SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

Form 10-K

(X) Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For Fiscal Year ended December 29, 1996.

( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________
to ________

Commission File Number: 0-22408

PURUS, INC.
(Exact name of registrant as specified in its charter)

Delaware 77-0234694
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

600 California Street, Suite 1300, San Francisco, CA 94108
(Address of principal executive offices) (Zip code)

(415) 788-1903
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
------------------- ---------------------
None None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]

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 [X]

The aggregate market value of the registrant's voting stock held by
nonaffiliates of the registrant, based upon the closing sale price of the
Common Stock on January 28, 1997, as reported on the NASDAQ National Market
System, was approximately $2,914,590. Shares of Common Stock held by each
officer, director and holder of 5% or more of the outstanding common stock
have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes.

Outstanding shares of the registrant's common stock, $.01 par value, as of
January 28, 1997: 666,193

DOCUMENT INCORPORATED BY REFERENCE

Portions of the Company's Proxy Statement for its 1997 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Form 10-K.

PART I
ITEM 1. BUSINESS.

DEVELOPMENT AND DISCONTINUATION OF AIR POLLUTION CONTROL BUSINESS

Purus, Inc. (the "Company") was founded in 1989 and was originally
incorporated in the State of California. In October 1993, the Company
merged with and into Purus Merger Corporation, a Delaware corporation which
changed its name to "Purus, Inc." upon consummation of the merger. The
Company was engaged initially in research and product development of
environmental technologies. In 1992, the Company focused its efforts on the
development of an adsorptive based technology for the separation of
volatile organic compounds from air streams and began to manufacture,
market and sell products now known as PADRE(r) air pollution control
systems.

Beginning in November 1993, following the Company's initial public
offering, the Company expanded its efforts to commercialize the PADRE
technology. In anticipation of future demand, the Company increased its
engineering, manufacturing, sales and service capabilities and built up an
inventory of raw materials and finished units. However, during this period
corrosion and mechanical design problems became evident among installed
PADRE systems resulting in significant field service and redesign expenses.
A market perception of unreliability developed which adversely affected
sales. In August 1995, after an extensive review of its markets and
technologies, the Company announced that it would pursue the option of
selling some or all of its PADRE technology while taking other actions
intended to minimize further losses and preserve its capital.

On October 20, 1995, the Company licensed its PADRE air pollution control
technology to Thermatrix Inc., a California corporation ("Thermatrix"),
and, in connection therewith, entered into a five-year agreement not to
compete with Thermatrix. On April 18, 1996, the Company consummated the
sale of substantially all of its noncash assets, excluding inventory, to
Thermatrix, including all of its right, title, and interest to and in the
PADRE technology (the "Asset Sale"). In consideration for such assets, the
Company received a $300,000 cash payment and the right to royalties in the
amount of seven percent (7%) of the net invoice value of Thermatrix' PADRE
equipment sales until the earlier of (i) October 20, 2000, or (ii) the date
on which the Company has received an aggregate of $2,000,000 in royalty
payments. In addition, Thermatrix agreed to offer warranty services to the
Company as an independent contractor on an as-requested basis through the
earlier of (i) January 4, 2001, or (ii) the date on which both parties
agree that all warranty obligations on the part of the Company have
expired, and to take possession of a substantial portion of the Company's
inventory on consignment. At December 29, 1996, the Company had received
cash payments from Thermatrix of approximately $22,000 for royalties on
PADRE equipment sales and approximately $77,000 for the purchase of
consigned inventory. There can be no assurance that the Company will
receive any significant income from Thermatrix for royalties on PADRE
equipment sales or for the purchase of consigned inventory. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Discontinued Operations for the Fiscal Years Ended
December 29, 1996, December 30, 1995 and December 31, 1994."

In connection with the Asset Sale, the Company discontinued the
development, manufacture and marketing of air pollution control systems
which, prior to the Asset Sale, represented substantially all of its
operations. However, as of December 29, 1996, the Company continued to be
bound by an existing warranty agreement with respect to one PADRE
installation. Such agreement terminates no later than January 31, 1997 and
the Company intends to use its own employees, rather than Thermatrix, to
perform services thereunder. At December 29, 1996, the Company had two
full-time employees, each of whom was engaged primarily in the performance
of warranty services.

GENERAL DESCRIPTION OF CONTINUING OPERATIONS

In light of the discontinuation of its air pollution control operations and
its agreement not to compete with Thermatrix, the Company's current
operating plan is to (i) manage the cost of servicing its existing
customer, (ii) defend against legal actions (see "Item 3. Legal
Proceedings" below), (iii) handle the administrative and reporting
requirements of a public company and (iv) seek to identify potential
businesses, products, technologies and companies for acquisition. At
present, the Company has no understandings, commitments or agreements with
respect to the acquisition of any business, product, technology or company
and there can be no assurance that the Company will identify any such
business, product, technology or company suitable for acquisition in the
future. Further, there can be no assurance that the Company would be
successful in consummating any acquisition on favorable terms or that it
will be able to profitably manage any international call servicing or other
business, product, technology or company it acquires. The Company has no
current intention to liquidate.

RECENT DEVELOPMENTS

On May 10, 1996, due to the Company's failure to meet the net tangible
asset requirement of the Nasdaq Stock Market, Inc., the Company's common
stock, par value $.01 per share ("Common Stock"), was "delisted" from the
Nasdaq National Market and listed instead on The Nasdaq SmallCap Market.

On September 17, 1996, the Company announced that its Board of Directors
had authorized, subject to stockholder ratification, the declaration and
payment to all stockholders of record on November 1, 1996, a cash
distribution in the amount of $3.00 per share, payable on December 12, 1996
(the "Distribution"). The Board directed that the Distribution be submitted
for approval by the stockholders of the Company at the 1996 Annual Meeting
of Stockholders (the "1996 Annual Meeting"). Subsequently, the Company sent
to its stockholders a notice and proxy statement announcing that the 1996
Annual Meeting would be held on December 5, 1996, and describing the
proposals to be voted upon at such meeting, including the election of
directors and approval of the Distribution.

On or about November 5, 1996, a group of stockholders represented by the
Purus Stockholders' Protective Committee (the "Committee"), sent to the
Company's stockholders notice of a special meeting of stockholders to be
held on December 3, 1996 (the "Special Meeting"), together with a proxy
statement describing the Committee's proposal to remove two of the three
directors of the Company. In addition, on or about November 11, 1996, the
Committee sent to the Company's stockholders another proxy statement with
the intention of preventing the establishment of a quorum at the 1996
Annual Meeting. The Committee sought to remove, and prevent the election at
the 1996 Annual Meeting, of a majority of the existing directors of the
Company because it believed that (i) recent actions of the Board had been a
principal cause of the Company's poor financial performance and (ii)
payment of the Distribution would drain the Company of the resources
necessary for it to expand and develop.

On November 19, 1996, prior to the date scheduled for the 1996 Annual
Meeting, Russell K. Burbank and Michael V. Dettmers, two of the three
directors of the Company, resigned from the Board. Concurrently, Mr.
Burbank entered into a Release and Consulting Agreement with the Company
pursuant to which his employment by the Company as Chief Executive Officer
thereof was terminated. On November 20, 1996, Reinhard Siegrist, the sole
remaining director of the Company, appointed Joel R. Mesznik and Hans C.
Ochsner to fill the vacancies in the Board created by the resignations of
Messrs. Burbank and Dettmers. On November 21, 1996, Mr. Mesznik was elected
Chairman of the Board of Directors and President and Chief Executive
Officer of the Company and, on November 25, 1996, the Company announced
that it had postponed the 1996 Annual Meeting in order to give the new
directors time to examine the Company's operating plan and the prudence of
paying the Distribution. On November 25, 1996, the Committee announced the
cancellation of the Special Meeting and the discontinuation of its
solicitation.

On January 21, 1997, Mr. Mesznik resigned as Chairman of the Board of
Directors and President and Chief Executive Officer of the Company. On
February 4, 1997, the number of directors was decreased from three to two,
Russell K. Burbank was appointed interim Chief Executive Officer, and the
Board of Directors rescinded the Distribution. The Board determined that
payment of the Distribution was not in the best interests of the Company
and its stockholders. Accordingly, approval of payment of the Distribution
will not be included for consideration of the Company's stockholders at its
1997 Annual Meeting of Stockholders.

ITEM 2. PROPERTIES

Purus currently sub-leases 400 square feet of office space at 600
California Street, Suite 1300, San Francisco, California 94108 on a
month-to-month basis. The Company also leases approximately 3,750 square
feet of warehouse space on a month-to-month basis in an industrial park in
Alcoa, Tennessee, which the Company intends to vacate no later than
February 28, 1997.

ITEM 3. LEGAL PROCEEDINGS

On or about July, 27, 1995, Aron Parnes, a stockholder of the Company,
filed suit against the Company and five of its current or former employees,
officers, and directors in the United States District Court for the
Northern District of California. The lawsuit alleges violations of the
federal securities laws, and purports to seek damages on behalf of a class
of stockholders who purchased the Company's common stock during the period
November 9, 1993 through March 8, 1995. On April 16, 1996, the Company
filed a motion to dismiss the complaint. On or about November 5, 1996,
plaintiffs filed a motion seeking a preliminary injunction to freeze or
impose a constructive trust on the Company's assets. Plaintiffs asserted
that a freeze of the Company's assets was necessary in light of the
Company's announced declaration to pay the Distribution, subject to
stockholder ratification. On November 25, 1996, following replacement of a
majority of the Board of directors and the cancellation of the proposed
Distribution, the Company announced that such motion had been withdrawn by
plaintiffs. At January 28, 1997, a ruling on the Company's motion to
dismiss plaintiff's complaint was pending. If the action is not dismissed,
the Company intends to litigate it vigorously. The Company and other
defendants have obtained discovery regarding the validity of plaintiff's
purported class action through document and interrogatory requests. The
plaintiffs have begun to pursue formal discovery, including requesting
documents from the Company and from third parties.

In July 1995, eight former employees of the AT&T Multi Language Center
filed suit against the Company and AT&T in Santa Clara County Superior
Court. The lawsuit alleges that plaintiffs were exposed to an unspecified
toxic substance while working at the AT&T facility, previously located next
door to the Company's former San Jose, California facility. The Company has
filed an answer denying all liability. On January 3, 1997, the plaintiffs
began to pursue formal discovery through document requests.

The Company is not a party to any other pending legal proceedings which it
believes will materially affect its financial condition or results of
operations.

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

For information regarding the settlement terminating the proxy solicitation
by the Purus Stockholders' Protective Committee to remove and replace a
majority of the Company's Board of Directors, see (Item 1. Business --
Recent Developments.) The cost to the Company of such solicitation was
approximately $128,000.

PART II

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

COMMON STOCK PRICE PER SHARE

Quarter Ended
12/29 9/28 6/29 3/30 12/30 9/30 7/1 4/1
1996 1996 1996 1996 1995 1995 1995 1995
----- ----- ----- ----- ----- ----- ----- -----

High $6.25 $5.25 $4.75 $7.00 $5.94 $9.38 $11.56 $17.19
Low $3.00 $3.38 $3.50 $2.13 $1.88 $5.00 $6.88 $5.00

The Company's common stock is traded on the Nasdaq SmallCap Market under
the symbol "PURUS." The high and low bid information disclosed above
reflects inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily reflect actual transactions.

At December 29, 1996, there were approximately 100 holders of record of the
Company's common stock. The Company has not paid cash dividends and does
not anticipate paying cash dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA.
(Numbers in thousands, except per share data)

Year Ended:
December 29,<F1> December 30, December 31,
------------ ------------ ------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----

Loss from
continuing operations $(699) $(1,243) $(886) $(4,401) $(2,438)
Income(loss) from
discontinued operations 782 (4,961) (13,597) (3,862) (5,503)
Net income/(loss) 83 (6,204) (14,483) (8,263) (7,941)

Net income/(loss) per share<F2>:
Continuing operations (1.06) (1.96) (1.42)
Discontinued operations 1.19 (7.80) (21.78)
------- ------- -------
Net income/(loss)
per share 0.13 (9.76) (23.20)

Pro forma net loss per share<F2>:
Continuing operations (1.20) (4.30)
Discontinued operations (9.93) (20.70)
------- -------
Pro forma net loss per share (11.13) (25.00)
Cash, cash equivalents,
and short-term
investments 5,235 7,032 8,441 22,699 402
Working capital (deficit) 3,728 3,545 9,079 23,158 (4,867)
Total assets 5,346 7,230 12,373 26,014 1,068
Total liabilities 1,606 3,661 2,606 1,777 5,527
Accumulated deficit (41,393) (41,476) (35,273) (20,790) (12,527)
Stockholders' equity
(deficit) 3,740 3,569 9,766 24,237 (4,459)
- -------------------------
<FN>
<F1> See "Item 1 Business" for a description of the Company's sale of
substantially all of its non-cash assets in April 1996.

<F2> Net income/(loss) per share for fiscal year 1996 is computed using the
weighted average number of shares of Common Stock and Common Stock
equivalents outstanding during fiscal year 1996. Net loss per share
for fiscal years 1995 and 1994 is computed using the weighted average
number of shares of Common Stock outstanding during the respective
fiscal years. Pro forma net loss per share amounts are based on the
pro forma weighted average number of shares of Common Stock and Common
Stock equivalents outstanding during fiscal years 1992 and 1993 after
giving retroactive effect to the conversion of $3,690,000 of demand
notes and Series A, B, and C Preferred Stock at their respective
issuance dates.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

Certain statements in this Form 10-K, particularly those set forth in Item
1 and in this Item 7, constitute (forward-looking statements,(including,
without limitation, those relating to (i) future income from discontinued
operations, (ii) the Company's plan to seek to identify suitable
businesses, products, technologies and companies for acquisition, (iii) the
stockholder litigation currently pending against the Company and (iv) the
Company's obligations under an existing warranty agreement. The Company is
subject to all of the risks and uncertainties inherent in a corporation
that has discontinued substantially all of its operations, as well as other
known and unknown risks, uncertainties and contingencies, including,
without limitation, (i) the inability of Thermatrix to sell substantial
amounts of PADRE equipment, (ii) Company management's inability to identify
candidates for acquisition, to consummate acquisitions on favorable terms
or to operate profitably following the consummation of any acquisition,
(iii) adverse litigation outcomes and (iv) unexpected warranty claims, many
of which could cause actual results or outcomes to differ materially from
those expressed in such forward-looking statements.

In April 1996, the Company consummated the sale of substantially all of its
noncash assets, excluding inventory, to Thermatrix in consideration for a
cash payment of $300,000 and royalties in the amount of seven percent (7%)
of the net invoice value of Thermatrix' PADRE equipment sales. In addition,
Thermatrix agreed to take possession of the Company's remaining inventory
on a consignment basis. Accordingly, the Company does not believe that its
results of operations from prior periods, in particular, fiscal year 1996,
are indicative of future performance. See "Item 1. Business".

The Company has incurred cumulative net losses of approximately $41,393,366
from inception to December 29, 1996. The Company does not expect to be
profitable unless and until such time as it acquires a new business,
product, technology or company and only then if such acquisition is
successful and on favorable terms. There can be no assurance that the
Company will achieve profitability.

RESULTS OF CONTINUING OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 29,
1996, DECEMBER 30, 1995 AND DECEMBER 31, 1994

The Company had no revenues from continuing operations in fiscal years
1996, 1995 and 1994.

General and administrative expenses from continuing operations of the
Company consisted of general corporate administration expenses, costs
associated with the Company's reporting and disclosure obligations as a
public company, directors' and officers' insurance and similar items. These
expenses were approximately $1,007,000, $1,714,000 and $1,431,000 for the
fiscal years ended December 29, 1996, December 30, 1995 and December 31,
1994, respectively. The decrease in such expenses from fiscal year 1995 to
fiscal year 1996 was principally due to reductions in personnel and related
costs as a result of the discontinuation of the Company's principal
operations. The increase in such expenses from fiscal year 1994 to fiscal
year 1995 was principally attributable to costs related to the stockholder
action filed against the Company in July 1995. See "Item 3. Legal
Proceedings".

Interest income in fiscal years 1996, 1995, and 1994 was approximately
$308,000, $472,000 and $545,000, respectively, resulted from the investment
of the net proceeds of the Company's initial public offering in 1993 into
short-term, liquid cash equivalents. Interest income in fiscal year 1996 is
lower than fiscal years 1995 and 1994 due to a reduction in the Company's
cash and short-term investments which were used to fund operating losses
from continuing operations, and to pay accrued warranty and legal expenses
from discontinued operations. Interest income will likely continue to
decrease if additional cash or short-term investments are used to fund
operating losses and accrued expenses, or if interest rates decline.

As a result of the foregoing factors, the Company's net loss from
continuing operations was approximately $699,000 in fiscal year 1996 as
compared to a net loss of $1,243,000 in fiscal year 1995 and $886,000 in
fiscal year 1994.

RESULTS OF DISCONTINUED OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 29,
1996, DECEMBER 30, 1995 AND DECEMBER 31, 1994

Revenues from discontinued operations in fiscal year 1996 of approximately
$252,000, consisted of royalty payments, inventory purchases by Thermatrix
in connection with the Asset Sale, and revenues from customer services
provided by the Company on PADRE systems not sold to Thermatrix. The
Company expects to continue to have some royalties and other revenue for
the first two quarters of fiscal year 1997 as a result of Thermatrix' sale
of a large PADRE system in the fourth quarter of fiscal year 1996, and that
the amount of such revenue will decline thereafter. However, there can be
no assurance that the Company will continue to generate any future revenue
related to the Asset Sale. The Company's revenues of approximately
$2,387,000 and $3,181,000 for fiscal years 1995 and 1994, respectively,
were principally from the shipment and rental of PADRE systems.

The Company recorded no research and development, sales, marketing, or
general and administrative expenses from discontinued operations in fiscal
year 1996. The Company performed services provided for under certain
warranty obligations during fiscal year 1996 which were accrued in fiscal
year 1995 as part of the provision for discontinued operations.

Manufacturing expenses from discontinued operations, which were essentially
all related to the production of PADRE systems, decreased to approximately
$4,546,000 in fiscal year 1995 from $7,213,000 in fiscal year 1994. The
decline from fiscal year 1994 resulted from reduced product shipments in
fiscal year 1995 and to inventory write-downs that were taken in fiscal
year 1994 but were partly offset by larger warranty provisions in 1995.

Research and development expenses of discontinued operations for fiscal
year 1995 were approximately $82,000 as compared to $2,465,000 in fiscal
year 1994. The decrease in such expenses reflect the termination of
research projects not directly related to the PADRE product line in late
1994 and of essentially all other research and development in fiscal year
1995. Research and development expenses consisted primarily of salaries and
benefits, supplies and materials and fees paid to outside consultants.

Sales, marketing and service expenses of discontinued operations in fiscal
year 1995 decreased to approximately $1,976,000 from $5,280,000 in fiscal
year 1994. The decrease principally reflects the personnel reductions made
in late 1994, and additional personnel cuts in fiscal year 1995, as well as
approximately $757,000 in bad debt expenses for fiscal year 1994.
General and administrative expenses of discontinued operations for fiscal
year 1995 were approximately $744,000 as compared to approximately
$1,819,000 in fiscal year 1994. The decrease from fiscal year 1994 to 1995
is due to reduction in payroll and employee benefits and to the closure of
the Company's European office in late 1994. Discontinued general and
administrative expenses consisted primarily of payroll and related costs.

During the fourth quarter of fiscal year 1995, when the Company
discontinued its operations, it included provisions for the write-down of
inventory and fixed assets, for the costs of employee termination, for
anticipated warranty expenditures over the remaining life of PADRE
installations and for the operating losses of the discontinued operations.

The net liabilities of the discontinued operations were approximately
$1,062,000 as of December 29, 1996 and approximately $2,574,000 as of
December 30, 1995. The decrease in net liabilities of discontinued
operations of approximately $1,512,000 from December 30, 1995 to December
29, 1996 resulted from the Company's payment of expenses associated with
the costs of employee termination and warranty expenditures for PADRE
systems and reduction of the overall accrual for the cost of discontinued
operations.

As a result of the foregoing factors, the Company's net income from
discontinued operations was approximately $782,000 in fiscal year 1996 as
compared to a net loss of approximately $4,961,000 in fiscal year 1995 and
$13,597,000 for fiscal year 1994.

The Company's future utilization of net operating loss carryforwards for
federal and state income tax purposes is limited as a result of successive
changes of ownership that occurred between 1989 and 1993. Future changes in
ownership could further restrict the Company's ability to use its net loss
carryforwards. Further, if the Company failed to continue its business
enterprise for a period of two years following an ownership change, the net
operating loss carryforwards could be forfeited. (See Note 7 of "Notes to
Financial Statements").

NET INCOME/NET LOSS FROM CONTINUING AND DISCONTINUED OPERATIONS

As a result of the foregoing factors, the Company's net income from both
continuing and discontinued operations was approximately $83,000 in fiscal
year 1996, as compared to net losses of approximately $6,204,000 in fiscal
year 1995 and $14,483,000 in fiscal year 1994.

LIQUIDITY AND CAPITAL RESOURCES

At December 29, 1996, the Company had working capital of approximately
$3,728,000 as compared to approximately $3,545,000 at December 30, 1995.
Working capital as of both dates consisted substantially of short-term
investments, cash and cash equivalents, accrued liabilities, and net
liabilities from discontinued operations. Net cash used in operating
activities was approximately $1,885,000 in fiscal year 1996, and $1,413,000
in fiscal year 1995. Although the Company's most significant assets consist
largely of cash and cash equivalents, the Company has no intent to become,
or hold itself out to be, engaged primarily in the business of investing,
reinvesting, or trading in securities. Accordingly, the Company does not
anticipate being required to register pursuant to the Investment Company
Act of 1940 and expects to be limited in its ability to invest in
securities, other than cash equivalents and government securities, in the
aggregate amount of over 40% of its assets. There can be no assurances that
any investment made by the Company will not result in losses.

Management believes that the Company has sufficient cash and short-term
investments to meet the anticipated needs of the Company's continuing and
discontinued operations through at least the next twelve (12) months.
However, there can be no assurances to that effect, as the Company has no
assurance of significant revenues and is subject to numerous contingent
liabilities which could result in the depletion of its capital, including,
without limitation (i) any damages awarded and/or costs and expenses
incurred by it in connection with pending and threatened litigation against
the Company, in particular the currently pending stockholder action (see
"Item 3. Legal Proceedings"), and (ii) its obligations and liabilities
under an outstanding warranty and service agreement . Judgments or
settlements against the Company in connection with such litigation could
exceed the Company's insurance coverage and require the Company to use its
limited capital resources in satisfaction thereof. In addition, the Company
may require outside advisors to assist management in seeking and evaluating
potential acquisitions, in consummating such transactions and/or in
managing the resulting enterprises. In the event that the Company has not
reserved sufficient cash for (i) its obligations under warranty and service
agreements, (ii) costs and expenses relating to pending or threatened
litigation or (iii) the acquisition of a particular business, product or
technology, the Company may require additional financing. There can be no
assurance that such financing would be available to the Company on
acceptable terms or at all. The Company does not presently have a line of
credit or other bank credit facility.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.

The following financial statements are filed with this report as pages F-2
through F-12 following the signature page:

Report of Independent Certified Public Accountants
Balance Sheets
Statements of Operations
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The Company's current directors are Reinhard Siegrist and Hans C. Ochsner.
The Company's current principal executive officers are Russell K. Burbank
and Stephen D. Mayer. Each of Messrs. Siegrist and Ochsner is an
independent private investor. Mr. Burbank is Chief Executive Officer of the
Company and his principal occupation is an independent management
consultant. Mr. Mayer is Treasurer and Principal Financial Officer of the
Company and his principal occupation is managing partner of the accounting
firm of Burr, Pilger & Mayer. The remainder of the information required by
this Item is incorporated by reference from the sections of the
Registrant's definitive Proxy Statement for its 1997 Annual Meeting of
Stockholders entitled "Proposal No. 1- Election of Directors-Nominees" and
"Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item is incorporated by reference from the
section of the Registrant's definitive Proxy Statement for its 1997 Annual
Meeting of Stockholders entitled "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) (1) and (2)

The following financial statements and financial statement schedule of
the Registrant are filed as part of this Form 10-K.

(1) Financial Statements.

Report of Independent Certified Public Accountants
Balance Sheets
Statements of Operations
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements

(2) Financial Statement Schedule.

Schedule II 3/4 Valuation and Qualifying Accounts

All other schedules required by Form 10-K Annual Report have been
omitted because they were not applicable, were included in the notes to the
consolidated financial statements, or were otherwise not required under the
instructions contained in Regulation S-X.

(a) (3) Exhibits.

The exhibits listed on the accompanying Exhibit Index are filed as part of,
or are incorporated by reference into, this Form 10-K. The Company will
furnish any of such exhibits not contained herein to any person upon
request therefor and payment by such person of a fee in the amount of $5.00
to the Company.

(b) Reports on Form 8-K.

During the fiscal quarter ended December 29, 1996, the Company filed one
(1) Current Report on Form 8-K. The Form 8-K, dated November 20, 1996, and
filed with the Securities and Exchange Commission on November 26, 1996,
reported the resignation of two of the three current directors and the sole
remaining director's appointment of two new directors to fill the
vacancies, and that the Company had postponed the 1996 Annual Meeting of
Stockholders in order to give its newly appointed directors time to
reexamine the merits of the Company's proposed $3.00 per share cash
distribution.

SIGNATURES

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

PURUS, INC.

s/Russell K. Burbank
---------------------
Russell K. Burbank, Chief Executive Officer

February 21, 1997
San Francisco, California

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Stephen D. Mayer his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstititution, for him or her and in his or her name, place and stead,
in any and all capacities to sign any and all amendments to this Report on
Form 10-K, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

s/ Russell K. Burbank
---------------------- Chief Executive Officer February 21, 1997
Russell K. Burbank

s/Stephen D. Mayer Treasurer
---------------------- (Principal Financial February 21, 1997
Stephen D. Mayer and Accounting Officer)

s/Reinhard Siegrist
---------------------- Director February 21, 1997
Reinhard Siegrist

s/Hans C. Ochsner
---------------------- Director February 21, 1997
Hans C. Ochsner

INDEX TO EXHIBITS

Exhibits
- --------
3.1 Certificate of Incorporation of the Registrant.(1)
3.2 Bylaws of the Registrant.(1)
3.3 Amended and Restated Certificate of Incorporation of the
Registrant.(1)
10.1 Description of Registration Rights.(1)
10.2 Form of Indemnity Agreement entered into between the Registrant
and its directors and officers.(1)
10.3 Registrant's 1993 Stock Option Plan (the "Stock Option Plan").(1)
10.4 Form of Incentive Stock Option Grant under the Stock Option Plan.
(1)
10.5 Form of Non-qualified Stock Option Grant under Stock Option Plan.
(1)
10.6 Registrant's 1993 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan").(1)
10.7 Form of Non-qualified Stock Option Grant under the Directors'
Plan.(1)
10.8 Form of Incentive Stock Option Grant under the 1990 Stock Option
Plan.(1)
10.22 Offer Letter to Russell K. Burbank, dated November 11, 1994.(2)
10.24 Amended and Restated 1993 Stock Option Plan.(3)
10.25 1995 Non-Employee Directors Stock Option Plan.(3)
10.26 Purus, Inc. Severance and Retention Plan and Summary Description
dated July 28, 1995.(4)
10.27 License Agreement between Thermatrix Inc. and Purus, Inc. dated
October 20, 1995.(5)
10.28 Asset Purchase Agreement between Thermatrix Inc. and Purus, Inc.
dated January 4, 1996.(5)
10.29 Warranty Services Agreement between Thermatrix Inc. and Purus,
Inc. dated January 4, 1996.(5)
10.30 Warranty Services Trust Agreement among Purus, Inc., Thermatrix
Inc., and Cupertino National Bank & Trust dated January 31, 1996.
(5)
10.31 Purus, Inc. Severance and Retention Plan - Amendment No. 1.(6)
10.32 Release and Consulting Agreement with Russell K. Burbank dated
November 19, 1996
24.1 Power of Attorney. Reference is made to page 11 herein.
- ----------
(1) Incorporated by reference to identically numbered exhibit to
registrant's Form S-1 Registration Statement (No. 33-68946) which
became effective November 8, 1993.

(2) Incorporated by reference from identically numbered exhibit to
registrant's Form 10-K for the fiscal year ended December 31, 1994.

(3) Incorporated by reference from identically numbered exhibit to
registrant's Form 10-Q for the quarterly period ending April 1, 1995.

(4) Incorporated by reference from exhibit numbered 99.1 to registrant's
Form 10-Q for the quarterly period ending September 30, 1995.

(5) Incorporated by reference from identically numbered exhibit to
registrant's Form 10-K for the fiscal year ended December 30, 1995.

(6) Incorporated by reference from identically numbered exhibit to
registrant's Form 10-Q for the quarterly period ending March 30, 1996.

INDEX TO SCHEDULES
Schedule
- --------
II Purus, Inc. - Valuation and Qualifying Accounts

INDEX TO FINANCIAL STATEMENTS
Page
----

Report of Independent Auditors. . . . . . . . . . . . . . . . . . .F-2

Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . .F-3
Statements of Operations. . . . . . . . . . . . . . . . . . . . . .F-4
Statements of Shareholders' Equity. . . . . . . . . . . . . . . . .F-5
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . .F-6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . .F-7
Report on Financial Statement Schedule and Consent of
Independent Auditors . . . . . . . . . . . . . . . . . . . . F-14
Schedule II -- Valuation and Qualifying Accounts. . . . . . . . . F-15

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Purus, Inc.
San Francisco, California

We have audited the accompanying balance sheets of Purus, Inc. (the
Company), as of December 29, 1996 and December 30, 1995, and the related
statements of operations, shareholders' equity, and cash flows for each of
the years in the three-year period ended December 29, 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 financial position of the Company as of
December 29, 1996 and December 30, 1995, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 29, 1996, in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP
Palo Alto, California
January 15, 1997

PURUS, INC.
BALANCE SHEETS
December 29, December 30,
1996 1995
------------ ------------

ASSETS
Current Assets:
Cash and cash equivalents $ 494,201 $ 281,922
Short-term investments 4,740,963 6,750,439
Other current assets 99,339 173,626
---------- ----------
Total current assets 5,334,503 7,205,987

Property and equipment, net 652 9,909
Other assets 10,745 14,465
---------- ----------
$5,345,900 $7,230,361
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,642 $ 15,000
Accrued expenses 525,194 1,071,970
Net liabilities of discountinued
operations 1,062,373 2,574,103
---------- ----------
Total current liabilities 1,606,209 3,661,073

Shareholders' equity
Preferred stock; $.001 par value,
5,000,000 shares authorized; none
outstanding
Common stock; $.01 par value,
5,000,000 shares authorized;
666,193 and 637,208 shares
issued and outstanding as of
December 29, 1996 and December 30,
1995, respectively 6,662 6,372
Additional paid-in capital 45,126,395 45,039,185
Accumulated deficit (41,393,366) (41,476,269)
------------ ------------
Total shareholders' equity 3,739,691 3,569,288
------------ ------------
$ 5,345,900 $ 7,230,361
============ ============
See accompanying notes to financial statements.

PURUS, INC.
STATEMENTS OF OPERATIONS
Year Ended Year Ended Year Ended
December 29, December 30, December 31,
1996 1995 1994
------------ ------------ ------------

Operating (income)/expenses of continuing operations:
General and administrative $1,006,713 $ 1,714,437 $ 1,431,493
Interest Income (307,992) (471,562) (545,056)
------------- ------------- -------------
Loss from continuing operations (698,721) (1,242,875) (886,437)
Income/(loss) from discontinued
operations 781,624 (4,960,696) 13,596,703)
------------- ------------- -------------
Net income/(loss) $ 82,903 $(6,203,571) $(14,483,140)
============= ============= =============

Net loss from continuing
operations per share $(1.06) $(1.96) $(1.42)

Net income/(loss) from
discontinued operations
per share 1.19 (7.80) (21.78)
------------- ------------- -------------
Net income/(loss) per share $0.13 $(9.76) $(23.20)
============= ============= =============
Weighted average common shares 654,947 635,742 624,226

See accompanying notes to financial statements.

PURUS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY

Common Stock Additional Total
---------------------- paid-in Accumulated shareholders'
Shares Amount capital deficit equity
- ----------------------------------------------------------------------------------------------------

BALANCES,
DECEMBER 31, 1993 622,426 $6,224 $45,020,163 $(20,789,558) $4,236,829
------- ------ ----------- ------------ ----------
Stock options
exercised, net 11,947 120 12,572 - 12,692

Net loss - - - (14,483,140) (14,483,140)
------- ------ ----------- ------------ ------------
BALANCES,
DECEMBER 31, 1994 634,373 6,344 45,032,735 (35,272,698) 9,766,381
------- ------ ----------- ------------- ------------
Stock options
exercised, net 2,835 28 6,450 - 6,478

Net loss - - - (6,203,571) (6,203,571)
------- ------ ----------- ------------- ------------
BALANCES,
DECEMBER 30, 1995 637,208 6,372 45,039,185 (41,476,269) 3,569,288
------- ------ ----------- ------------- ------------
Stock options
exercised 28,985 290 87,210 - 87,500

Net income - - - 82,903 82,903
------- ------ ----------- ------------- ------------
BALANCES,
DECEMBER 29, 1996 666,193 $6,662 $45,126,395 $(41,393,366) $3,739,691
======= ====== =========== =============

See accompanying notes to financial statements.

PURUS, INC.
STATEMENTS OF CASH FLOWS
Year Ended
--------------------------------------------------------------
12/29/96 12/30/95 12/31/94
-------- -------- --------

Cash flows from operating activities:
Net income/(loss) $82,903 $(6,203,571) $(14,483,140)
Adjustments to reconcile net
income/(loss) to net cash
used in operating activities:
Depreciation and amortization 9,257 216,367 606,756
Provision for losses on accounts
receivable - 376,500 410,200
Write-down of rental inventory - 144,933 739,248
Provision for loss on disposal
of fixed assets - 350,973 114,925
Changes in operating assets
and liabilities:
Accounts receivable - 443,309 (322,836)
Inventories - 2,063,380 (1,111,556)
Other current assets 74,287 187,176 16,672
Rental inventory - (96,600) (437,829)
Other assets 3,720 50,037 28,775
Accounts payable 3,642 (407,212) (667,783)
Accrued expenses (546,776) (1,112,099) 1,497,162
Net liabilities of dis-
continued operations (1,511,730) 2,574,103 -
------------ ------------ ------------
Net cash used in oper-
ating activities (1,884,697) (1,412,704) (13,609,406)
------------ ------------ ------------
Cash flows from investing
activities:
Purchases of short-term
investments (30,358,165) (18,531,167) (10,160,408)
Proceeds from sale/maturity of
short-term investments 32,367,641 19,026,181 19,057,989
Purchases of property and
equipment - (2,599) (660,667)
------------ ------------ ------------
Net cash provided by
investing activities 2,009,476 492,415 8,236,914
------------ ------------ ------------
Cash flows from financing
activities:
Proceeds from sale of common
stock 87,500 6,478 12,692
------------ ------------ ------------
Net cash provided by
financing activities 87,500 6,478 12,692
------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents 212,279 (913,811) (5,359,800)
Cash and cash equivalents,
beginning of the year 281,922 1,195,733 6,555,533
------------ ------------ ------------
Cash and cash equivalents.
end of the year $ 494,201 $ 281,922 $ 1,195,733
============ ============ ============
See accompanying notes to financial statements.

PURUS, INC.
NOTES TO FINANCIAL STATEMENTS

1. Summary of the Company and Significant Accounting Policies

(a) Company

Purus, Inc. (Purus or the Company) discontinued its environmental
technology business in November 1995. Consequently, thereafter
the Company's continuing operations consist principally of
management of the Company's short-term investments,
administration of general corporate and legal matters, and
investigation of potential acquisitions of businesses, products
or technologies that may or may not be related to the
environmental market.

(b) 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
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

For purposes of the accompanying statements of cash flows, the
Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

(d) Short-Term Investments

Short-term investments consist of debt securities issued by the
U. S. Treasury and other U. S. government agencies with maturity
dates at the time of purchase of between three and twelve months.
As of December 29, 1996, all short-term investments had maturity
dates of less than nine months. These investments are classified
as held-to-maturity securities and are valued at cost, plus
accumulated interest, which approximates market value. Realized
and unrealized losses and gains within the Company's short-term
investments are not material.

(e) Depreciation and Amortization

Purchased equipment is stated at cost. Depreciation and
amortization of property and equipment and rental inventory are
computed using the straight-line method over the estimated useful
lives of the related assets, generally three to five years.

(f) Income Taxes

In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. SFAS No. 109 requires a change from
the deferred method of accounting for income taxes of APB Opinion
No. 11 to the asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS
No. 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date. The cumulative effect of adopting
SFAS No. 109 from prior years was not material.

(g) Fair Value of Financial Instruments

In 1995, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 107, Disclosures about Fair Value of
Financial Instruments. SFAS No. 107 requires entities to disclose
the fair value of certain on- and off-balance sheet financial
instruments in their financial statements. Fair value estimates,
methods, and assumptions are set forth below for the Company's
financial statements.

(i) The carrying amounts of cash, cash equivalents, accounts
receivable, accounts payable, and accrued liabilities approximate
fair values due to the short maturity of those instruments.

(ii) The fair value of short term investments is estimated based
on bid quotations received from securities dealers. The
investments are classified as (held-to-maturity( securities in
accordance with SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities. Market value approximates cost for
such investments.

(h) Net Income/(Loss) Per Share

Net income/(loss) per share for 1996 is computed using the
weighted average number of shares of Common Stock and Common
Stock equivalents outstanding during fiscal year 1996. Net loss
per share for fiscal years 1995 and 1994 is computed using the
weighted average number of common shares outstanding. Fully
diluted net income/(loss) per share amounts are not presented as
the effects of common stock equivalents are antidilutive.

(i) Reverse Stock Split

On November 17, 1995, the shareholders approved a one-for-ten
reverse stock split of the Company's common stock. The financial
statements for all periods presented have been restated to
retroactively reflect this reverse stock split as if it had been
in effect as of the beginning date of each statement.

(j) Change in Fiscal Year

In 1995, the Company converted to a reporting calendar in which
quarters end on the Saturday closest to March 31, June 30,
September 30, and December 31.

(k) Recent Accounting Pronouncement

In October 1995, the Financial Accounting Standards Board
("FASB") issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 is effective for fiscal years
beginning after December 15, 1995, and requires that the Company
either recognize in its consolidated financial statements costs
related to its employee stock-based compensation plans, such as
stock option and stock purchase plans, or make pro-forma
disclosures of such costs in a footnote to the consolidated
financial statements. The Company has elected to continue to use
the intrinsic value-based method of Accounting Principles Board
("APB") Opinion No. 25, as allowed under SFAS No. 123, to account
for all of its employee stock-based compensation plans. The
adoption of SFAS No. 123 did not have a material effect on the
Company's consolidated financial position or results of
operations.

2. Inventories

In 1995, the Company discontinued its environmental operations and as
of December 30, 1995 the carrying value of all inventory was written
off.

3. Property and Equipment

A summary of property and equipment follows:

December 29, December 30,
1996 1995
------------ ------------

Machinery and equipment $42,134 $42,134
Less accumulated depreciation
and amortization 41,482 32,225
------------ ------------
$ 652 $ 9,909
============ ============

4. Accrued Expenses

A summary of accrued expenses follows:

December 29, December 30,
1996 1995
------------ ------------

Payroll related $ - $ 292,147
Legal and professional expenses 461,194 300,000
Other 64,000 479,823
------------ ------------
$ 525,194 $1,071,970
============ ============

5. Discontinued Operations

During the fourth quarter of 1995, when the Company discontinued its
operations, it included provisions for the write-down of inventory and
fixed assets, for the costs of employee termination, for anticipated
warranty expenditures over the remaining life of PADRE installations, and
for the operating losses of the discontinued operations. The net
liabilities of the discontinued operations were $1,062,373 as of December
29, 1996 and $2,574,103 as of December 30, 1995. The decrease in net
liabilities of discontinued operations was due to paying expenses
associated with the costs of employee termination and warranty expenditures
for PADRE systems and reducing the overall accrual for the cost of
discontinued operations.

A summary of the net liabilities of the discontinued operations as of
December 29, 1996 and December 30, 1995 follows:

December 29, December 30,
1996 1995
------------ ------------

Accrued payroll and related $ 32,350 $ 185,671
Accrued warranty 1,012,620 2,200,000
Other 17,403 188,432
------------ ------------
$ 1,062,373 $ 2,574,103
============ ============

A summary of operating results of the discontinued operations follows:

Year Ended
----------------------------------------
12/29/96 12/30/95 12/31/94
----------- ----------- -----------

Revenue $ 251,723 $ 2,387,175 $ 3,181,160
Operating expenses:
Reversal of warranty provision 529,901 - -
Manufacturing - 4,545,787 7,213,099
Research and development - 81,811 2,465,180
Sales, marketing and service - 1,976,108 5,280,109
General and administrative - 744,165 1,819,475
----------- ----------- -----------
529,901 7,347,871 16,777,863
----------- ----------- -----------
Income/(loss) from
discontinued operations $ 781,624 $(4,960,696)$(13,596,703)
=========== =========== ===========

6. Shareholders' Equity

The Company has reserved 100,000 shares of common stock for issuance under
its 1993 Stock Option Plan (the "1993 Plan"), which succeeded the Company's
1990 Stock Option Plan. The Company's Board of Directors administers the
1993 Plan and determines the terms of the options granted under the 1993
Plan, including the exercise price, number of shares subject to each option
and exercisability thereof. The exercise price of incentive options granted
under the 1993 Plan must be at least equal to the fair market value of such
shares on the grant date and the exercise price of nonqualified stock
options granted under the 1993 Plan must be at least equal to 85% of the
fair market value of such shares on the date of the grant. Options granted
under the 1993 Plan usually become exercisable over four years and have a
five-year term. The maximum term of each option is 10 years.

The Company's 1995 Non-Employee Director Stock Option Plan (the "1995
Director Plan") was adopted by the Company's Board of Directors and
approved by the Company's shareholders as the successor to the Company's
1993 Non-Employee Director Stock Option Plan. The 1995 Director Plan
provides for the granting of stock options to nonemployee directors of the
Company. The Board of Directors and the shareholders have authorized a
total of 20,000 shares of common stock for issuance under the 1995 Director
Plan. The Company's Board of Directors administers the 1995 Director Plan.

The Company has elected to use the intrinsic value-based method of APB
Opinion No. 25 to account for all of its employee stock-based compensation
plans. Accordingly, no compensation cost has been recognized in the
accompanying consolidated financial statements for the stock option plans
because the exercise price of each option equals or exceeds the fair value
of the underlying common stock as of the grant date for each option. The
Company has adopted the pro forma disclosure provisions of SFAS No. 123.
Compensation cost for the Company's stock-based compensation plans,
determined in a manner consistent with the fair value approach described in
SFAS No. 123, was immaterial.

A summary of the status of the Company's stock option plans as of
December 29, 1996, December 30, 1995, and December 31, 1994 and changes
during the fiscal years ended on those dates is presented below:

Year Ended
--------------------------------------------------------------
12/29/96 12/30/95 12/31/94
------------------- ------------------- -------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
------ -------- ------ ------- ------ --------

Outstanding
at beginning
of year 63,876 $15.16 44,754 $39.68 62,018 $ 42.67
Granted 32,000 3.52 50,250 9.66 7,925 92.91
Exercised (29,000) 3.02 (2,583) 2.51 (10,198) 2.98
Forfeited (64,376) 15.22 (28,545) 45.08 (14,991) 105.14
-------- -------- -------- -------- -------- --------
Outstanding
at end of year 2,500 $ 4.56 63,876 $15.16 44,754 $ 39.68
======== ======== ======== ======== ======== ========
Options
exercisable
at year-end 2,125 $ 3.99 27,361 $11.68 26,615 $ 15.46
======== ======== ======== ======== ======== ========

The following table summarizes information about stock options outstanding
at December 29, 1996:

Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise OutstandingContractual Exercise Exercisable Exercise
Prices at 12/29/96 Life Price at 12/29/96 Price
-------- ----------- --------- -------- ----------- --------

$ 3.50-4.00 2,000 9 years $ 3.75 2,000 $ 3.75
7.81 500 8 7.81 125 7.81
----- -----
3.50-7.81 2,500 8.5 4.56 2,125 3.99
===== =====

A total of 75,657 shares of common stock remain reserved for future grants
under the plans as of December 29, 1996.

As of December 29, 1996, the Company had outstanding warrants to purchase
34,260 shares of common stock at exercise prices between $8.50 and $120.00
per share. The warrants are immediately exercisable and expire at various
dates between February 1997 and September 1998.

7. Income Taxes

The provision for income taxes differs from the amount computed by applying
the federal statutory rate of 34% due to the Company's inability to utilize
its currently generated net operating losses.

The tax effect of temporary differences that give rise to significant
portions of the deferred tax amounts are presented as follows:

December 29, December 30,
1996 1995
------------ ------------

Net operating loss carryforward $11,900,000 $10,978,000
Warranty reserve/discontinued
operations/accrued expenses
and reserves 463,000 876,000
Research credit carryforward 650,000 650,000
Other - 200,000
----------- -----------
Gross deferred tax asset 13,013,000 12,704,000
Less valuation allowance $13,013,000 $12,704,000
=========== ===========
Net deferred tax asset $ - $ -
=========== ===========

As of December 29, 1996, the Company had available net operating loss
carryforwards approximating $32,800,000 and $7,850,000 for federal and
California tax purposes, respectively. The Company also has a research
credit carryforwards of approximately $460,000 and $190,000 for federal and
California tax purposes, respectively. The federal and California net
operating losses can be carried forward to reduce income taxes on future
earnings subject to the limitations discussed below.

Sections 382 and 383 of the Internal Revenue Code provide for annual
limitations on the utilization of net operating loss and credit
carryforwards following an ownership change as defined. Further, if the
Company failed to continue its business enterprise for a period of two
years following an ownership change, the net operating loss carryforwards
could be forfeited. As the Company has not determined if an ownership
change occurred in 1995 or 1996, the net operating loss carryforwards may
be subject to such limitation.

8. Commitments and Contingencies

Aside from certain provisions for legal expenses, the financial statements
for the period ended December 29, 1996 do not contain any provisions for
these legal proceedings.

Although the Company was engaged in research and development and
manufacturing operations that generated only very small volumes of waste,
it, like its customers, may be potentially subject to environmental
liabilities with respect to the investigation or cleanup of hazardous waste
sites. The Company currently maintains no specific environmental impairment
liability insurance. Although the Company believes that the risk is minimal
that it would ever be found by a court or regulatory agency to be liable
for the investigation or cleanup of a hazardous waste site, the costs
associated with such a finding could be substantial.

9. Related Party Transactions

In March, 1996, the Company retained The Dettmers Consulting Group ("DCG"),
of which Mr. Dettmers, a former director of the Company, is a principal, to
provide services with respect to the wind-down of the Company's operations.
For the services provided to the Company in fiscal year 1996, Mr. Dettmers
and DCG were paid $5,000.

In November, 1995, the Company retained the accounting firm of Burr, Pilger
& Mayer ("BPM") for financial, accounting and administrative services, of
which Stephen D. Mayer, the Company's Treasurer and Principal Financial and
Accounting Officer, is a managing partner. For the services provided to the
Company in fiscal year 1996, BPM was paid $144,000.

REPORT ON FINANCIAL STATEMENT SCHEDULE
AND CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Purus, Inc.
San Francisco, California

The audits referred to in our report to the Board of Directors of Purus,
Inc. dated January 15, 1997, included the related financial statement
schedule as of December 29, 1996, and for each of the years in the
three-year period ended December 29, 1996, included in the Form 10-K. This
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements, taken as a whole, presents fairly, in all material respects,
the information set forth therein.

We consent to incorporation by reference in the registration statement (No.
33-93402) on Form S-8 of our reports included herein.

KPMG PEAT MARWICK LLP
Palo Alto, California
January 15, 1997

SCHEDULE II

PURUS, INC.
VALUATION AND QUALIFYING ACCOUNTS

Additions
Balance at Charged to Charged Balance at
beginning costs and to other at end
of period expenses accounts Deductions of period
--------- --------- --------- --------- ---------

YEAR ENDED DECEMBER 29, 1996
Allowance for
doubtful
accounts and
returns $426,300 - - $(169,493) $256,807
<F1>
Accrued warranty 2,200,000 - - (1,187,380) 1,012,620
<F4>
YEAR ENDED DECEMBER 30, 1995
Allowance for
doubtful
accounts and
returns 410,200 $ 376,500 - (82,434) 426,300
(277,966) <F1>
<F2>

Accrued warranty 770,000 1,857,121 $277,966 (831,000) 2,200,000
125,913 <F3> <F4>
<F5>
YEAR ENDED DECEMBER 31, 1994
Allowance for
doubtful
accounts and
returns - 410,200 - - 410,200
Accrued warranty 420,000 350,000 - - 770,000
- ----------
<FN>
<F1> Receivable write-offs net of recoveries
<F2> Reclassification to accrued warranty
<F3> Reclassification from allowance for doubtful accounts
<F4> Materials used or reserved for warranty support
<F5> Reclassification from other liability accounts