
refinancing its term and revolving debt whereby it expects to
incur long-term financing from the Canadian Development Bank and
reduce its reliance on its short-term revolving line of credit by
approximately $500,000.

In November 1993 the Company began a five-year financing
arrangement with the CIT Group Credit/Finance, Inc. (CIT). Their
total commitment to the Company amounted to $7,000,000 of term
and revolving credit at 2.75% above prime. However, the maximum
amount to be borrowed is determined based upon eligible
collateral, including equipment, receivables and inventory.
Borrowing under this financing amounted to $412,275 in term debt
and $2,299,357 in revolving debt at July 31, 1996. In June 1995,
Logic refinanced a portion of its term debt, not related to the
CIT financing above, which provided an additional $500,000 in
proceeds with a finance company over 60 months.

The Company received $1,000,000 in proceeds from an SBA
mortgage loan which was funded on September 23, 1994. Such
proceeds were added to working capital. In January 1995, the
Company funded a ten year $2,000,000 mortgage loan to finance the
new building purchase by Logic replacing the lease purchase
obligation due under the deferred purchase contract.

The Company sold one division in fiscal 1996 and two
divisions in fiscal 1995 receiving approximately $2,068,583 and
$3,494,593, respectively in cash proceeds which were used to pay
current obligations, reduce debt and provide additional working
capital.

Substantially all of the Company's assets, including
certificates of deposit are pledged as collateral for the
Company's long-term and short-term indebtedness.

17

Capital Expenditures

The Company purchased equipment consisting of normal asset
acquisitions and replacement of approximately $344,447 and
$622,122 during fiscal 1996 and 1995, respectively. For fiscal
1994, the Company purchased machinery and equipment of
$2,491,210 principally for the new facility acquired during
fiscal 1993 by Logic. The Company does not anticipate any other
significant capital expenditures, other than in the ordinary
course of replacing worn-out or obsolete machinery and equipment
utilized by its subsidiaries. The Company may, from time to
time, purchase such machinery and equipment provided such assets
serve as additional collateral for outstanding loans to the
Company (and its subsidiaries).

The Company acquired the net assets of a paint facility for
approximately $400,000 in January 1995 for cash.

Dividend Policy

No cash dividends have been declared on common stock by the
Company's Board of Directors since the Company's inception. The
Company does not contemplate paying cash dividends on its common
stock in the foreseeable future since it intends to utilize its
cash flow to service debt, for working capital and capital
additions, and to finance expansion of its operations.
Cumulative dividends on the Series A, 7% Convertible Preferred
Stock, have not been paid and amounted to $39,353 as of July 31,
1996. Further, additional dividends of $15,879 were due on
September 30, 1996

Other Business Matters

Accounting for Post-Retirement Benefits. The Company
provides no post-retirement benefits; therefore, FASB No. 106
will have no impact on the Company's financial position or result
of operations.

Inflation. The Company does not expect the current effects
of inflation to have any effect on its operations in the
foreseeable future. The largest single impact effecting the
Company's overall operations is the general state of the economy
and principally the home construction sector.

Item 8. Financial Statements and Supplementary Date.

Information required by this item appears in the
Consolidated Financial Statements and Auditors' Report of
Electric & Gas Technology, Inc. and Subsidiaries for July 31,
1996, 1995, and 1994 as listed under Item 14.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.

There have been no disagreements on accounting and financial
disclosure.

18

PART III

Item 10. Directors and Executive Officers of Registrant

(a) During fiscal year ended July 31, 1996, the following
persons served as directors of Registrant:

Shares
Beneficially
Director Owned (%) of
Name and Age Position Since Outstanding

S. Mort Zimmerman (69) Chairman of the Board, 1985 850,740 9.84%
President and Director

Daniel A. Zimmerman (35) Sr. Vice President 1989 370,131 4.28%
and Director

Edmund W. Bailey (54) Vice President, Chief 1994 52,221 0.60%
Financial Officer and
Director

Fred M. Updegraff (62) Vice President, 1987 76,073 0.88%
Treasurer and Director

S. Mort Zimmerman and Daniel A. Zimmerman are father and son.

(b) Executive Officers:

The Executive Officers of Registrant are:

See (a) above.

Marie W. Pazol, Secretary

19

BACKGROUND

S. Mort Zimmerman: Chairman of the Board, President and
Chief Executive Officer of the Company since its formation in
March 1985.

After attending Georgia Institute of Technology and
Oglethorpe, Mr. Zimmerman graduated in 1958 with a Bachelor of
Science in Electrical Engineering from Pacific International
University. He established the first electronics subsidiary for
the predecessor corporation of LTV Corporation which was formed
to market a low cost television camera invented by Zimmerman and
for which he was awarded a United States Patent in 1958. Prior
to 1963 he participated in the engineering and installation of 18
television stations.

In 1965 Mr. Zimmerman formed the first "one-bank holding
company" of its kind in the United States and which later served
as a model from which many bank holding companies were formed.
He served as Chairman of the Board of four individual banking
institutions, three of which were located in Florida (Springs
National of Tampa, Metropolitan of Miami and Mercantile National
of Miami Beach) and New York City (Underwriters Trust). After
obtaining a public underwriting these banks were sold to others.
In 1967 Intercontinental Industries, Inc. was organized and Mr.
Zimmerman served as its Chairman and Chief Executive Officer.
This diversified holding company was primarily engaged in the
operations of Intercontinental Manufacturing Company, a weapons
manufacturer that was later sold. Through his research and
development in the field of video X-ray and imaging, Mr.
Zimmerman caused the organization in 1981 of Video Science
Technology, Inc. in 1981 to exploit the inventions for which he
was awarded two U. S. Patents. Patents awarded include:
Television Camera-Video Amplifier and Blanking Circuits-1958,
Electronic Thermometer-1963, Video-X-Ray Imaging System and
Method-1977, Video System and Method for Presentation and
Reproduction of X-Ray Film Images-1977, Electromagnetic Radio
Frequency Excited Explosion Proof Lighting Method and System-
1986, and Laser Display of an Electronically Generated Image
Signal-1987. Recently, Mr. Zimmerman participated as a co-
inventor on new Electronic Refrigeration technology to which
patents are pending.

Daniel A. Zimmerman: Mr. Zimmerman was elected Senior
Vice President in 1991 and was re-elected as a Director of the
Company in 1990 (Mr. Zimmerman served as a director from March,
1985 to January, 1988). Mr. Zimmerman is presently serving as
President and Director of Reynolds. He also serves as Vice
President Marketing for SMI since its inception, December 1,
1992. He received his Liberal Arts Degree from Austin College in
Sherman, Texas in May, 1982.

Edmund A. Bailey, CPA: Mr. Bailey has served as Vice
President and Chief Financial Officer of the Company since March,
1992. He was elected a member of the Board of Directors May
1994. From January 1989, to March, 1992, Mr. Bailey was a
shareholder in the public accounting firm of Jackson & Rhodes
P.C., Dallas, Texas. From August, 1987, to December, 1988, Mr.
Bailey served as Vice President and Chief Financial Officer of
Southern Foods Group, Inc., an independent milk producer. From
May, 1986, to July, 1987, he was with the public accounting firm
of Pannell Kerr Foster, Dallas, Texas. Prior experience included
16 years in public accounting with Fox & Company and Arthur Young
& Company (now Ernst & Young). Mr. Bailey earned a B.S. degree
in Business from Monmouth College, West Long Branch, New Jersey,
and an M.B.A. degree from Southern Methodist University, Dallas,
Texas. Mr. Bailey is licensed in the State of Texas as a
Certified Public Accountant.

Fred M. Updegraff: Mr. Updegraff has served as Vice
President and Treasurer of the Company since 1985. He was
elected Treasurer and a member of the Board of Directors in May,
1987. Mr. Updegraff is also Vice President, Controller and
Director of DOL Resources which files reports under Section 13 of
the Securities Act of 1934. From 1976 to 1981, he was Vice
President of a manufacturing company engaged in the manufacture
of brass valves for the plumbing industry. Mr. Updegraff
graduated from Emporia State University with Bachelor degrees in
Business Administration and Education.

20

(c) Significant and Key Employees:

The following provides certain information regarding key
employees who serve as officers of the subsidiary companies of
the Company:

W. Ken Wilemon: Mr. Wilemon, having served two years as
General Manager, was elected President of Logic in 1984. Prior
to his employment with Logic, he was a manufacturer's
representative of Electra III Corporation in Dallas, Texas.

Michael D. Beall: Mr. Beall presently serves as Vice
Chairman of the Board of Reynolds.. In 1986 he was elected
President of Reynolds and served in this position until 1992.
Mr. Beall was employed by Wilson Flow Measurement in 1968, which
was acquired by Louis Reynolds and the name changed in 1973.

Gabriel Prieto: Mr. Prieto became President of SMI on
December 1, 1992, the effective date the Company completed the
acquisition of the Texas Instruments Incorporated magnetics
operation in Denison, Texas. He has also served as President of
Fridcorp since its acquisition in January, 1992. From 1989 until
January, 1992, Mr. Prieto was engaged as an independent business
consultant. During 1988 and 1989, he was an officer of Domac
Plastics, Inc., a corporation formerly wholly owned by the
Company; from 1982 to 1988, he served as a Vice President and
Senior Petroleum Engineer for Nations Bank, N.A., Dallas, Texas;
from 1980 to 1982, he was employed by Freeport McMoran, Inc. an
oil and gas exploration firm based in New Orleans, Louisiana;and
from 1976 to 1980, he was employed by Mobil Oil Corporation as a
senior petroleum engineer in its New Orleans, Louisiana offices
and earned a B.S. degree in Petroleum Engineering from Louisiana
Tech University, Ruston, Louisiana. He is a registered Petroleum
Engineer in the State of Texas. Also, Mr. Prieto is a member of
the Society of Petroleum Engineers, the Society of Plastics
Engineers and the International Association of Energy Economists.

Item 11. Executive Compensation

Summary Compensation Table

Long Term Compensation
Awards Payouts
Annual Compensation Other Restricted Number of Shares Long Term
Annual Stock Covered By Incentive Plan All Other
Name and Principal Position Year Salary Bonus Compensation Awards Option Grant Payout Compensation
S. Mort Zimmerman 1996 $219,400(a) $14,166(b) $ - - 232,000 - -

Chairman of the 1995 110,000 $ - $ - - 232,000 - $642(c)
Board & President
1994 185,000 $ - $ - - 200,000 - $642(c)

(a) Includes accrued and unpaid compensation of $75,000 for fiscal year
1996 and 1994, respectively.
(b) Issued 11,333 shares of Common Stock valued at $1.25 per share.
(c) Company match of 401 (K) employee contributions.

21

1996 Stock Option Grants

The following table sets forth stock options granted in
fiscal 1996 to the Company's executive officer named in the
Summary Compensation Table and to all other employees as a group.
The table also sets forth the hypothetical gains that would exist
for the options at the end of their 5 year term, assuming rates
of stock appreciation of 0%, 5% and 10%. The actual future value
of the options depend on the market value of the Company's Common
stock.

There were no options granted during fiscal 1996.

Aggregate Option Exercises and Year-end Option Values

Set forth below are the number of shares covered by
exercisable and unexercisable options held by S. Mort Zimmerman
on July 31, 1996 and the aggregate gains that would have been
realized had these options been exercised on July 31, 1996, even
though these options were not exercised, and the unexercisable
options would not have been exercised, on July 31, 1996.

Number of Shares Value of Unexercised
Covered by Unexercised In-The- Money
Options on 7/31/96 Options as of 7/31/96
Name Exercisable Unexercisable Exercisable Unexercisable(a)

S. Mort Zimmerman -0- -0- -0- -0-

(a) Market value of shares covered by in-the-money options on
July 31, 1996 less option exercise price. Options are in-the-
money if the market value of the shares covered thereby is
greater than the option exercise price.

Item 12. Security Ownership of Certain Beneficial Owners and
Management

(a) The following tables sets forth the number of shares
of Common Stock of holders of the Company known to the Company to
be the beneficial owner of more than five (5%) per cent of its
Common Stock at July 31, 1996.

Name and Address Amount and Nature of Percent of
Beneficial Owner Class

S. Mort Zimmerman 850,740 (1) 9.84%
13636 Neutron Road
Dallas, Texas 75244-4410

22

(b) The following table sets forth the number of shares of
Common Stock of Registrant owned by all directors and officers as
a group as of July 31, 1996:

Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class

S. Mort Zimmerman 850,740 (1) 9.84%
Chairman of the
Board and President

Daniel A. Zimmerman(5) 370,131 (2) 4.28%
Sr. Vice President
and Director

Edmund W. Bailey 52,221 (3) .60%
Vice President &
Chief Financial Officer

Fred M. Updegraff 76,073 (4) .88%
Vice President
Treasurer & Director

All Officers &
Directors, as a
Group 1,363,276 15.77%

(1) Includes (i) 232,000 shares subject to options owned by Mr.
S. Mort Zimmerman; (ii) 82,388 shares of the 823,878 shares owned
beneficially and of record by Trans-Exchange Corporation, in
which Mr. S. Mort Zimmerman has a 10% beneficial interest; and
(iii) 31,429 shares owned by Glauber Management Company, a firm
42% owned by Mr. S. Mort Zimmerman and in which he effectively
controls the voting of the Company's stock owned by such firm.
Mr. S. Mort Zimmerman disclaims any beneficial interest in the
shares owned by his wife's estate and their adult children.

(2) Includes 31,667 shares subject to options owned by Mr.
Zimmerman.

(3) Includes 36,666 shares subject to options owned by Mr.
Bailey.

(4) Includes 31,666 shares subject to options owned by Mr.
Updegraff.

(5) S. Mort Zimmerman and Daniel A. Zimmerman are father and
son.

23

Item 13. Certain Relationships and Related Transactions

THE FOLLOWING IS A SUMMARY OF ADVANCES FROM/TO AFFILIATED
COMPANIES AT JULY 31, 1996.

1996 1995

Refineries Consolidated Technology, Inc. $ 415,000 $ -
Cooper Manufacturing Corporation 1,191,869 -
VSTI - 150,000
Others (58,561) 452,681
$1,548,308 $602,681

The Company for several years has been owed approximately
$530,000 due from Comtec, a dormant affiliate. During 1996, it
was determined that $235,000 of this amount was actually paid for
the benefit of the Company and was written-off in 1996 in other
expenses. It has been determined that Comtec does not have the
capability to liquidate the remaining debt and the remaining
receivable was offset against accrued salaries of the officer who
had guaranteed the receivable. The Company has advanced through
the pledging of its certificates of deposit with a bank,
corresponding to direct bank loans and direct advances to
Refineries Consolidated Technology, Inc. and Cooper Manufacturing
Corporation ("Cooper") approximately $706,869. The Company has
also acquired a secured note receivable from Cooper in exchange
for 90,000 shares of its $10.00 par value Preferred Stock to an
unaffiliated company who previously owned Cooper. During 1994
the Company purchased certain equipment with a cost of
approximately $47,000 and subsequently sold the equipment to an
affiliated company for $200,000. The gain of approximately
$153,000 is included in other income.

24

PART IV

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

(a) Documents filed as part of this Report

1. Financial Statements

Consolidated Financial Statements of Electric & Gas
Technology, Inc. and Subsidiaries:

(i) Reports of Independent Certified Public
Accountants

(ii) Consolidated Balance Sheets July 31, 1996
and July 31, 1995.

(iii) Consolidated Statements of Operations for the
three years ended July 31, 1996.

(iv) Consolidated Statements of Changes in
Stockholders' Equity for the three years ended
July 31, 1996.

(v) Consolidated Statements of Cash Flows for the
three years ended July 31, 1996.

(vi) Notes to Consolidated Financial Statements

2. Financial Statement Schedules Required by Item 8
of Form 10-K and paragraph (d) of Item 14

None

3. Exhibits

3.1 Articles of Incorporation of Registration
(filed as Exhibit 3.1 and 3.2 to
Registration Statement form S-18 -
Registrant No. 33-2147FW of Registrant and
Incorporation herein by reference.

3.2 By-laws of Registrant (filed as Exhibit 3.3
Registration Statement on Form S-18 -
Registrant No. 33-2147FW - of Registrant and
incorporated herein by reference.

4.1 Specimen Copy of Common Stock Certificate
(filed as Exhibit 1.1 to Registration
Statement under the Securities Exchange Act
on Form 8-A and incorporated herein by
reference).

4.1 Warrant Agreement and Text of Warrant (filed
Exhibit 4.1 to Amendment No. 1 to
Registration Statement on Form S-18,
Registration #33-2147FW, of Registrant
incorporated herein by reference.

25

10.1 Agreement and Plan of Acquisition between
Petro Imperial Corp. and Superior
Technology, Inc. dated June 30, 1986 for
the acquisition of 80% of American Brass,
Inc. (filed as Exhibit 1 to Registrant's
Form 8-K Report dated July 9, 1986,
Commission File No. 0-14754 and incorporate
herein by reference).

10.2 Acquisition Agreement dated July 29, 1988
and Amendment thereto dated November 15,
1988, (filed as Exhibit 1 to Form 8-K
Report, as amended on Form 8 filed August 9,
1988 and incorporated herein by reference).

10.32 U. S. Small Business Administration
authorization and loan agreement
dated August 3, 1994 between
Independence Funding Company Ltd.
and Electric & Gas Technology,
Inc., Reynolds Equipment Company,
Superior Technology, Inc. and
Fridcorp Plastics, Inc. and Note
for $1,000,000 (filed as exhibit
10.32 to Form 10-K, filed October
27, 1994 and incorporated herein by
reference).

10.33 Asset Purchase Agreement dated as
of April 18, 1995 by and between
Superior Technology, Inc. and
American Circuit Breaker
Corporation (filed as exhibit 10.32
to Form 10-Q, filed June 12, 1995
and incorporated herein by
reference).

10.34 "Asset Purchase Agreement" dated as
of October 31,1995 by and between
Test Switch Technology, Inc.,
Electric & Gas Technology, Inc. and
The Durham Co.

(b) Reports on form 8-K

None

26

SIGNATURES

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

ELECTRIC & GAS TECHNOLOGY, INC.

By: /s/ Edmund W. Bailey
Edmund W. Bailey, Vice President
and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of Registrant and in the capacity and on the
date set-forth following their name:

Signature Capacity Date

/s/ S. Mort Zimmerman Chairman and President November 12, 1996
S. Mort Zimmerman

/s/ Daniel A. Zimmerman Senior Vice President
Daniel A. Zimmerman and Director November 12, 1996

/s/ Edmund W. Bailey Vice President, Chief Financial
Edmund W. Bailey Officer and Director November 12, 1996

/s/ Fred M. Updegraff Vice President, Treasurer
Fred M. Updegraff and Director November 12, 1996

/s/ Marie W. Pazol Secretary November 12, 1996
Marie W. Pazol

27

ELECTRIC & GAS TECHNOLOGY, INC.
AND SUBSIDIARIES

JULY 31, 1996 AND 1995

Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 29

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS 30

CONSOLIDATED STATEMENTS OF OPERATIONS 31

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY 32

CONSOLIDATED STATEMENTS OF CASH FLOWS 33-34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 35-49

28

Report of Independent Certified Public Accountants

Board of Directors and Stockholders
Electric & Gas Technology, Inc.
and Subsidiaries

We have audited the accompanying consolidated balance sheets
of Electric & Gas Technology, Inc. and Subsidiaries as of July
31, 1996 and 1995, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended July 31, 1996. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Electric & Gas Technology, Inc. and
Subsidiaries as of July 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended July 31, 1996, in conformity with
generally accepted accounting principles.

Jackson & Rhodes P.C.

Dallas, Texas
October 9, 1996 (Except as to Note 7, which is
as of November 12, 1996)

29

ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 31,

ASSETS
CURRENT ASSETS 1996 1995

Cash and cash equivalents $ 879,110 $ 1,044,851
Accounts receivable trade, less allowance for doubtful
receivables of $39,798 in 1996 and $184,317 in 1995 4,334,153 5,112,853
Note receivable - 684,031
Inventories 6,317,992 8,317,588
Prepaid expenses 165,918 172,310
Total current assets 11,697,173 15,331,633

PROPERTY, PLANT AND EQUIPMENT, net 8,720,454 9,944,103

OTHER ASSETS
Discontinued operations - 484,842
Other assets 2,671,978 2,473,155
Total other assets 2,671,978 2,957,997
TOTAL ASSETS $23,089,605 $28,233,733

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 4,525,668 $ 5,116,457
Accounts payable 3,733,576 3,609,596
Accrued liabilities 1,355,441 1,485,334
Current maturities of long-term obligations 1,198,036 1,215,484
Total current liabilities 10,812,721 11,426,871

LONG-TERM OBLIGATIONS
Long-term obligations, less current maturities 4,850,308 5,944,202
Other 705,646 434,799
Total long-term obligations 5,555,954 6,379,001

COMMITMENTS AND CONTINGENCIES - -

STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 5,000,000 shares
authorized, 90,000 issued and outstanding 900,000 -
Common stock, $.01 par value, 30,000,000 shares authorized,
issued 8,250,416 and 7,905,416 in 1996 and 1995,
respectively 82,504 79,054
Additional paid-in capital 10,201,334 9,823,534
Retained earnings (Deficit) (2,941,282) 2,091,269
Pension liability adjustment (214,639) (265,302)
Cumulative translation adjustment (430,870) (424,577)
7,597,047 11,303,978
Less treasury stock, 274,792 shares in 1996 and 1995,
at cost (876,117) (876,117)
Total stockholders' equity 6,720,930 10,427,861
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,089,605 $28,233,733

See Accompanying notes.
30

ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended July 31,

1996 1995 1994

Sales $33,967,952 $41,363,628 $46,448,998
Cost of goods sold 26,335,377 30,915,606 36,491,557

Gross profit 7,632,575 10,448,022 9,957,441

Selling, general and administrative expenses 8,849,955 10,082,034 10,887,521

Operating profit (loss) (1,217,380) 365,988 (930,080)

Other income and (expenses)
Interest, net (1,495,590) (1,090,677) (1,042,380)
Other (Note 2):
Gain on sale of operating divisions 577,336 1,094,743 -
Default on purchase obligation (1,813,838) - -
Investment losses (1,130,590) - (700,000)
Commission adjustment - 286,106 -
Other 47,511 139,521 224,358

(3,815,171) 429,693 (1,518,022)

Earning (loss) from continuing operations
before income tax (5,032,551) 795,681 (2,448,102)

Provision (credit) for income taxes - (54,896) (341,725)

Earnings (loss) from continuing operations (5,032,551) 850,577 (2,106,377)

Discontinued operations (Note 2):

Loss on disposal of metal extraction segment - - (4,000,000)

NET EARNINGS (LOSS) (5,032,551) 850,577 (6,106,377)

Dividends on Preferred Stock (39,353) - -

Net earnings or loss applicable to Common Stock $(5,071,904) $ 850,577 $(6,106,377)

Earnings (loss) per common share:
Primary:
Continuing operations $(0.66) $ 0.11 $(0.28)
Discontinued operations - - (0.52)
Net earnings $(0.66) $ 0.11 $(0.80)
Fully diluted (1)
(1) Conversion of Preferred Stock is antidulitive.

Weighted average number of common
shares outstanding 7,635,624 7,615,474 7,634,432

See accompanying notes.
31

ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended July 31, 1996, 1995 and 1994

Retained Pension
Preferred Common Paid-in (Deficit) liability Translation Treasury
Stock Stock Capital Earnings adjustment adjustments Stock Total

Balance at July 31, 1993 $ - $77,864 $10,003,000 $ 7,347,069 $(424,965) $(305,955) $(1,395,633) $15,301,380
Net loss for the year - - - (6,106,377) - - - (6,106,377)
Pension liability adjustment - - - - (48,858) - - (48,858)
Cumulative translation
adjustments - - - - - (154,892) - (154,892)
Treasury stock cancelled - (1,560) (472,156) - - - 473,716 -
Purchase of treasury stock - - - - - - (17,500) (17,500)
Exercise of options - 800 112,040 - - - - 112,840
Investment in Techstar
Industries, Inc. - 1,950 200,850 - - - - 202,800

Balance at July 31, 1994 - 79,054 9,843,734 1,240,692 (473,823) (460,847) (939,417) 9,289,393
Net earnings for the year - - - 850,577 - - - 850,577
Pension liability adjustmen - - - - 208,521 - - 208,521
Cumulative translation
adjustments - - - - - 36,270 - 36,270
Treasury stock transferred - - (20,200) - - - 80,800 60,600
Purchase of treasury stock - - - - - - (17,500) (17,500)

Balance at July 31, 1995 - 79,054 9,823,534 2,091,269 (265,302) (424,577) (876,117) 10,427,861
Net earnings for the year - - - (5,032,551) - - - (5,032,551)
Pension liability adjustment - - - - 50,663 - - 50,663
Cumulative translation
adjustments - - - - - (6,293) - (6,293)
Preferred Stock issued 900,000 - - - - - - 900,000
Bonus stock issued - 1,450 179,800 - - - - 181,250
Stock issued for cash - 2,000 198,000 - - - - 200,000

Balance at July 31, 1996 $900,000 $82,504 $10,201,334 $(2,941,282) $(214,639) $(430,870) $ (876,117) $6,720,930

See accompanying notes.
32

ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended July 31,

1996 1995 1994
Increase (decrease) in cash:
Cash flows from operating activities:
Net earnings (loss) $(5,032,551) $ 850,577 $(6,106,377)
Adjustments to reconcile net earnings ( loss)
to net cash provided by operating activities:
Discontinued operations - - 4,000,000
Depreciation of property, plant
and equipment 1,102,068 1,138,406 1,145,626
Issuance of stock for services 181,250 - -
Deferred income tax - (75,345) (206,463)
Amortization of goodwill and patents 6,684 6,892 26,850
Treasury stock transferred for expenses - 60,600 -

Gain on sale of operating divisions (577,336) (1,094,743) (156,749)
Deferred income 61,066 - (20,470)
Losses on investments 2,797,948 - -
Changes in assets and liabilities:
Accounts receivable 310,584 1,428,979 (1,842,751)
Inventories 655,082 (454,767) 2,604,561
Prepaid expenses 6,392 50,505 (50,041)
Other assets 510,975 (749,107) 884,533
Accounts payable 143,980 (1,130,536) 86,433
Accrued liabilities (129,893) (741,233) 137,633

Net cash provided by (used in) operating activities 36,249 (709,772) 502,785

Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 2,068,583 3,494,593 209,010
Purchase of property, plant and equipment (344,447) (622,122) (1,009,577)
Proceeds on note receivable 264,167 - -
Investments in affiliates (681,869) - -
Acquisition of paint facility - (400,000) -

Net cash provided by (used in) investing activities 1,306,434 2,472,471 (800,567)

Cash flows from financing activities:
Proceeds from issuance of long-term obligations 38,976 3,763,021 921,125
Issuance of common stock 200,000 - 112,840
Payments on long-term obligations (1,150,318) (3,640,352) (2,662,578)
Purchase of treasury stock - (17,500) (17,500)
Increase (decrease) in notes payable (590,789) (1,488,985) 610,265

Net cash provided by (used in) financing activities (1,502,131) (1,383,816) (1,035,848)

Effect of exchange rate changes on cash (6,293) 27,723 (268,200)

NET INCREASE (DECREASE) IN CASH (165,741) 406,606 (1,601,830)

Cash - beginning of year 1,044,851 638,245 2,240,075

Cash - end of year $ 879,110 $1,044,851 $ 638,245

See accompanying notes.
33

ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended July 31,

Supplemental disclosures of cash flow information:
1996 1995 1994
Cash paid during the year for:
Interest $1,520,776 $ 1,268,542 $1,139,243
Income tax $5,771 $24,969 $42,000

Supplemental schedule of noncash investing and financing activities:

During the year ended July 31, 1996, the following noncash
transactions occurred:

The Company issued 90,000 shares of Series A, $10.00 par value,
7% Convertible Preferred Stock ($900,000) in partial exchange for a
$1,000,000 Note Receivable from Cooper Manufacturing Corporation.

During the year ended July 31, 1995, the following noncash
transactions occurred:

The Company received non-cash consideration in the form of notes
and accounts receivable from the sale of the meter socket division
in the amount of $1,344,792.

The Company acquired machinery and equipment amounting to
$257,898 with notes payable and lease purchase obligations.

During the year ended July 31, 1994, the following noncash
transactions occurred:

The Company acquired machinery and equipment amounting to
$1,481,633 with notes payable and lease purchase obligations.

The Company acquired 600,000 shares of Techstar Industries, Inc.
for 195,000 shares of the Company's common stock valued at $202,800.

The Company cancelled 156,000 shares of treasury stock valued at
$473,716.

The Company reduced the present value of future performance
obligations by $140,058.

See accompanying notes.
34

ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1
SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies consistently
applied in the preparation of the accompanying consolidated
financial statements follows.

Organization:

Electric & Gas Technology, Inc.("the Company"or "ELGT") was
organized under the laws of the State of Texas on March 18, 1985,
to serve as a holding company for operating subsidiary
corporations. In April, 1985, the Company (i) acquired from
Commercial Technology, Inc. ("COMTEC"), an affiliated company, all
of the stock of Reynolds Equipment Company ("Reynolds") for stock
of the Company and (ii) acquired from a subsidiary of COMTEC all of
the stock of Retech, Inc. ("Retech") [formerly Test Switch
Technology, Inc.("Test Switch"), formerly Superior Technology, Inc.
("Superior")] for stock of the Company. In 1988, the Company
acquired 85% (and subsequently 100%) of the stock of Data
Automation Company, Inc. ("DAC") from Video Science Technology,
Inc., formerly an affiliate of COMTEC and of the Company; DAC owned
100% of Domac Plastics, Inc. ("Domac") and Logic Design Metals,
Inc. ("Logic"). Domac was subsequently sold. During 1992 Logic
merged into DAC, its parent, and DAC changed its name to Logic
Design Metals, Inc. and is referred to herein as "Logic". In June
1986 Superior acquired from Petro Imperial Corp. (A subsidiary of
COMTEC) its ownership in American Brass, Inc. ("ABI"). Fridcorp
Plastics, Inc. ("Fridcorp") was acquired by the Company in January,
1992, in exchange for 162,000 shares of Company Common Stock.
Hydel Enterprises, Inc. ("Hydel") [formerly Stelpro Limited
("Stelpro")] was acquired by the Company in April, 1992, in
exchange for 166,474 shares of Company Common Stock and $1,100,000
(Cdn. funds)(April 30, 1992, exchange rate: .8370). On August 1,
1992, Hydel acquired all of the outstanding capital stock of Hydel
Engineering Limited ("Hydel Engineering") for cash and notes
payable of approximately $719,000 ($850,000 Cdn.). Hydel
Engineering was merged into Hydel effective August 1, 1995. The
number of shares of Company Common Stock issued in the acquisitions
of Fridcorp and Hydel was, in each case, determined through arms-
length negotiations. Superior Magnetics, Inc. ("SMI") was formed
by the Company to acquire the operating assets of the business
operations of Denison Magnetics of Texas Instruments Incorporated
on November 30, 1992 for cash and deferred payments of
approximately $2,900,000.

The Company presently is the owner of 100% of Retech, which
currently owns 80% of ABI and the Company owns 100% of Logic,
Reynolds, Fridcorp, Hydel and SMI, and, through such subsidiaries,
operates in five distinct business segments: (1) the manufacture
and sale of electric meter enclosures and pole-line hardware for
the electric utility industry and the general public (Hydel and
Retech); (2) the design and manufacture o