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

                                     FORM 10-KSB 

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 [Fee Required] or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934 [No Fee Required]
 
                       For the fiscal year ended April 30, 1997
                               Commission File #0-27832


         COMPOST AMERICA HOLDING COMPANY, INC.
 ................................................................
(Exact name of registrant as specified in its charter)

    New Jersey                     22-2603175                   
____________________________     __________________________
(State or other jurisdiction of  (I.R.S. Employer
incorporation or organization)   Identification No.)



320 Grand Avenue    Englewood, New Jersey        07631
_____________________________________________ _______________
(Address of Principal Executive Office)       (Zip Code)

Registrant's telephone number, including area code: (201)541-9393

Securities registered pursuant to Section 12(b) of the Act: None

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

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

Yes   X   No
    -----   -----

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


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State the issuer's revenues for its most recent fiscal year: 

                                       $147,466

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked price of such stock, as of a specified date within the past 60
days - $ 17,564,645 (approximate as of July 31, 1997)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

1.  Common Stock -  18,707,277 shares outstanding as at July 31, 1997.

Documents Incorporated By Reference - None

PLEASE ADDRESS ALL CORRESPONDENCE TO:  Mark Gasarch, Esq.
                                       1285 Ave. of the Americas
                                       3rd  Floor
                                       New York, New York  10019


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                                        PART I


ITEM 1.
DESCRIPTION OF BUSINESS 

BACKGROUND

     The Company was incorporated on August 20, 1981 in the State of New Jersey
under the name Alcor Energy and Recycling Systems, Inc. ("Alcor") for the
purpose of designing, constructing, managing and operating resource recovery
facilities. On January 23, 1995 Alcor acquired all of the outstanding shares of
Compost America Company of New Jersey, Ltd. ("CANJ"), which had been
incorporated on December 17, 1993 in the State of Delaware for similar purposes,
and subsequently changed its name to Compost America Holding Company, Inc. The
Company conducts its business directly, through its wholly-owned subsidiary
CANJ, and through its wholly-owned subsidiary American Soil, Inc., a New York
corporation. The Company has two other wholly-owned subsidiaries, both presently
inactive; Compost America Technologies, Inc., incorporated in Delaware on June
15, 1995 to license certain rights to composting technology and Gardenlife Sales
Company, Inc., incorporated in Delaware on March 1, 1996 to handle future sales
of produced compost by the Company. CANJ itself has six subsidiaries, Newark
Recycling and Composting Company, Inc. ("NRCC"), incorporated in Delaware on May
10, 1994, owned 75% by CANJ and 25% by Prince Georges Contractors, Inc., doing
business as Potomac Technologies, Inc. ("PTI"), an unaffiliated company, with
NRCC itself owning 100% of American Bio-Ag, and five wholly-owned subsidiaries,
Monmouth Recycling and Composting Co., Inc., incorporated in Delaware on May 10,
1994, Chicago Recycling and Composting Company, Inc., incorporated in Delaware
on August 4, 1995, Gloucester Recycling and Composting Company, Inc.,
incorporated in Delaware on August 15, 1994, Philadelphia Recycling and
Composting Company, Inc., incorporated in Pennsylvania on March 8, 1995 and
Miami Recycling and Composting Company, Inc., incorporated in Delaware on
November 17, 1995, which itself owns all of the outstanding common stock of
Bedminster Seacor Services Miami Corporation, a Florida corporation. Unless
otherwise indicated, references to the Company includes the Company and its
subsidiaries and CANJ and its subsidiaries.

      The Company is a development stage company which, through its
subsidiaries, will construct, manage and own enclosed organic material recycling
compost manufacturing plants. Composting is a method of converting the organic
portion of garbage (Municipal Solid Waste--"MSW") and sewage sludge into a peat
moss like product with agronomic benefits. The Company will be paid fees
("tipping fees"), just as landfills and incinerators are paid, for receiving and
processing the organic waste and sewage sludge. The Company also will receive
revenues from the sale of the compost it produces. The Company anticipates that
it will be competitive with 

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other waste management options by locating its plants convenient to urban
centers, thus eliminating the need to use local transfer stations and reducing
the transportation costs associated with hauling waste to distant out-of-state
landfills. The Company's first two projects will be a 200,000 square foot fully
enclosed composting facility in Newark, New Jersey ("Newark Project"), which is
75% owned by the Company through CANJ, and 25% owned by PTI, and a 200,000
square foot fully enclosed composting facility in Dade County, Florida ("Miami
Project").

      The Company's executive offices are located at 320 Grand Avenue,
Englewood, New Jersey 07631-4355. The Company's telephone number is (201)
541-9393; fax (201) 541-1303.

INTRODUCTION

     The Company is a development stage company in the business of developing
large scale Company owned organic waste recycling facilities which will process
commercial and residential food, soiled paper and coated cardboard, among other
organic wastes, which are found in municipal and commercial solid wastes
("organic waste") and sewage sludge ("biosolids") from municipal waste water
plants into compost and, in the business of the land application of biosolids.
The Company through its subsidiary entities, currently has five projects
actively under development and is negotiating for additional projects which it
plans to acquire through acquisition, merger or joint venture. To date, the
Company has had no significant revenues from operations and has utilized private
financing for the development of each of its projects and for general corporate
expenses.

     The Company uses a combination of patented and proven technologies
currently in use at composting plants in Europe and the United States. The
Company plans to construct fully enclosed, environmentally sound facilities,
each capable of processing 300 to 700 tons per day of varying amounts of organic
waste and biosolids. Initial efforts have been concentrated (1) in New Jersey,
where a progressive regulatory environment, extensive waste supply and some of
the highest organic waste and biosolids disposal ("tipping") fees in the United
States make it a most attractive market for the Company to develop composting
facilities and where, in Newark, New Jersey and Miami, Florida, the Company
hopes shortly to commence construction of its first enclosed composting
facilities; (2) in Florida, where the City of Miami has entered into a 30 year
"put or pay" contract with a corporation which the Company recently has
acquired, and where the Company, on March 29, 1996, purchased property for which
it has received a state composting permit; (3) in Chicago, where a site has been
optioned and a permit application has been filed and a Facility Construction and
Development Permit received for a composting facility; (4) in Monmouth County,
New Jersey, where an agreement has been executed to acquire property where the
Company believes a permit may be obtained to build an 

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invessel composting facility, and (5) in Gloucester City, New Jersey, where a
demonstration composting project is in the final stages of planning and, upon
proof of concept to the local Mayor and Council, will be upgraded to a full
scale commercial facility. 


THE COMPOST INDUSTRY

INTRODUCTION

     The Company believes that the compost industry has entered into a period
that should allow for rapid growth. Economic, legal and regulatory factors have
converged to create the impetus for the development of composting facilities
capable of converting the organic fraction of municipal and commercial solid
waste ("MSW") and sewage treatment plant biosolids into a "beneficial use
product" called compost.The Company hopes to capitalize on this opportunity by
developing company owned composting facilities to be constructed by Black and
Veatch Corporation and to be operated by the Professional Services Group, Inc.,
unaffiliated companies which construct and manage similar plants across the
United States. The Company expects that its composting facilities will have
sufficient resources to assure the efficient, effective and cost-competitive
production of high quality compost. The Company expects to be able to compete
effectively on price ("tipping fees") with landfills and incinerators and yet be
environmentally superior in that the organic fraction of municipal and
commercial solid waste and biosolids will be recycled into environmentally safe
compost.

STATE OF THE WASTE INDUSTRY

     The quantity of solid waste and biosolids generated in the United States
each year continues to grow while the trends in managing this waste are
changing. Landfill capacity in many areas of the country continues to diminish
due to the stricter regulation of Subtitle D of the Federal Resource
Conservation and Recovery Act. Twelve states have less than five years of
available capacity remaining. Incineration has reached a ceiling in terms of
future growth due to environmental (Clean Air Act) and "NIMBY" (Not In My
Backyard) concerns regarding the desirability of additional incinerating
capacity and future sites. Curbside recycling of plastic, glass, aluminum,
ferrous and clean paper materials continues to grow, maturing from source
separation regulation to the common daily practice of almost 100,000,000
Americans. The source separation of plastic, glass, aluminum and ferrous
materials has, in turn, significantly increased the quality of the organic
content of the remaining waste, making composting a more efficient alternative
to either incineration or to landfilling. The "Ocean Dumping Act" banned ocean
dumping of sewage sludge and has mandated land based use alternatives. The
"Clean Water Act" has resulted in dramatic increases in the quantity of "clean"
biosolids, creating further recycling (composting) opportunities. The growth of 

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recycling and composting can be expected to continue as regulatory,
environmental and economic pressures continue to converge. Composting is a
primary waste management method which the Company believes, unlike landfills and
incinerators, can be successfully built in urban America.

     Although the terms solid waste, garbage and trash are used as general
terms, approximately 70% of these wastes are "organic". Solid wastes include the
following:

Municipal and Residential Organic Waste

    sewage sludge
    septage
    municipal solid waste
    leaves
    grass
    tree stumps
    stable waste
    Christmas trees

Commercial Organic Waste

    meat, fish, fowl processing waste
    canning byproducts and residues
    restaurant waste
    produce processing waste
    animal by-products and waste (including paunch manure)
    pallets (wood, cardboard)
    waxed and coated cardboard
    soiled paper
    school paper and cafeteria waste
    grocery store waste

Solid Waste Trends

     The United States each year generates approximately 300 million tons of
solid waste, of which approximately seventy percent, or 120 million tons, are
organic compostables and approximately 200 million tons of biosolids from sewage
sludge and commercial waste water plants. The following milestones have occurred
which created forces of change which had the effect of permanently restructuring
America's waste management industry and created a significant composting
opportunity:

*   The Federal Ocean Dumping Ban of 1988 prohibited ocean disposal of all
    municipal biosolids after December 31, 1991. As a result, domestic
    treatment works which had been ocean dumping were forced to develop land
    based management strategies, such as composting, which offered the
    beneficial use of biosolids.

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*   The Part 258 municipal solid waste landfill regulations of 1993 established
    minimum requirements for new and existing landfills. These national
    regulations put new standards in place for landfill location restrictions,
    operational requirements, design standards, groundwater monitoring,
    corrective action, closure and post-closure care and financial assurance.
    The result has been the closure of "open dumps" and the upgrading of
    existing facilities. The Company believes that this will result in higher
    landfill tipping fees and reduced capacity as substandard facilities must
    spend money to upgrade, or close. 

*   The 40 CPR Part 503 regulations of 1993 set national standards for the
    management of biosolids. These regulations establish the characteristics
    that biosolids must meet for different processes and land application. They
    also transform the highest quality biosolids from a waste material, heavily
    regulated by state and federal law, into a product that can move freely in
    commerce with no regulations beyond the production point. This results in a
    level playing field throughout the United States for the distribution of
    compost products to end users.

*   The Federal Clean Water Act of 1977 resulted in substantial funding to
    state and local governments through the "Construction Grants Program" to
    upgrade domestic treatment works. Through this upgrade, domestic treatment
    works advanced beyond primary treatment to add secondary microbial
    treatment and chemical tertiary treatment. This resulted in a production of
    higher quantities of biosolids. In addition, under the National Pollutant
    Discharge Elimination System permitted program, industrial pretreatment
    resulted in substantially cleaner biosolids which are ideal for composting
    and use as a landscape/manufactured topsoil product in commerce.

*   The cessation of Federal Clean Water Act funding to state and local
    governments has fueled the movement to privatization for the development of
    new capacity for biosolids management, such as through in-vessel composting
    facilities constructed by the Company.

*   The creation of the National Compost Council by Proctor & Gamble and
    environmental groups in 1990 which serves as an independent source of
    unbiased technical expertise in the composting field. The Council has
    published significant literature and guidance on proper composting
    procedures and serves as a national clearinghouse of technical information,
    bringing a high profile and level of creditability to composting.

*   The national proliferation of recycling programs throughout the late 1980's
    and 1990's which have removed the vast 


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    majority of inorganic materials from the municipal waste stream. Nearly
    every state has adopted voluntary, and in some cases mandatory, recycling
    goals. In all cases, initial efforts focused on newspaper, aluminum cans
    and glass containers. Many programs have been expanded to capture plastics,
    tin/bimetal cans, white goods, household hazardous waste, waste oil
    collection, universal waste and pollution prevention programs help ensure
    that any materials of concern are managed separate from municipal waste.

*   The continuing decline of urban centers led to the development, in the
    1980's, of an effort to clean up and make use of the property located at
    the heart of urban America. These properties are at the center of biosolids
    and solid waste generation and cities want to increase their tax base and
    to generate jobs. Unlike incinerators and landfills, the development of
    in-vessel composting facilities becomes a compatible land use desirable to
    local governments. Proximity near the source of waste generations also
    reduces transportation costs and provides economies of scale which make
    in-vessel composting a desirable waste management method.

DISPOSAL ALTERNATIVES

     INTRODUCTION. Approximately 62% of the solid waste generated in the United
States goes to landfill, 15% goes to energy incinerators, 1% to conventional
incinerators, and 22% is recycled (source: EPA Characterization of MSW in the
USA). These percentages will continue to change due to economic, legal and
regulatory trends which emerged in the early 1990's.

    SOURCE REDUCTION. Recently, there has been an attempt to emphasize on
source reduction. However, source reduction is not a disposal alternative.
Rather, it seeks to reduce the quantity of the disposable wastes at the outset.
Packaging in bulk, or leaving grass clippings on the lawn are two examples of
proposed source reduction steps. Source reduction would most likely not reduce
the amount of organic compostables available to the Company, since the materials
composted by the Company are not subject to source reduction.

     LANDFILLS. The number of landfills in the United States continues to
decline from approximately 30,000 in the 1970's to less than 3,600 today. The
continued reduction in the number of landfills will result from a combination of
factors, including increasingly stringent operating and environmental
regulations, renewed enforcement activities and a reluctance on the part of
municipalities to permit new landfills.

     This continued closure of existing landfills will not only have a
significant impact on alternative technologies for disposing of organic solid
waste, but the higher cost of development, 

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permitting and operating new landfill space, along with increased transportation
and transfer station fees, will create a pricing floor allowing for the growth
of alternative waste solutions and technologies specifically emphasizing
composting. Disposal costs, including transportation, transfer station thruput
fees and landfill tip fees, are highest along the Eastern seaboard. In some
areas, such as Florida, the Mid-Atlantic states and New England, disposal costs
are in excess of $60 a ton, and in northern New Jersey, disposal rates are in
excess of $100 per ton.


     INCINERATION. A volume reduction option for municipal and commercial waste
is incineration. There are presently less than 160 waste to energy plants in
operation in the United States with a total capacity of approximately 30 million
tons per year. Typical plants range from 400 tons per day to 2,000 tons per day.
Incinerators do not dispose of waste, they merely reduce the volume of waste
going to landfills, typically by about 90% (75% reduction by weight).

     The use of incineration was the result of a significant increase in tipping
fees, the subsidizing of incinerator costs through electrical energy rates, the
acceptance of the technologies combined with operating and performance
guarantees by large credible companies and reductions in local landfill space
combined with pressures by municipalities to cap the escalation of long term MSW
disposal costs.

     Local resistance to the development of new incineration plants will be a
significant deterrent to the growth of incineration as a solution to the solid
waste disposal problem. Additionally, the subsidizing through electrical energy
rates will be eliminated.

     RECYCLING. Recycling is recognized as a waste recovery strategy whereby
waste materials are beneficially converted into useful products.
Initially,recycling included only metals, plastics, glass and some paper. Today
recycling includes "organic materials" which represent up to seventy percent
(70%) of the solid waste stream. The Company believes that composting is the
only viable method to recycle organic waste materials.

     Federal, state and local laws and regulations have played an increasingly
important role in the growth of recycling. Many states and the District of
Columbia have instituted recycling laws. Such states, including New York,
California, Florida, Illinois, Maryland, New Jersey, Ohio, Pennsylvania,
Connecticut and Massachusetts, have mandated recycling goals. Some states have
mandatory source separation laws.

     Recycling methods include: (1) curbside collection, (2) drop off centers,
(3) MRF (material recovery facilities), (4) recycling centers (where commingled
recyclable materials are separated for recovery through manual and automated
techniques) and (5) 

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composting facilities where the organic fraction of MSW and sewage sludge are
processed into compost.

     The Company believes that the trend toward recycling should continue to
increase for numerous reasons, including:

          1. Increasing consumer/business awareness regarding the environmental
concerns of waste disposal;
                                 
          2. The development of industry solutions to using recycled materials
and in creating new products, primarily resulting from the availability of
consistent, price competitive supplies of recycled materials;

          3. A proliferation of mandatory recycling goals and laws; and

          4. The economic and beneficial use of processing the organic fraction
of MSW and sewage sludges into compost.

     The Interrelationship of Waste Management Methods. While each of these
three major waste management methods will be used at various times and
locations, composting should experience dramatic growth.

     Compost facilities will recycle organic waste materials, including the
organic fraction of MSW and sewage sludge, so as to meet federally mandated
regulatory guidelines. While some portion of the various organic waste materials
will be commingled with plastic, glass and metals and processed together, a
significant portion of the commercially generated waste will be source separated
and not commingled, thereby offering a significant opportunity for composting.

     Incinerators and/or refuse derived fuel facilities will seek to receive
mostly dry wastes and will seek to limit those items that are high in nitrogen
and moisture or which can be readily recycled (composted). Landfills will
receive those wastes that are not incinerated, recycled and/or composted.

THE NATIONAL MARKET

     Organic recycling will require the use of in-vessel composting facilities
designed to meet all environmental regulations while producing a beneficial use
product (compost) using sewage sludge and the organic fraction of MSW as the
feed stock. The demand for organic recycling will be driven by higher tipping
fees, reduced local landfill space, higher incinerator costs and the overall
impact of urban development on a nationwide basis.

     The Company believes that this projected increased demand for organic
recycling will create the opportunity for the Company to 

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expand its existing project base from New Jersey, Chicago, Illinois, and Miami,
Florida, into other major urban areas in the United States. The Company
estimates that within the next ten years there will be a significant demand for
in-vessel composting facilities in urban areas throughout the United States,
each with a capacity of 300-500 tons per day, capable of processing the organic
fraction of MSW and sewage sludge. Furthermore, given to the capital constraints
of municipalities, the lack of significant state or Federal grants or loans, and
the pressing need of rapidly satisfying federal and state requirements, the
Company believes that a significant number of these facilities can be expected
to be privately owned.

THE ENVIRONMENT FOR COMPOSTING IN NEW JERSEY

     In 1993, the New Jersey Department of Environmental Protection
("NJDEP"),issued two comprehensive plans governing the strategy for managing New
Jersey's waste through the year 2003. These plans, the "Statewide Sludge
Management Plan Update", and the "Solid Waste Management State Plan Update
1993-2002", together with Governor Whitman's current updates, are addressing the
major problems in the waste industry in New Jersey. As a result, significant new
business opportunities, principally in the area of recycling and composting,
have developed. Important highlights of these plans include the following:

*   The state must recycle sixty percent of its total waste stream and fifty
    percent of its municipal waste stream by December 31, 1995. Through
    calendar year 1993, the State reported having achieved a 53% total waste
    stream rate (including construction debris and junked cars) and a 40%
    municipal waste stream rate.

*   New Jersey must cease all waste exports and become one hundred percent self
    sufficient by December 31, 1999. Over the past seven years, new in-state
    capacity and increased recycling have reduced exports from four million to
    two million tons per year.

*   Sixty-one percent of New Jersey's sewage and two million tons per year of
    solid waste which is now exported to other states must be recycled,
    beneficially reused or disposed of within the state by December 31, 1999.

*   Composting is promoted; new incinerators are discouraged.

*   One hundred sixty-eight landfills which have been closed must be
    re-vegetated. Over 400 additional sites which closed prior to the State's
    Sanitary Landfill Closure Statute being passed also may require
    re-vegetation in the future.

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*   Source separated food wastes are now exempt from county waste control
    regulations.

*   Leaves are banned from landfill disposal or incineration statewide and
    grass is a prohibited waste type for acceptance in some State issued
    incinerator permits.

     The implementation of these policies, along with the enactment of
complementary legislation, has created a fertile environment for the development
of in-vessel composting plants. Therefore the Company has targeted three of its
first five facilities in the State of New Jersey. Additional elements of the
state's solid waste and sewage sludge management plans include the following:

Regionalization

     The state has moved away from its previous approach which called for each
of the twenty-one counties (and one special district) to develop individual
plans for waste processing. Instead, the NJDEP is encouraging the development of
regional disposal facilities to serve more than one county. This sets the stage
for partnerships in the development of new source separated organics and MSW
composting facilities between counties which currently export waste, as well as
counties using landfills which wish to preserve capacity and counties which
incinerate and wish to reduce emissions (such as SO2 from grass) and improve Btu
values, which generally are diminished by high organic waste content.

County Solid Waste Plans

     A requirement of New Jersey's solid waste plan is that each county must
submit a waste plan conforming to the objectives and requirements of the state
plan. The counties bear the primary responsibility for achieving self
sufficiency, recycling and source reduction goals established by the NJDEP. One
of the state's objectives is to manage organic wastes through composting.

Permitting Improvements

    The NJDEP is involved in a comprehensive effort to streamline and improve
its overall permitting capabilities. The NJDEP recently announced a new food
waste permit which is simpler and less costly than previously required municipal
solid waste or sludge permits. The State also recently announced a program to
pursue "performance partnership agreements" where traditional operational
requirements are maintained, but programs for advanced environmental protection
will be voluntary, selected by facility owner/operators and memorialized in
consent agreements entered with the State. The benefit of entering such
agreements will be reduced bureaucratic requirements and reduced reporting and
inspection which will bring compliance costs down for the Company's planned New
Jersey facilities.

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Promoting The Development Of The Compost Industry

     As a follow up to the development of the solid waste and sludge management
plans, New Jersey's governor issued Executive Order No. 91 in October 1993,
requiring state agencies to purchase recycled products. Specifically, all state
agencies must now utilize compost and soil amendments made from organic
materials in maintenance, landscaping and construction of public lands or
projects. These products shall be used in lieu of other non-recycled products
(i.e., farm topsoil, peat moss and chemical fertilizers). The purpose of this
legislation is to create new high volume end markets for compost, a product made
from recycled materials, so that more private compost facilities will be built.

Waste Hierarchy

     The state's solid waste plan is based upon a hierarchy of waste handling
and disposal methods. The waste hierarchy, in order of priority, is as follows:

* Source reduction;

* Source separation and recycling;

* Composting of source separated waste;

* Materials recovery systems;

* Solid waste composting;

* In-state landfilling and regional incineration;

* Out-of-the-state landfilling (as a short-term measure only).

    The economic, regulatory and legislative environments in New Jersey have
quickly evolved to create a favorable environment for the development of
in-vessel compost plants in the state. In order for the state to achieve its
recycling and waste self-sufficiency goals, the more than $300 million dollars
per year that is presently spent on disposing of waste out of state must be
re-channeled into recycling before the end of the decade. Given that statewide
mandatory recycling has already been in effect in New Jersey for over eight
years, the only realistic way to achieve the state's recycling and
self-sufficiency goals is through source separated organic waste composting.

Other Key Factors Supporting the Company's Plans for New Jersey

In addition to the policy framework outlined above which is supportive of
developing in-vessel composting systems, a number of other key factors reinforce
the Company's initial efforts to focus on project development in the State of
New Jersey.

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*   Source Separated Organic material is considered a "recyclable commodity" in
    New Jersey if destined for composting. It is therefore exempt from "flow
    control" and can move as a "product in commerce."


*   New Jersey has had mandatory recycling in place for eight years and has
    achieved a 40% MSW recycling rate. These advanced recycling programs in
    each town already have removed a large percentage of inorganic material,
    such as glass, aluminum, tin and bimetal cans, and plastics, thereby
    creating cleaner organic waste streams.

*   In terms of pricing, New Jersey has some of the highest tipping fees in the
    United States, particularly in the northeastern part of the State
    surrounding the Newark project site. The average tipping fee for commercial
    landfill, incineration and transfer station facilities in the immediate
    area of the Newark facility is nearly $102 per ton.

*   From a disposal standpoint, only three facilities exist in the entire
    northeastern region of the State; two mass burn incinerators and one
    landfill. The landfill has less than one year of remaining capacity and
    virtually no chance of being expanded. All other MSW is exported to
    out-of-state landfills through expensive transfer station operations.

*   The are no new disposal facilities in the development, planning or
    construction stage in all of New Jersey other than those of the Company. 

*   Distances to major commercial out-of-state disposal facilities are
    significant from most of New Jersey, and especially from its northeastern
    area. For example, distances from Newark to Waste Management Inc.'s GROWS
    and Tulleytown Landfills in Lower Bucks County, Pennsylvania are about 120
    miles round trip, and the distance to the Empire Landfill in Taylor,
    Pennsylvania is about 200 miles round trip. Since distances to commercial
    out-of-state disposal facilities are too great for direct haul
    transportation from the northeastern region, the use of expensive transfer
    stations presently is required.

*   Should waste flow regulations be eliminated, the nearest out-of-state
    disposal facilities may be heavily used beyond permitted and logistical
    capabilities leading to long lines, time delay and heightened regulatory
    scrutiny by state and local enforcement agencies. Solid waste haulers are
    primarily in the "collection" industry. Being able to move quickly in and
    out of the Company's Newark facility will be of great utility to these
    haulers, for whom "time is money."

*   Should waste flow regulations be eliminated, demand for the 

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    use of out-of-state landfills will increase, no doubt leading to an
    increase in their tipping fees. These higher tipping fees will be supported
    by the baseline requirements of the U.S.E.P.A.'s Part 258 landfill
    requirements 


*   Should "Economic Flow Control" strategies be implemented, rates will be
    market based and should stay in the range of $70 to $80 per ton.

*   Most solid waste movement will be from northeastern New Jersey and New York
    City to points west, bringing it past the Company's New Jersey facilities. 


THE COMPANY'S RESPONSE

INTRODUCTION

     With proven technologies and strategically located sites in Newark, New
Jersey, Chicago, Illinois and Miami, Florida, along with the possible
acquisition of existing operating companies, the Company believes that it is
poised to meet a significant portion of the organic recycling market demand. 

     The Company, directly and through its subsidiaries and affiliates, is in
the business of recycling organic wastes including the organic waste fraction of
MSW and sewage sludge, by converting them into compost and other soil products
which it plans to sell, through its Gardenlife Sales Company, Inc. subsidiary.
The process which the Company will employ is composting, or the controlled
decomposition of organic matter into humus (a component of soil). Like a
landfill or an incinerator operator, the Company will be paid to accept waste
from the generators of organic materials. In selected markets, like New Jersey,
Illinois and Florida, the Company believes that the opportunity to create a
profitable business based upon the efficiencies of receiving and processing
large volumes of organic waste into compost is significant.

TEAMING

    While each of the Company's composting facilities will be owned and
operated through a different Company subsidiary, the various projects will be
designed, engineered, constructed and, once "on-line", operated by "teaming
partners", non-affiliated entities who are proven leaders in their own core
competencies. These strategic teaming partners either already have executed
teaming agreements with the Company, or will do so shortly. The Company intends
to use the same teaming partners as it develops its in-vessel composting
facilities throughout the United States. The efforts of all project teaming
partners are coordinated through the 

                                          13


<PAGE>

Company, and all technology development, siting, permitting, waste procurement,
financing and compost marketing will be done by the Company itself "in house." 
The Company's principal teaming partners are their core competencies are:



Engineering, Procurement and Construction - Black & Veatch
Operations - Professional Services Group
Construction - VRH Construction Corp.
Financing - Paine Webber Inc.
Feasibility Consultant - R. W. Beck
Composting Facility Consultant - Robert Tardy & Associates
Biosolids Land Application & Composting - Potomac Industries, Inc.

BLACK & VEATCH. Established in 1915, Black & Veatch has evolved into one of the
largest and most respected engineering and construction companies in the world.
With more than 4,800 professionals and 45 offices around the world, the firm is
constantly ranked among the top 10 firms in various design and construction
categories according to leading environmental and construction industry
publications. Black & Veatch Environmental Enterprises provides turnkey services
- project development, engineering, financing, procurement, construction and
operation services - and program/construction management for public and private
sector environmental projects. Black & Veatch will serve as the Engineering,
Procurement and Construction contractor for the Company's projects and will
provide a seamless transition to Professional Services Group for the actual
operation of the facility.

PROFESSIONAL SERVICES GROUP. Professional Services Group ("PSG") is the nation's
leading operator of municipal wastewater treatment facilities. PSG is a
subsidiary of Air & Water Technologies ("AWT"), which itself is controlled by
Compagnie Generale des Eaux ("CGE"), the world's largest municipal services
company will revenues in excess of $30 billion. PSG has extensive experience in
the operation of composting facilities, currently operating biosolids and/or
municipal solid waste composting facilities in Baltimore, Maryland; Schenectady,
New York; Bristol, Tennessee/Virginia; Hickory, North Carolina; Southbridge,
Massachusetts; and Wright County, Minnesota. PSG will operate the Company's
composting facilities.

VRH CONSTRUCTION. VRH Construction is one of the nation's top 200 construction
management companies. It has participated in managing large projects at La
Guardia, Kennedy and Newark airports. The Port Authority of New York and New
Jersey is a major and steady client as are all the major airlines which provide
services at these various airports.

PAINE WEBBER, INC. Paine Webber, Inc. is a leading full-service 

                                          14


<PAGE>

firm with a distinguished 115-year history. Paine Webber has an internationally
recognized corporate brand name and a strong reputation for quality client
service. Paine Webber serves the investment and capital needs of over two
million clients, including individuals, institutions, corporations, state and
local governments and public agencies in the United States and abroad. Among the
firm's key businesses are private client brokerage, investment banking,
municipal securities, real estate, institutional equity and fixed income sales
and trading, research, international asset management and transaction services.
Paine Webber will serve as senior underwriter and financial advisor for all of
the Company's projects and has executed an exclusive Master Letter Agreement to
perform this function.

R. W. BECK. R. W. Beck's Solid Waste Practice provides a complete range of
services in the fields of engineering, planning, management, economics,
environmental analysis and operations analysis. The Solid Waste Practice works
with all types of solid waste systems including landfills, incinerators,
recycling systems, material recovery facilities and refuse derived fuel plants.
This diverse range of knowledge and skills makes R. W. Beck particularly expert
in evaluating composting systems within a complete solid waste management
overview. R. W. Beck has 12 offices and over 650 employees nationwide.

ROBERT TARDY & ASSOCIATES. The principal of Robert Tardy & Associates, Robert
Tardy, is a nationally recognized expert in compost facility design. Mr. Tardy
directed all aspects of The Composting Council's Operating Guide, which has
become a composting industry standard. Mr. Tardy has eleven years experience in
biosolids management and has been engaged as a technical consultant for the
Newark composting facility.

POTOMAC TECHNOLOGIES, INC.  Potomac Technologies, Inc. ("PTI") has successfully
performed many contracts related to the operation, maintenance and construction
of wastewater treatment facilities. PTI maintains the distinction of being one
of the only minority -owned entities in the United States engaged in the
business of managing biosolids. From 1984 to 1991, PTI successfully performed
the composting of biosolids for the city of Washington, D.C. and presently is a
subcontractor to a joint venture under contract with the District of Columbia to
beneficially use approximately 1,000 wet tons per day of biosolids through land
application. PTI is a 25% equity partner in the Company's Newark project.
 

DESCRIPTION OF COMPOSTING TECHNOLOGY USED BY THE COMPANY

     The Company has licensed or contracted for three patented technologies, one
of which already has been permitted by the NJDEP. These three technologies will
be provided to the Company through agreements with Bedminster Bio Conversion
Corporation, D.J. Egarian 

                                          15


<PAGE>

and Associates and Compost Industries, LLC. The Company's facilities will be
similar to operating sites in Europe and the United States. See "Process
Description" below. A typical Company facility will convert approximately 300 to
700 tons per day of organic waste materials including MSW and/or sewage sludge
into compost.

PROCESS DESCRIPTION

     There are four stages to the composting process:

          (1) The first stage involves the receipt of the incoming organic waste
materials. Trucks entering the site will be weighed at a scale and will unload
the materials indoors onto a "tipping floor." The waste material will be
inspected and accepted. (Any unacceptable materials will either be immediately
removed by the trucker, or will be deposited into an on-site container for later
removal.)

          (2) Stage two involves mixing the organic materials and commencing the
composting process. The material received will be loaded into rotary mixing
drums, called "Bio Wet Mills" 12 feet or greater in diameter and between 100 and
220 feet long, where it will be processed for 12 to 72 hours under precise
controls. The rotary action of the drums causes the heterogenous and varied
carbonaceous and nitrogenous organic waste material to be reduced in size to
less than one inch while homogenizing the entire mix. When the desired
characteristics have been reached, this thoroughly mixed and partially
decomposed material will be discharged from the mixing drums and screened to
remove any remaining large and/or inert items. These removed inert materials
will be placed in a container for recycling or offsite disposal.

          (3) In stage three, the screened homogenized organic material will be
placed in an aerated composting/curing system for up to 90 days, during which
time the material will be agitated and processed through biological activity.
Temperature, oxygen and moisture monitors connected to a computerized monitoring
system will indicate when water and/or air needs to be added in order to
maximize the rate of biological activity (i.e., the composting process). When
the desired compost characteristics are reached, the cured compost will be
removed.

           (4) During the final stage, the compost will be processed through
multiple 3/8 inch screens and placed into storage. There will be up to 90 days
of final storage capacity at each facility or at satellite storage and blending
sites.

     The objective of composting indoors in a controlled environment is to
optimize the processing time to convert the organic waste into compost. Another
objective is to maximize the volume processed for a given capital cost (which in
turn minimizes 

                                          16


<PAGE>

the capital cost per ton). A key to accomplishing these goals is to monitor and
control the composting process through the entire system. Incoming waste
materials are mixed to achieve the desired carbon to nitrogen content, moisture
level, pH, and material sizing. From the time decomposition starts in the Bio
Wet Mills to when it ends in curing area, these and other process parameters are
continuously measured. The process variables which will be controlled so that
composting occurs at the fastest possible rate are: (a) the moisture content,
(b) the oxygen level, (c) the frequency of agitation (or turning of the
material), (d)temperature, (e) pH and (f) C/N ratio and (g) particle size. The
Professional Services Group facility operator will be responsible for managing
the facilities and monitoring the computerized control system to achieve optimal
performance.

ODOR CONTROL

     An important aspect of the facility's design is its odor control system.
The Company's plants will be completely enclosed, with doors opened only to
accept deliveries of organic waste materials and to ship finished compost. Each
facility will be under negative air pressure, meaning that air will be drawn
into the plant when the doors are opened. Process air within the facility will
be processed through a chemical filter and/or a bio-filter system, resulting in
the emission of only clean air, water vapor and carbon dioxide into the
atmosphere. The facilities are being designed so that there will be no negative
off-site impact generated by the composting facility.

TRANSPORTATION IMPACT

     All of the Company's sites are easily accessible from major state highways
and each will have sufficient on-site queuing to manage movement of in and
out-bound trucks. As a result, the transportation impact on the local business
communities will be minimal.

NOISE

     All composting operations will be within enclosed structures and the
operations will not generate excessive levels of noise, thus not adversely
impacting surrounding property owners. Noise levels will be within all State and
Federal noise parameters. Primary sources of noise will be trucks accessing the
site, the rotary drum motors and front end loaders which operate inside the
buildings. As a result, any impact from noise generated from the operations will
be minimal. Facilities will be located in industrial areas or on sites away from
residential areas.

COMPOST MARKETING

     Certain of the Company's principals were actively engaged in 

                                          17


<PAGE>

the marketing of compost in New Jersey and Pennsylvania in the 1980's and early
1990's. They contracted with various municipalities, including the City of
Philadelphia, Washington, D.C., and others, to market the compost produced at
the municipalities' sewage sludge composting facilities. The marketing
activities included performing research studies with agricultural departments in
leading universities, developing compost markets, and managing all aspects of
the transportation and application of the finished products.

     All of the compost will be marketed under the GARDENLIFE or TURFLIFE
tradenames. Compost and blend products made with compost, such as topsoil, will
be sold by Garden Life Sales Company, Inc. in combination with local landscape
supply companies. Garden Life Sales Company, Inc. has developed a variety of
markets for selling compost and blend products. Some of these users will include
landscapers, growers, greenhouses, sod farms, golf courses,
municipalities,schools and others.

    At present, Garden Life Sales Company, Inc. has had some of its product
line certified and approved by NOFA-NJ, the association of organic farmers in
New Jersey.

PROJECT DESCRIPTIONS


NEWARK PROJECT

     Newark Recycling and Composting Company, Inc., owned 75% by CANJ and 25% by
PTI, is developing a 1200 ton per day in-vessel composting facility located on a
12 acre site in the East Ward of Newark, New Jersey, at the convergence of
Routes 78, 1, 9 and the New Jersey Turnpike. The plant is designed to compost
sewage sludge from any one or a combination of sludge generators from the New
Jersey/New York metropolitan area while utilizing source separated
food/paper/wood wastes as the bulking agent. The plant also is permitted to
dewater liquid sludge which may be provided from municipal and commercial
wastewater plants located in New Jersey. The City of Newark granted preliminary
approval to build the facility on November 21, 1994 and final site plan approval
on January 30, 1995. Final design drawings and plans have been submitted to the
NJDEP. NJDEP air permits have been received, and notice of intent to issue
facility operating permits was issued on August 2, 1995.

     A final R.W. Beck market demand and feasibility report is anticipated in
December, 1997, together with final cost estimates, a guaranteed maximum price
construction contract from Black and Veatch Construction Corporation and a
maximum price/minimum thruput operations, maintenance and management contract
from Professional Services Group. The managing underwriter for the project,
Paine Webber Incorporated, has advised the Company that it anticipates a closing
of approximately $75,000,000 in principal amount of project 

                                          18


<PAGE>

revenue bonds of the New Jersey Economic Development Authority in early 1998 to
finance this facility. Construction is anticipated to begin immediately
thereafter.

MIAMI PROJECT

     The Company, through a subsidiary Miami Recycling and Composting
Company,Inc., acquired from Bedminster Bioconversion Corporation all of the
outstanding stock of its subsidiary Bedminster Seacor Services Miami
Corporation, a corporation developing a 150,000 ton per year MSW/sludge
co-composting project in northwestern Dade County. The project is based upon a
30 year put or pay contract between the City of Miami and Bedminster Seacor
Services Miami Corporation for the composting of all of its residential MSW. The
Company also purchased a 45 acre acceptable site which has zoning and state
approvals to construct the facility. The Dade County Industrial Development
Authority has authorized the issuance of up to $15,000,000 of tax exempt bonds
to finance the project and authorization for additional funds is being sought.

CHICAGO PROJECT

     Chicago Recycling Company, Inc., a wholly owned subsidiary of the Company,
is developing an in-vessel composting facility for source separated organic
waste and sewage sludge on a site adjacent to a new materials recovery facility
and MSW transfer station, both under construction. The Company has entered into
an agreement to purchase the site for which all local approvals have been
received and applications for required State of Illinois permits were
submitted,with the state permit issued in December 1995. Although financing
arrangements have not been completed, the Company anticipates financing the
project through the issuance of tax-exempt municipal bonds by the local
industrial development
authority.

GLOUCESTER PROJECT

     Gloucester Recycling and Composting Company, Inc., a wholly owned
subsidiary of the Company, together with Compost Industries, LLC, Professional
Services Group, Inc., Tardy and Associates and others have organized a
composting project to demonstrate the collection and composting of source
separated organic wastes from residential and commercial sources in an urban
setting. Compostable wastes will be collected from selected neighborhoods in
Gloucester City and from commercial establishments with compostable wastestreams
that service the same area. Waste providers will include supermarkets,fast food
restaurants, convenience stores and other organic waste generators. The organic
wastes will be composted by the Company using a new patented in-vessel
composting system which the Company has licensed from Compost Industries, LLC.
Compost from the demonstration project will be tested and analyzed 

                                          19


<PAGE>

for safety, nutrient content and physical characteristics.

     Upon the successful operation of this Demonstration Project, the Company
plans to seek approval to construct a food/fiber waste composting facility at
the same site. The materials to be processed will come from surrounding New
Jersey counties as well as from Philadelphia. The Company anticipates that all
required local approvals will be obtained by the first quarter of 1998. The
Company signed a thirty year lease/purchase agreement with the City of
Gloucester to purchase the property owned by the City.

MONMOUTH PROJECT

     Monmouth Recycling and Composting Co., a wholly owned subsidiary of the
Company, has entered into a purchase option agreement on 15 acres in Freehold
Township, Monmouth County, New Jersey. The property is adjacent to a permitted
outdoor windrow composting facility which the Company had signed an agreement,
amended various times, to purchase by June 30, 1996, and did purchase in October
1996. The outdoor facility is permitted to compost up to 50,000 tons per year of
supermarket produce waste and yard wastes. The Company had intended to merge
these two facilities, and may attempt to revive the agreement if the
environmental concerns are satisfactorily resolved.

COMPANY FINANCING

     The ability of the Company to successfully complete these projects is
dependent upon, among other factors, continued Company financing to cover
Company overhead, the completion of project financing to cover the costs of
project construction and the acquisition of all applicable permits to allow for
the construction and operation of the projects.

PROJECT FINANCING

     On February 13, 1996 the Company entered into an agreement (the "Master
Letter Agreement") with Paine Webber Incorporated ("Paine Webber") pursuant to
which Paine Webber agreed to act as sole financial advisor and senior managing
underwriter for the Company's projects. On that same date the Company's 75%owned
subsidiary, Newark Recycling & Composting Co., Inc. ("NRCC") entered into an
agreement (the "Newark Project Letter Agreement") with Paine Webber pursuant to
which Paine Webber agreed to act as sole financial advisor and senior managing
underwriter for NRCC to raise approximately $75 million in a senior-lien tax
exempt bond financing to finance the Newark Project. On that same date the
Company's wholly-owned subsidiary, Monmouth Recycling & Composting Co.,
Inc.("MRCC") entered into an agreement (the "Monmouth Project Letter Addendum")
with Paine Webber pursuant to which Paine Webber agreed to act as sole financial
advisor and sole managing underwriter to raise up to $30 million in a
senior-lien tax-exempt 


                                          20


<PAGE>

bond financing to finance the Monmouth Project. Paine Webber will act
exclusively on behalf of the Company in those geographic areas where the Company
intends to operate composting facilities. All agreements with Paine Webber are
subject to certain terms and conditions as set forth therein.

     Paine Webber anticipates a closing of approximately $75 million for the
Newark Project in early 1998, making funds available for the commencement of
construction for this Project immediately thereafter. In addition, Paine Webber
anticipates a closing of approximately $50 million for the Miami Project in the
last quarter of 1997, making funds available for the commencement of
construction for this Project immediately thereafter. Without this project
financing, the Company will be unable to construct or operate these proposed
facilities, and the Company's future viability would be in doubt.

FACILITIES SITINGS AND PERMITS

     Most aspects of location, construction and operation of composting
facilities are regulated by the states and subject to state and Federal
environmental laws. Obtaining local approvals and state air, water and operating
permits is a detailed and complex process, in many cases taking years to
successfully complete. This is especially true where the compost facility is to
be located in or near urban areas. Representative approvals to be obtained in
most jurisdictions include Local Planning Boards, Zoning Boards, Solid Waste and
Water Disposal Boards, Composting Operation Permits, Air Permits and Building
Permits. 

THE COMPANY'S PERMITS

     The Company believes that the permits it already has acquired, and its now
proven ability to acquire these permits, reflects the experience and expertise
of its management in this area, and provides the Company with an advantage over
possible competitors seeking to enter similar geographic markets. To date, the
Company has acquired or is in the process of acquiring the following permits for
each of its five projects:

NEWARK PROJECT

     1. November 21, 1994--City of Newark grants preliminary approval to build
the facility

     2. January 30, 1995--City of Newark grants final site plan approval to
build the facility

     3. September 26, 1995--New Jersey Department of Environmental
Protection("NJDEP") issues air quality regulation permit controlling emission
limits

                                          21


<PAGE>

     4. October 16, 1995--Application for a Treatment Works Approval for liquid
sludge storage and treatment is filed with NJDEP, with approval anticipated in
June 1996

     5. October 25, 1995--NJDEP Division of Water Quality issues a New Jersey
Pollutant Discharge Elimination System permit for a 680 ton per day facility.
This permit controls the dewatering, lime stabilization, storage,
transfer,composting and distribution of sludge and organic bulking agent.

     6. November 27, 1995--City of Newark Department of Engineering issues a
Soil Erosion and Sediment Control permit.

     7. February 26, 1996--Company notified that Final Construction Approval has
been authorized by the City of Newark.

    8. August 6 1996--Treatment Works Approval issued.

    9. December 26, 1996--Essex County Solid Waste Plan approval to process up
to 1,200 TPD authorized (issued December 30, 1996)

    10. January 1997--Remedial Action Workplan for site completed. Approval for
remediation issued by NJDEP Division of Responsible Party Site Remediation on
June 11, 1997.

    11. February 1997--Phase I Environmental Audit completed. State of New
Jersey recommends no further action needed.

    12. April 1, 1997--Air Quality Permit Modification issued to allow the
processing of 1200 TPD.

    13. April 29, 1997--Stream Encroachment Waiver issued.

    14. June 4, 1997--Authorization for Freshwater Wetlands Statewide General
Permit issued.

    15. June 4, 1997--Facility accepted in the State of New Jersey Solid Waste
Plan for up to 1200 TPD.

GLOUCESTER PROJECT

     1. September 1, 1994--NJDEP Division of Solid Waste Management issues a
Demonstration Project Approval for a 10-ton per day in-vessel facility to
compost source separated organic waste, vegetative and food processing waste and
NJDEP Air Pollution Control Program issues a Temporary Certificate to Operate
Control Apparatus permit to demonstrate the feasibility of collecting and
composting source separated organic wastes from residential and commercial
sources.

                                          22


<PAGE>


CHICAGO PROJECT

     1. All local approvals to operate and construct received from Village of
Riverdale, Illinois.

     2. December 1, 1995--Illinois Environmental Protection Agency, Bureau of
Land, issues a construction and development permit for a facility to compost 350
tons per day of source separated organics and sewage sludge.

    3. January 14, 1997 --Village of Riverdale approved the Host Community
Agreement and Real Estate Tax Abatement resolution. The Village of Riverdale
Engineer previously had approved the site infrastructure plans.

MIAMI PROJECT

     1. County zoning approvals to construct 285,000 ton per year MSW/sludge
co-composting project in western Dade County have been received.

    2. A state composting permit has been received.

     In addition, the Company believes that it will benefit from the Interstate
Memorandum of Understanding under which the states of New Jersey, California,
Illinois and Massachusetts have signed a reciprocal technology transfer
agreement whereby the states will mutually accept support data and the results
of demonstrations, evaluations and certifications of environmental technologies
that are conducted by the other member state environmental agencies. Once fully
established, this process should greatly reduce the Company's permitting
timeframes and application submission costs since it already has obtained
benchmark permits in New Jersey and Illinois.

EMPLOYEES

     The Company presently employs a total of 8 persons, one is an officer of
the Company, 2 of whom are administrative personnel and 5 of whom are involved
in project development. None of the Company's employees are subject to
collective bargaining agreements and the Company has not experienced any labor
difficulties, work stoppages or strikes.


ITEM 2.
DESCRIPTION OF PROPERTY

     The Company maintains its executive, finance and accounting offices at 320
Grand Avenue, Englewood, New Jersey rent-free within the offices VRH through
March 31, 1996 and thereafter at $4,000 per month for five years, plus real
estate taxes and electricity over 

                                          23


<PAGE>

the base year. 

    In December 1995 Newark Recycling and Composting Company, Inc. purchased a
12 acre site in the East Ward of Newark, New Jersey at the convergence of Routes
78, 1, 9 and the New Jersey Turnpike on which the Newark project will be
located.

     On March 29, 1996 the Company purchased 45 acres in northwest Dade County,
Florida. The Company has entered into an option agreement to purchase the
properties for its projects in Chicago, Illinois and Monmouth County, New
Jersey. The Company has executed a lease/purchase agreement for the required
site for the Gloucester, New Jersey project from the City of Gloucester.

     On March 20, 1996 Chicago Recycling and Composting Company, Inc. and Hub
Cap City entered into a lease agreement for the premises located at 13831
Ashland Avenue, Riverdale, Illinois 60627.  The lease is for a term of 36 months
beginning on the date Chicago Recycling and Composting Company, Inc. purchases
the property.  The lease will automatically renew for a period of three years
unless terminated.  The lease payment is $500 per month for a total of $6,000
annually, any renewals are on the same terms.

     On July 1, 1995 Gloucester City (lessor) and Gloucester Recycling and
Composting Company, Inc. (lessee) entered into a lease agreement for certain
real property located in Gloucester City, New Jersey containing approximately
7.98 acres and also Parcel No. 2 (Block 120, Lot 1) if acquired by Gloucester
City.  Approximately 12 acres of Parcel No.2  shall be dedicated for the full
scale, permanent composting facility.  The lease shall commence on March 7, 1996
for an initial term of 24 consecutive months.  With the lessor's consent the
lessee shall have the right and option to extend the term for an additional 30
years.  The rent is based on a rent formula (See Note 7(C)(1) of Notes to
Consolidated Financial Statements).

     On October 2, 1996 the Company was assigned a lease commitment with the
Township of Freehold, New Jersey for two parcels of land located in the Township
of Freehold, County of Monmouth, State of New Jersey.  One parcel 10.462 acres
and the second parcel 8.296 acres.  The lease is for 5 years with a 5 year
option.  The cost of the lease is 5% of the audited profits net of either state
or federal income taxes conducted on the above described premises or a minimum
of $4,000 per year, payable quarterly.  The property shall be used for
receiving, processing and composting organic materials, and wholesale and retail
sale of finished horticultural products.  Organic materials shall include yard
wastes, processing wastes, paper products and wood chips.  The Company must
maintain $2,000,000 of insurance on the premises.

                                          24


<PAGE>


ITEM 3.
LEGAL PROCEEDINGS

     There are no material legal proceedings in which the Company is involved
except that, in 1997, an action was commenced by Praxair, Inc. and Praxair
Foundation in Superior Court of New Jersey, Essex County, Law Division, against
Newark Recycling and Composting Company, Inc. seeking payment in full of a
$2,100,000 note and mortgage, as well as unpaid interest, expenses and
attorney's fees and, in a second action, commenced by the same plaintiffs in
Superior Court of New Jersey, Essex County, Chancery Division, seeking to
foreclose on the property on which the Newark Project would be developed, which
property is collateral for the note. The Company is seeking to refinance this
note and mortgage, and believes that by making certain payments on account,
these actions will be held in abeyance pending this refinancing.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None

                                          25


<PAGE>

                                       PART II   
 
ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's shares of Common Stock presently are being traded on the
Electronic Bulletin Board of the NASD under the symbol "CAHC", and also are
listed in the "pink sheets" of the National Quotation Bureau, Inc. The following
table shows, for the calendar periods indicated, the range of reported high and
low bid quotations for these shares. Such prices necessarily reflect inter
dealer prices, without retail mark up, mark down or commission and may not
necessarily represent actual transactions.

      There were no recorded bids for the common shares of Alcor during the
period May 1, 1993 through October 31, 1994, and no recorded bids or offers for
the common shares of Alcor or the Company during the period November 1, 1994
through April 28, 1995. Furthermore, the Company has outstanding only 199,500
freely tradable common shares prior to the effective date of this offering. On
November 28, 1994 Alcor effected a 1 for 20 reverse split of the shares of its
Common Stock.


                       Quarterly Common Stock Price Range
 

                         High Bid    Low Bid
                       ----------  ----------
1994/1995:
Quarter ended 7/31..............  no bid      no bid
Quarter ended 10/31.............  no bid      no bid
Quarter ended 1/31..............  unpriced    unpriced
Quarter ended 4/30..............  unpriced    unpriced

1995/1996:
Quarter ended 7/31..............  $6.00       $4.00 
Quarter ended 10/31.............  $6.50       $5.50 
Quarter ended 1/31..............  $6.50       $5.75   
Quarter ended 4/30............... $6.00       $4.75   

1996/1997:
Quarter ended 7/31............    $5.50       $4.38
Quarter ended 10/31.............  $5.25       $4.13
Quarter ended 1/31............    $5.00       $3.13
Quarter ended 4/30............    $3.88       $1.72


     As of July 31, 1997, there were approximately 360 holders of record of the
shares of the Company's Common Stock.

                                          26


<PAGE>

     To date, the Company has not paid any cash or other dividends on its Common
Stock and does not anticipate paying dividends in the foreseeable future.
Moreover, the Company's ability to pay dividends on its Common Stock in the
future may be limited by future preferred stock issuances or by lenders.

     During the fiscal quarter ended April 30, 1997, the Company issued 282,434
shares of its common stock, without registering the securities under the
Securities Act of 1933, as amended, to 12 individuals for services rendered
valued at $0.50 per share. There were no underwriters involved in the
transaction, and no underwriting discounts or commissions. In light of the small
number of purchasers and that all securities issued were restricted against
subsequent transfer, the Company believes that 
this issuance of securities was effected under an exemption provided by Section
4(2) of the Securities Act of 1933, as amended, being sales by an issuer not
involving a public offering. A complete listing of all issuances of unregistered
common shares by the Company during its fiscal year ended April 30, 1997 may be
found in Notes to Consolidated Financial Statements, Note 5, AA through TT. 


ITEM 6.   PLAN OF OPERATION

Introduction

     The Company is a "development stage" company and has not generated
significant operating revenues from its inception to date. The Company does not
expect to generate any significant operating revenues until the Company has
successfully financed, constructed and begun commercial operations of one or
more of its compost project facilities currently in development. Since a merger
between a "public shell" and a "private operating company" is considered to be a
recapitalization of the operating company, with no recognition of intangibles as
a result of the merger, the acquisition of the Company's subsidiary, Compost
America Company of New Jersey, Ltd. (the "private operating company"), on
January 23, 1995, has been accounted for as a reverse purchase of the assets and
liabilities of the Company by Compost America Company of New Jersey, Ltd.
Accordingly, the consolidated financial statements represent assets, liabilities
and operations of only Compost America Company of New Jersey, Ltd. prior to
January 23, 1995 and the combined assets, liabilities and operations of both
companies for the ensuing period. The financial statements reflect the purchase
of the stock of Alcor Energy and Recycling Systems, Inc. (the "public shell"),
the former name of Compost America Holding Company, Inc., by Compost America
Company of New Jersey, Ltd. for stock and the assumption of liabilities of
$49,094, this amount being the historical cost of the assets and liabilities
acquired. All significant inter-company profits and losses from transactions 

                                          27


<PAGE>

have been eliminated.

     Since its inception, the Company has met its liquidity needs from the
proceeds of the sale of its common stock and from loans made by directors of the
Company, by VRH Construction Corporation, a principal shareholder of the Company
whose owners are directors of the Company, and by other individuals and
institutions not affiliated with the Company. The Company received $1,365,860
from private sales of its common stock during the fiscal year ended April 30,
1996, $906,409 from private sales of its common stock during the fiscal year
ended April 30, 1995 and $692,000 during the period December 1993 through April
30, 1994. Since April 30, 1996 through April 30, 1997, the Company has raised an
additional $737,154 through private sales of its common stock.

     In addition, VRH Construction Corporation made loans to the Company
totalling $2,869,116 during the fiscal year ended April 30, 1996 and $640,072
during the fiscal year ended April 30, 1995. Since April 30, 1996 through April
30, 1997, VRH Construction Corporation has loaned an additional $555,167 to the
Company. Other loans to the Company since April 30, 1996 through April 30, 1997
have totalled $1,885,800. 

    Total funds raised from the sale of common shares and loans from
shareholders from December 1993 through April 30, 1996 are $6,473,457, plus an
additional $3,178,121 since April 30, 1996 through April 30, 1997.  

    Significant revenues from operations are not anticipated until 1999, when
the Company's initial projects will be fully constructed and operational. Until
that time, the Company anticipates that it will need an additional $3,000,000 to
meet current debt obligations, provide additional development capital for its
various projects and fund ongoing corporate overhead expenses. The Company
anticipates that it will be able to secure these funds from the sale of
additional common shares and/or the issuance of additional debt. In addition,
the Company expects to have completed project financing for the construction of
the Company's facilities in Miami, Florida and Newark, New Jersey prior to the
end of the current fiscal year and the Company may receive development fees and
management fees in connection with this project financing. 

    The Company does not expect to perform any significant product research and
development and does not expect any significant changes in the number of
employees in the current fiscal year. The Company does expect to commence
construction of its Miami, Florida and Newark, New Jersey composting facilities
during the current fiscal year, and, financing and weather permitting, may also
commence construction of its Chicago facility. 

                                          28


<PAGE>


ITEM 7.  FINANCIAL STATEMENTS

(a) Consolidated Balance Sheet as at April 30, 1997
(b) Consolidated Statement of Income (Loss) for the fiscal years     ended
    April 30, 1997, April 30, 1996 and December 17, 1993   (inception) through
    April 30, 1997
(c) Consolidated Statement of Stockholders' Equity from December 17, 1993
    (inception) through April 30, 1997 
(d) Consolidated Statement of Cash Flows for the fiscal years ended April 30,
    1997, April 30, 1996 and December 17, 1993 (inception) through April 30,
    1997
(e) Notes to Consolidated Financial Statements 




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

    On October 10, 1995 Zeller Weiss & Kahn, CPAs replaced Rosen Seymour Shapss
Martin & Company, CPAs as accountants for CANJ by mutual agreement between
CANJ's Board of Directors and the resigning accountants. No report on CANJ's
financial statements issued by the resigning accountants contained an adverse
opinion or disclaimer of opinion or was qualified or modified as to uncertainty,
audit scope or accounting principles, nor were their any disagreements on any
matter of accounting principals or practices, financial statement disclosure or
auditing scope or procedure.

                                          29


<PAGE>
                                       PART III

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

             Directors and Executive Officers

     The following persons were directors and officers of the Company as at July
31, 1997.

     Name                     Age          Position(s)
-------------------------  -----------  ------------------------
Victor D. Wortmann, Sr.        60         Chairman of the Board;
                                             Director
Roger E. Tuttle                57         President and         
                                             Principal Executive
                                             and Financial     
                                             Officer; Director
John B. Fetter                 46         Executive Vice Presi-
                                             dent; Treasurer;
                                             Director
Alfred A. Rattie               43         Vice President--
                                             Marketing
Robert E. Wortmann             58         Secretary; Director
Pasquale J. Dileo              45         Director



     The by-laws provide that the Directors of the Company serve until the next
annual meeting of shareholders and until their successors are duly appointed and
qualified. All officers serve at the pleasure of the Board of Directors. There
are at present no committees of the board of directors.

     Victor D. Wortmann, Sr. is a Director and Chairman of the Board. He has
been Chairman since January 1994. He is the President of VRH Construction
Corporation ("VRH") which, along with his brother Robert E. Wortmann, he founded
in 1958. VRH specializes in facility construction at airports and supporting
services. Mr. Wortmann is the principal in charge of all phases of the
construction business for VRH. He has been the project executive for numerous
projects including terminal construction and expansions at JFK International
Airport in New York for American Airlines, Alitalia, British Airways, Eastern
Airlines, Flying Tigers, Northwest Airlines, Pan American and TWA. Mr. Wortmann
is a graduate of the University of Miami, School of Business (B.A. 1959). He is
an unsalaried part time employee of the Company.

     Roger E. Tuttle is the Company's President, Chief Executive and Financial
Officer and a Director, and was its founder. He has twelve years experience in
compost research and in developing 

                                          30


<PAGE>

marketing programs for the beneficial use of compost, serving as the President
for Earthlife Sales Co. from 1988 through March 1990, President of Bird Compost
Management, Inc. from April 1990 through March 1992 and of Compost Management,
Inc. from March 1992 until it was merged into the Company. Mr. Tuttle was a
founding board member of the Composting Council in Washington, D.C., the
industry trade association. He is a member of the New Jersey Department of
Environmental Protection sludge management task force, responsible for
developing a statewide sludge management plan, is a contributor
to the United States Environmental Protection Agency research on beneficial use
of organic waste.

     Mr. Tuttle has conducted research and developed utilization plans for City
and State Governments on compost quality and use. He has consulted on plant
growth in compost, and has conducted research on mass balances of different
composting configurations. Mr. Tuttle has consulted on the startup of several
in-vessel composting facilities, has conducted a review of active and closed
compost facilities in the United States and has participated in the design and
implementation of programs for compost use for the revegetation of landfills and
strip mines. He is a nationally recognized speaker and has authored or
co-authored manuals and literature for use in the compost industry. Mr. Tuttle
is a graduate of Fairleigh Dickinson University (B.A. Economics,
Chemistry/Biology--1963 and M.B.A.--1969).

     John B. Fetter is the Company's Executive Vice President and Treasurer, and
is a Director, and has been affiliated with the Company since April 1992. He is
a co-founder of Chicago Recycling Company, subsequently acquired by the Company,
and has more than 20 years experience in engineering, construction management
and project development. In September 1991, he founded Foundation Systems, Inc.
("FSI"), an organization specializing in developing energy and environmental
projects and implementing energy strategy and strategic management programs for
client organizations, and has served as FSI's president since its founding. At
FSI he has consulted to the boards of municipal agencies as well as Fortune 500
companies across the United States on the integration of engineering and
economics into the design and construction of complex projects. From January
1985 through August 1991 he served as senior consultant, manager and later a
partner of Delian Corp. and its successor companies, and led the team which
developed the study which resulted in the construction of the Midland
Cogeneration Venture, the largest co-generation project in the United States.

    Mr. Fetter has consulted on numerous environmental projects on topics
ranging from compliance strategies to environmental impact statements. He has
significant experience in financial, legal, and operational analyses, strategic
planning, project management, and systems implementation. He has developed state
of the art computer applications for management of engineering, environmental

                                          31


<PAGE>

compliance, transportation, construction, marketing and distribution
organizations. Mr. Fetter's extensive environmental background has included
management of environmental compliance projects for several firms and sites
requiring definition of policies and procedures for implementing CERCLA, RCRA,
and SARA legislation for manufacturing, process, and petrochemical facilities.
He has participated in the development of cogeneration and energy projects as
well as solid waste management projects. He has been responsible for planning,
scheduling, cost control and contract administration of construction projects
ranging from wastewater treatment facilities to nuclear generating facilities.
Mr. Fetter is a graduate of the University of Colorado (B.S. Chemical
Engineering--1975) and The University of Pennsylvania's Wharton School of
Business (M.B.A.--1981).

    Alfred A. Rattie, the Company's Vice-President of Marketing, is responsible
for directing the Company's compost marketing and land application efforts. He
has twelve years experience in compost research and in developing marketing
programs for the beneficial use of compost, serving as the Vice President for
Earthlife Sales Co. from 1988 through March 1990, Vice President of Bird Compost
Management, Inc. from April 1990 through March 1992 and of Compost Management,
Inc. from March 1992 until it was merged into the Company. Mr. Rattie is a
charter member of New Jersey SCORE (Statewide Committee for Organic Recycling
Education), the Governor's group formed to address the state's organic waste
supply problems.  His expertise has allowed him to develop a working
relationship with the New Jersey Department of Environmental Policy as he has
permitted over 25 large compost use projects within the state.  In addition, he
has co-authored technical literature on compost use and is a frequent speaker
concerning compost issues.  Mr. Rattie is a graduate of Pennsylvania State
University (B.A.- 1975).

    Robert E. Wortmann, the Company's Secretary and a Director, is the Vice
President of VRH Construction Corporation. He, along with his brother, Victor D.
Wortmann, Sr. founded VRH in 1958. He is the principal in charge of all
estimating, and has been the project executive on numerous projects including
the Delta Air Lines Terminal at La Guardia Airport, the People Express and
Continental Terminals at Newark International Airport, the Air France and Sabena
Terminals at JFK Airport, the Port Authority of New York and New Jersey
Maintenance Complex, the Northwest Airlines Maintenance Complex at La Guardia
Airport, and the current International Terminal at Newark Airport. Mr. Wortmann
is a graduate of the University of Miami, School of Engineering (B.S.C.E. 1961).
He spends approximately five hours per week on Company business, and receives no
compensation as either an officer or director of the Company.

     Pasquale ("Pat") J. Dileo, a Director of the Company, has been the
President of Select Acquisitions, Inc., a diversified holding 

                                          32


<PAGE>

company, since 1993. From 1989 through 1993 he was the president of Tinton
Downs, Inc., a healthcare development company. Prior thereto, from 1988 through
1989, he was employed by Merrill Lynch Realty as Director of Commercial Real
Estate. He is a 1976 graduate of Trenton State College with a degree in
industrial arts
education.

ITEM 10.
EXECUTIVE COMPENSATION


    (b)  SUMMARY COMPENSATION TABLE

Name                        Annual Compensation                       All
and          Fiscal                        Other                      Other
Principal    Year                          Annual                     Compen-
Position     Ended      Salary    Bonus    Comp.    Long-Term Comp.   Sation
--------     -----      ------    -----    ------   ---------------   -------
Roger E.     4/30/97   $ 60,000    none     none     none              none
Tuttle,      4/30/96   $ 60,000    none     none     none              none
Pres. CEO    4/30/95   $ 60,000    none     none     none              none

John B.      4/30/97   $   none    none     none     none              none
Fetter,      4/30/96   $ 10,000    none     none     none              none
Vice-Pres.   4/30/95   $ 30,000    none     none     none              none

Alfred A.    4/30/97    $60,000    none     none     none              none
Rattie,      4/30/96    $60,000    none     none     none              none
Vice-Pres.   4/30/95    $60,000    none     none     none              none

Gary Son-    4/30/97      n/a       n/a      n/a      n/a               n/a
dermeyer,    4/30/96    $30,000    none     none     250,000 shares    none
Vice-Pres.   4/30/95      n/a       n/a      n/a      n/a               n/a 

George S.    4/30/97    $ n/a       n/a      n/a      n/a               n/a
Chu,         4/30/96    $ 7,500    none     none     none              none
Vice-Pres.   4/30/95      n/a       n/a      n/a      n/a               n/a


    (c)  OPTIONS/SAR GRANTS TABLE

            Number of   %age of                       
            Shares      Total                         
            Under-      Options                       
            lying       Granted                  
            Options     in Fiscal   Exercise or Base    Expiration
Name        Granted     Year        Price  per  Share   Date
----        -------     --------    -------------------------
R. Tuttle   1,000,000     35%            $2.50        11/14/2000
J. Fetter     none        n/a            n/a               n/a
A. Rattie     none        n/a            n/a               n/a
G. S'meyer    n/a         n/a            n/a               n/a
G. Chu        n/a         n/a            n/a               n/a

                                          33


<PAGE>

(d) AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
    FISCAL YEAR-END OPTION/SAR VALUE TABLE

                                        Number of
                                        Shares Under      Value of  
                                        Unexercised     Unexercised 
                Shares                  Options at      In-The-Money
                Acquired    Value       Fy-end; All      Options at 
Name            On Exerc.   realized    Exercisable        Fy-end   
------------    ---------   --------    -------------   ------------
R. Tuttle       none        none         1,000,000          n/a
J. Fetter       none        none            none            n/a
A. Rattie       none        none            none            n/a
G. S'meyer      none        none            none            n/a
G. Chu          none        none            none            n/a

Note:    The market price of the Registrant's common stock at the 4/30/97
         fiscal year end was $2.25 per share.


    (e)  LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE

    None of the persons included in (b) above were covered by any plans.


    (f)  COMPENSATION OF DIRECTORS

    No Director of the Registrant is compensated for serving as a director.
    


    (g)  EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND 
         CHANGE-IN-CONTROL ARRANGEMENTS                        

    None of the persons included in (b) above were covered by any employment
contracts, termination of employment or change-in-control arrangements other
than as set forth in the employment agreement set forth herein.

     On May 10, 1996 the Company entered into an employment agreement with its
President, Roger E. Tuttle. His agreement provides for employment as the
Company's President through November 14, 2000 at an initial annual salary of
$225,000, with annual increases commensurate with the growth of the Company,
plus options to purchase 1,000,000 shares of the Company's common stock at $2.50
per share exercisable through November 14, 2000. In addition, he receives a
one-time bonus of $500,000 the first time that the Company attains sales of
$5,000,000 for any one quarter.

    On November 16, 1996 Gary Sondermeyer resigned as a vice-president of the
Company and his employment agreement was 

                                          34


<PAGE>

terminated by mutual agreement. On December 1, 1996 George Chu resigned as a
vice-president of the Company. He did not have an employment agreement.


    (h)  REPORT ON REPRICING OF OPTIONS/SARS

    None

ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The Company has only one class of voting securities, its Common Stock, no
par value. As at July 31, 1997, the Company had  18,707,277 shares of its Common
Stock issued and outstanding. The following table sets forth certain information
with respect to each beneficial owner of five percent or more of the outstanding
shares of the Company's Common Stock, each officer and each director of the
Company and all officers and directors of the Company as a group.

                                Amount and
                                Nature of
Name and Address                Benefits of      Percent of
of Beneficial Owners (A)        Ownership        Class 
------------------------        -----------      ----------

Pasquale J. Dileo                   562,360(1)      3.0%
  832 Bay Avenue
  Toms River, NJ 08753
  (Director)

John B. Fetter                    2,748,610(2)     14.7%
  820 Gatemore Road
  Bryn Mawr, PA 19010
 (Vice President, Trea-
   surer, Director)

Alfred A. Rattie                    595,000         3.2%
  29 East Ridge Avenue
  Sellersville, PA 18960
  (Vice President)

Select Acquisitions, Inc.           423,360         2.3%
  832 Bay Avenue
  Toms River, NJ 08753

Roger E. Tuttle                   4,407,105(4)     22.4%
  3105 Gibson Lane
  Doylestown, PA 18901
 (President, CEO,
   Director)

                                          35


<PAGE>

Robert E. Wortmann                2,002,358(5)     10.5%
  80 Knollwood Road
  Upper Saddle River, NJ 07158
  (Secretary, Director)
                         
Victor D. Wortmann, Sr.           1,922,358(6)     10.1%
  47 Mill Glen Road
  Upper Saddle River, NJ 07158
  (Director)

Officers and Directors As        11,832,933(7)     58.3%
As A Group (6 Persons)

---------------
* Less than 1%

(A) Unless otherwise indicated, each person named in the table exercises sole
voting and investment power with respect to all shares beneficially owned.

(1) Includes 139,000 shares owned directly by Mr. Dileo and 423,360 shares owned
by Select Acquisitions, Inc., of which Mr. Dileo is President.

(2) Includes 2,528,610 shares owned by John B. Fetter directly, 100,000 shares
owned by Marilyn S. Fetter, his wife and 120,000 shares owned by various trusts,
of which John B. Fetter is a trustee.

(4) Includes 2,333,509 shares owned by Roger E. Tuttle directly, 6,000 shares
owned by William Tuttle, his son and 100,000 shares owned by Elizabeth Tuttle,
his wife. Also includes 967,596 shares over which Mr. Tuttle has voting control
and 1,000,000 shares which may be acquired within sixty (60) days upon the
exercise of options.


(5) Includes 807,500 shares owned by Robert E. Wortmann directly, 40,000 shares
owned by Mary Wortmann, his wife, 150,000 shares owned by Robert E. Wortmann,
Jr., his son, 150,000 shares owned by Erika Wortmann, his daughter, 150,000
shares owned by Andrea Wortmann, his daughter and 404,858 shares owned by VRH
Construction Corporation, a company controlled by Mr. Wortmann and his brother,
Victor D. Wortmann, Sr. Also included in the holdings of Victor D. Wortmann, Sr.
Also includes 300,000 shares which may be acquired within sixty (60) days upon
the exercise of options.

(6) Includes 817,500 shares owned by Victor D. Wortmann, Sr. directly, 200,000
shares owned by Victor D. Wortmann, Jr., his son, 200,000 shares owned by Susan
Ann Curran, his daughter and 404,858 shares owned by VRH Construction
Corporation, a company controlled by Mr. Wortmann and his brother, Robert E.
Wortmann. Also included 

                                          36


<PAGE>

in the holdings of Robert E. Wortmann. Also includes 300,000 shares which may be
acquired within sixty (60) days upon the exercise of options.

(7) Includes 1,600,000 shares which may be acquired within sixty (60) days upon
the exercise of options and warrants. As at July 31, 1996, the Company had
18,707,277 shares outstanding. An additional 4,561,460 shares were subject to
acquisition within sixty (60) days upon the exercise of options and warrants,
for a total of 23,268,737.


ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In January 1994, VRH Construction Corp.("VRH"), whose principals, Victor D.
Wortmann, Sr. and Robert E. Wortmann are Directors of the Company, acquired
100,000 shares of the common stock of Compost America Company of New Jersey,
Ltd. ("CANJ") for $5.00 per share, or a total of $500,000. CANJ was a privately
held company at the time and this price was established arbitrarily by its
management. These shares, as part of the January 1995 Reorganization, were
exchanged for 600,000 shares of the Company's Common Stock. At that time VRH
entered into a ten year construction management agreement with the Company. The
agreement grants to VRH exclusive rights to build all of the Company's New
Jersey compost facilities at a cost not to exceed a fixed price. In return for
this commitment, and for acting as the general contractor, VRH will receive a
fee equal to 10% of the guaranteed facility construction cost. 

     From May 1, 1994 through April 30, 1997, VRH has made loans to the Company
totalling $4,064,355. These loans bear interest at ten (10%) percent per annum
and are due October 1, 1997. In addition, since May 1, 1994, Victor D. Wortmann,
Sr. and his family purchased additional shares of CANJ which, when exchanged for
shares of the Company, totalled 1,180,000 shares of the Company's common stock
for a total consideration of $75,750. During this same period, Robert E.
Wortmann and his family purchased additional shares of CANJ which, when
exchanged for shares of the Company, totalled 1,180,000 shares of the Company's
common stock for a total consideration of $75,750. CANJ was a privately-held
company and the purchase price of the CANJ shares was established arbitrarily by
its management. In December 1995 Robert E. Wortmann purchased 40,000 shares of
the Company's common stock directly from the Company for $2.50 per share, or a
total of $100,000. These shares were restricted as to transfer, and were
acquired at a time when the market price for the Company's common stock was
approximately $5.00 per share. On April 23, 1996 Victor D. Wortmann, Sr. and
Robert E. Wortmann each were granted options to purchase 300,000 shares of the
Company's common stock at $0.01 per share exercisable immediately through April
23, 2001 in consideration for making high 

                                          37


<PAGE>

risk, unsecured loans to the Company.

    The Company leases its executive offices from VRH Construction Company, as
set forth in Item 2 herein.

    George Chu, former Vice President of the Company, exercised options and
acquired 100,000 shares of the Company's common stock on May 1, 1995 for $1,000.

    Gary Sondermeyer, former Vice President of the Company, exercised options
and acquired 100,000 shares of the Company's common stock on July 1, 1996 for
$1,000.

    Employment agreement of Roger E. Tuttle, and compensation of Gary
Sondermeyer, Roger E. Tuttle, Alfred Rattie, George Chu and John Fetter are set
forth in Item 10 above.

    In addition to the transactions set forth above, issuances of the Company's
common shares to its officers, directors and Select Acquisitions, Inc. are set
forth in the Notes to Consolidated Financial Statements included herein,
specifically note 5 (Common Stock), note 7 (Agreements), note 14 (Common Stock
Purchase Warrants and Options), note 15 (Related Party Transactions) and Note 16
(Employment Contracts).

ITEM 13.
EXHIBITS AND REPORTS ON FORM 8-K
                                  
    a.   Exhibits required by Item 601 of Regulation S-B

         2.  Plan of Acquisition, 
             Reorganization, etc.           (1)

         3.  Articles of Incorporation      (1)
             and By-Laws                    

         4.  Instruments defining           (1) 
             the Rights of Security
             Holders

         9.  Voting Trust Agreement         None

        10.  Material Contracts             Employment Agreement
                                            of Roger E. Tuttle (1)
                             
        11.  Statement re Computation       See Note 28 to 
             of Per Share Earnings          Financial Statements
                                      
        13.  Annual or Quarterly Reports    none       
             
        16.  Letter on Change in            (1)           
             Certifying Accountant

                                          38


<PAGE>

        18.  Letter on Change in            none
             Accounting Principles
         
        21.  Subsidiaries of the            see Part I, Item 1,
             Registrant                     Background,
                                            herein

        22.  Published Report Regarding     none          
             Matters Submitted to Vote

        23.  Consents of Experts and        not applicable
             Counsel

        24.  Power of Attorney              none          

        27.  Financial Data Schedule        not required

        28.  Reports to State Insurance     not applicable
             Regulatory Authorities
    
        99.  Additional Exhibits            None

(1) Incorporated by Reference to Registration Statement on Form S-1; File No.
    333-1592; effective June 7, 1996



    (b)  Reports on Form 8-K during the last quarter -  None

                                          39


<PAGE>

                                      SIGNATURES

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

Date:              COMPOST AMERICA HOLDING COMPANY, INC.
August 12, 1997    (Registrant)

                 By:  /s/ ROGER E. TUTTLE
                   Roger E. Tuttle, President and Principal 
                               Executive Officer, Principal
                               Financial and Acocunting
                               Officer 
              

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



ROGER E. TUTTLE     August 12, 1997    By: /s/ ROGER E. TUTTLE   
President, Principal Executive          Roger E. Tuttle
Officer, Director



JOHN B. FETTER      August 12, 1997    By: /s/ JOHN B. FETTER
Executive Vice President,                John B. Fetter    
Treasurer, Director

VICTOR D. WORTMANN  August 12, 1997    By: /s/ VICTOR D. WORTMANN    
Chairman, Director                       Victor D. Wortmann


ROBERT E. WORTMANN  August 12, 1997    By: /s/ ROBERT E. WORTMANN
Secretary, Director                      Robert E. Wortmann


PASQUALE J. DILEO   August 12, 1997    By: /s/ PASQUALE J. DIELO
Director                                 Pasquale J. Dileo

Roger E. Tuttle, John B. Fetter, Victor D. Wortmann, Robert E. Wortmann and
Pasquale J. DiLeo constitute all of the members of the Registrant's Board of
Directors.

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES

            PERIOD ENDING APRIL 30, 1997 AND THE PERIOD DECEMBER 17, 1993 
                            (INCEPTION) TO APRIL 30, 1997








                                       CONTENTS


                                                                     Page     



Independent auditors' report                                         F-2     

Consolidated financial statements:

    Balance sheet                                                    F-3     

    Statement of income (loss)                                       F-4     

    Statement of stockholders' equity                             F-5 - F-7 

    Statement of cash flows                                          F-8     

    Notes to consolidated financial statements                    F-9 - F-80


Supplementary information to consolidated financial statements:

Report of independent auditors on statement of operating expenses    F-81    

  Schedule of operating expenses                                     F-82    


<PAGE>



                         [LETTERHEAD OF ZELLER WEISS & KAHN]





                             INDEPENDENT AUDITORS' REPORT



Board of Directors
Compost America Holding Company, Inc. and Subsidiaries
Doylestown, Pennsylvania

     We have audited the accompanying consolidated balance sheet of Compost
America Holding Company, Inc. and Subsidiaries as of April 30, 1997 and the
related statements of income (loss), stockholders' equity and cash flows, for
the periods ending April 30, 1997 and April 30, 1996 and for the period December
17, 1993 (inception) to April 30, 1997.  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 audit. 

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

     In our opinion, the financial statements referred to above, present fairly,
in all material respects, the financial position of Compost America Holding
Company, Inc. and Subsidiaries as of April 30, 1997 and the results of its
operations, changes in stockholders' equity and cash flows for the periods
ending April 30, 1997 and April 30, 1996 and for the period December 17, 1993
(inception) to April 30, 1997, in conformity with generally accepted accounting
principles.  

     As discussed in Note 9 the Company has been in the development stage since
December 17, 1993. 



                             /s/ Zeller Weiss & Kahn



July 31, 1997
Mountainside, New Jersey


                                                                             F-2

<PAGE>

           COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                       (A Development Stage Company)

                CONSOLIDATED BALANCE SHEET - APRIL 30, 1997

                                   ASSETS

Current assets:
  Cash                                                     $     8,012
  Accounts receivable                                           26,089
  Prepaid expenses                                             173,118
                                                           -----------
    Total current assets                                       207,219
                                                           -----------

Investments in joint venture                                         0
                                                           -----------

Plant, property and equipment
  Land                                                       8,466,441
  Site improvements                                            174,519
  Transportation equipment                                     160,046
  Office equipment                                              71,051
  Machinery & equipment                                        609,247
  Construction in progress, Compost projects                 7,149,777
                                                           -----------
                                                            16,631,081
  Less accumulated depreciation                                133,547
                                                           -----------
                                                            16,497,534
                                                           -----------
Other assets:
  Excess of cost over assets acquired, net of 
   amortization of $13,384                                     461,701
  Town of Freehold lease acquisition cost, net of 
   amortization of $51,332                                     809,529
  Restrictive covenant, net of amortization of $37,501         212,499
  Trademark costs, net of amortization of $390                   1,317
  Organization costs, net of amortization of $4,483              4,178
  Deposits                                                       6,342
  Option deposit                                                37,500
  City of Miami contract performance fee                     1,000,000
                                                           -----------
                                                             2,533,066
                                                           -----------

                                                           $19,237,819
                                                           -----------
                                                           -----------

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Mortgages payable - Praxair Corp.                        $ 2,100,000
  Current portion of long-term debt                          3,870,277
  Notes payable, bank                                          100,000
  Notes payable, others                                        606,050
  Notes payable, shareholder                                    90,000
  Due to affiliated company, Foundation Systems                321,159
  Due to affiliated company, Select Acquisitions, Inc.          78,060
  Due to affiliated company, VRH Construction Corp.          4,064,355
  Accounts payable and accrued expenses                      3,943,730
  Payroll taxes payable                                        209,073
  Reserve for land replacement                                  85,375
                                                           -----------
    Total current liabilities                               15,468,079
                                                           -----------

Long-term debt, net of current portion                       1,942,911
                                                           -----------
Contingencies and commitments
Minority interest in consolidated subsidiary                         0
                                                           -----------

Stockholders' equity:
  Preferred stock, no par value, 25,000,000 shares
   authorized; none issued         
  Common stock, no par value, 50,000,000
   shares authorized; 17,707,841 shares issued 
   and outstanding                                          10,611,169
  Common stock warrants       
  Deficit accumulated during the development stage        (  8,755,648)
  Less:  subscriptions receivable                         (     28,692)
                                                           -----------
                                                             1,826,829
                                                           -----------

                                                           $19,237,819
                                                           -----------
                                                           -----------

              See notes to consolidated financial statements.

                                                                             F-3

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                       CONSOLIDATED STATEMENT OF INCOME (LOSS)




 


                                                                    Cumulative
                                                                       from
                                                                   Dec. 17, 1993
                                         Year           Year        (Inception)
                                         Ended          Ended           to
                                       April 30,      April 30,      April 30,
                                         1997           1996           1997
                                         ----           ----           ----

Net sales                                                            $   80,741
Other revenues                       $   147,466     $   46,954        200,921
                                     -----------     ----------     ----------

    Total                                147,466         46,954        281,662

Cost of operations, transportation        10,803         12,342         28,146
                                     -----------     ----------     ----------

Gross income                             136,663         34,612        253,516

General and administrative             5,007,790      1,482,505      7,397,070
                                     -----------     ----------     ----------

Loss from operations                (  4,871,127)   ( 1,447,893)   ( 7,143,554)

Other non-operating expense:
  Interest                             1,166,082        284,231      1,461,066
                                     -----------     ----------     ----------

Loss before income tax expense      (  6,037,209)   ( 1,732,124)   ( 8,604,620)
Income tax expense                             0              0              0
                                     -----------     ----------     ----------

                                    (  6,037,209)   ( 1,732,124)   ( 8,604,620)

Minority interest in (income) loss
 of consolidated subsidiaries            129,209         80,618        209,827
                                     -----------     ----------     ----------

                                    (  5,908,000)   ( 1,651,506)   ( 8,394,793)

Loss in equity in joint venture     (     13,603)   (   321,300)   (   360,855)
                                     -----------     ----------     ----------

Net loss                            ($ 5,921,603)   ($1,972,806)   ($8,755,648)
                                     -----------     ----------     ----------
                                     -----------     ----------     ----------

Earnings per common share:
  Primary                                ( .31)         ($.13)
                                          ----           ----
                                          ----           ----

Weighted average number of
 common shares outstanding:
  Primary                             19,063,308     14,749,518
                                     -----------     ----------
                                     -----------     ----------


                      See notes to consolidated financial statements.
                                                                             F-4

<PAGE>

                          COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                                       (A Development Stage Company)

                              CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                                     (Deficit)
                                                                                                    Accumulated
                                                                                                     During The
                                                                              Common Stock          Development
                                                                         Shares          Amount        Stage
Balance, December 17, 1993                                               ------          ------     -----------
<S>                                                                  <C>           <C>             <C>
  Issuance of common stock for technology, 
   December 28, 1993 (.0017 per sh.)                                   2,160,000    $     3,600
  Issuance of common stock for technology, 
   January 1, 1994 (1.207 per sh.)                                       840,000      1,013,875
  Issuance of common stock January 1, 1994 - April 30, 
   1994 (.83 per sh.)                                                    830,400        692,000
  Issuance of common stock for services, April 30, 
   1994 (.0017 per sh.)                                                  368,640            614

     Net Loss April 30, 1994                                                                       ($  158,347)
                                                                      ----------    -----------     ----------

Balance, April 30, 1994                                                4,199,040      1,710,089    (   158,347)

  Issuance of common stock for settlement claim, 
   May 27, 1994 (.0017 per sh.)                                           24,000             40
  Redemption of common stock September 29, 1994 
   (.83 per sh.)                                                      (   60,000)  (     50,000)
  Issuance of common stock October 3, 1994 
   (.83 per sh.)                                                          60,000         50,000
  Issuance of common stock October and November, 
   1994 (.879 per sh.)                                                   369,600        325,000
  Issuance of common stock November 1, 1994 
   (.417 per sh.)                                                        120,000         50,000
  Issuance of common stock for merger, December 1, 
   1994 (.047 per sh.)                                                 2,631,360        122,613
  Exercise of warrants December 1, 1994 
   (.002 per sh.)                                                      2,580,000          4,300
  Issuance of common stock for acquisition, 
   February 8, 1995 (.18 per sh.)                                        274,500         49,094
  Issuance of common stock for private placement, 
   February 11, 1995 (2.50 per sh.)                                      190,000        475,000
  Exercise of warrants and options for legal services, 
   February 11, 1995 (.03 per sh.)                                     2,714,169         63,142
  Issuance of common stock for Chicago restructuring 
   agreement, February 15, 1995 (.83 per sh.)                            120,000        100,000

     Net loss April 30, 1995                                                                       (   702,892)
                                                                      ----------    -----------     ----------

Balance, April 30, 1995                                               13,222,669      2,899,278    (   861,239)

  Issuance of common stock, exercise of
   warrants May 1, 1995 (.01 per sh.)                                    100,000          1,000
  Issuance of common stock, May 1995 (2.50 per sh.)                       20,000         50,000
  Issuance of common stock, June 1995 (2.50 per sh.)                      70,000        175,000
  Issuance of common stock, August 1995 (2.50 per sh.)                    40,000        100,000
  Issuance of common stock, September 1996 
   (2.50 per sh.)                                                          2,000          5,000

</TABLE>

                              See notes to consolidated financial statements.

                                                                             F-5

<PAGE>

                          COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                                       (A Development Stage Company)

                              CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                                     (Deficit)
                                                                                                    Accumulated
                                                                                                     During The
                                                                              Common Stock          Development
                                                                          Shares         Amount        Stage
                                                                          ------         ------     -----------
<S>                                                                      <C>           <C>          <C>
  Issuance of common stock, October 1995 (2.50 per sh.)                   45,000        112,500
  Issuance of common stock, November 1, 1995 
   (.92 per sh.)                                                          33,000         30,360
  Issuance of common stock, November 1995 (2.50 per sh.)                  36,000         90,000
  Issuance of common stock, December 1995 (2.50 per sh.)                  85,600        214,000
  Issuance of common stock, January 1996, (2.50 per sh.)                  52,200        130,500
  Issuance of common stock, February 1996, 
   (2.50 per sh.)                                                         87,000        217,500
  Issuance of common stock, February 1996 (0 per sh.)                        500
  Issuance of common stock in acquisition of Bedminster
   Seacor Services Miami Corporation March 1, 1996
   (2.50 per sh.)                                                        200,000        500,000
  Issuance of common stock,
    March 1996 (2.50 per sh.)                                             40,000        100,000
    March 1996 (3.00 per sh.)                                              4,000         12,000
  Issuance of common stock,
    April 1996 (2.50 per sh.)                                             48,600        121,500
    April 1996 (3.00 per sh.)                                              2,500          7,500
  Issuance of common stock in settlement of American
   BIO-AG Corporation April 30, 1996 (2.50 per sh.)                       83,333        208,332
  Issuance of common stock for services, April 30, 1996
   (2.00 per sh.)                                                        267,000        534,000
  Issuance of common stock in settlement of debt, April
   30, 1996 (6.00 per sh.)                                                25,000        150,000
  Issuance of common stock for services, April 30, 1996
   (2.34 per sh.)                                                         40,000         93,404
  Issuance of common stock in payment of employees for
   excess services April 30, 1996 (5.00 per sh.)                          17,962         89,810
    
     Net loss, April 30, 1996                                                                      ( 1,972,806)
                                                                      ----------    -----------     ----------

Balance, April 30, 1996                                               14,522,364      5,841,684    ( 2,834,045)

  Issuance of common stock, May 1996 (3.00 per sh.)                       41,534        124,602
  Issuance of common stock settlement agreement with
   Select Acquisitions, May 31, 1996 (2.50 per sh.)                      200,000        500,000
  Issuance of common stock, June 1996 (3.00 per sh.)                      24,930         74,790
  Issuance of common stock for acquisition of assets,
   June 28, 1996 (2.50 per sh.)                                          305,000        762,500
  Issuance of common stock in payment to consultants
   for excess services, June 30, 1996 (5.00 per sh.)                       3,138         15,690
  Issuance of common stock, consulting agreement,
   June 30, 1996 (2.50 per sh.)                                              583          1,458
  Issuance of common stock, July 1996 (2.00 per sh.)                      16,335         49,005
  Issuance of common stock, consulting agreement
   services, July 1, 1996 (2.50 per sh.)                                  75,000        187,500
  Issuance of common stock for services July 24,
   1996 (1.00 per sh.)                                                   400,000        400,000
  Issuance of common stock, consulting agreement,
   July 31, 1996 (2.50 per sh.)                                              583          1,457

</TABLE>

                                  See notes to consolidated financial statements

                                                                             F-6

<PAGE>

                          COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                                       (A Development Stage Company)

                              CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY



<TABLE>
<CAPTION>

                                                                                                     (Deficit)
                                                                                                    Accumulated
                                                                                                     During The
                                                                              Common Stock          Development
                                                                          Shares         Amount        Stage
                                                                          ------         ------     -----------
<S>                                                                      <C>      <C>               <C>
  Charge deferred offering cost to stock proceeds                                  (     23,564)
  Issuance of common stock, August 1996 (3.00 per sh.)                    12,000         36,000
  Issuance of common stock, September 9, 1996
   (3.00 per sh.)                                                         52,540        157,620
  Issuance of common stock, September 1996 
   (1.00 per sh.)                                                         83,000         83,000
  Issuance of common stock, September 1996 
   (3.00 per sh.)                                                         67,900        203,700
  Issuance of common stock for payment of accounts
   payable October 11, 1996 (2.09 per sh.)                                51,000        106,760
  Issuance of common stock for services October 11,
   1996 (1.49 per sh.)                                                   414,000        608,500
  Issuance of common stock for services October 23,
   1996 (2.00 per sh.)                                                     3,000          6,000
  Issuance of common stock, October 1996 (1.00 per sh.)                    8,000          8,000
  Issuance of common stock, October 1996 (3.00 per sh.)                    8,000         24,000
  Issuance of common stock for services, December 1,
   1996 (.09 per sh.)                                                    100,000          9,000
  Issuance of common stock for services, December 1,
   1996 (1.00 per sh.)                                                     1,000          1,000
  Issuance of common stock for services, December 1,
   1996 (2.50 per sh.)                                                     5,500         13,750
  Issuance of common stock, consulting agreement
   services, January 8, 1997 (2.65 per sh.)                              150,000        397,500
  Issuance of common stock for services, February 17,
   1997 (.50 per sh.)                                                    198,594         99,297
  Issuance of common stock for services, February 27,
   1997 (1.00 per sh.)                                                   880,000        880,000
  Issuance of common stock for services, February 27,
   1997 (.50 per sh.)                                                      5,000          2,500
  Issuance of common stock for services, March 26, 
   1997 (.50 per sh.)                                                     78,840         39,420

     Net loss, April 30, 1997                                                                      ( 5,921,603)
                                                                      ----------    -----------     ----------

Balance, April 30, 1997                                               17,707,841    $10,611,169    ($8,755,648)
                                                                      ----------    -----------     ----------
                                                                      ----------    -----------     ----------

</TABLE>

                                 See notes to consolidated financial statements.

                                                                             F-7


<PAGE>

                          COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                                       (A Development Stage Company)

                                   CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                                         Cumulative
                                                                                            from
                                                                   Year Ended         December 17, 1993
                                                                    April 30,          (Inception) to
                                                               1997            1996    April 30, 1997
                                                               ----            ----    --------------
<S>                                                       <C>           <C>            <C>
Operating activities:
  Net loss                                                 ($5,921,603)  ($ 1,972,806)  ($ 8,755,648)

Adjustments to reconcile net cash and equivalents
 provided by operating activities:
  Amortization                                                  82,989         18,256        105,412
  Depreciation                                                  78,337         20,411        101,778
  Loss in equity in joint venture                               13,603        321,300        360,855
  Stock issued for professional services                     1,578,525        585,000      2,163,525
  Shareholder settlement                                       500,000        500,000
  Loss in equity of minority interest                      (   129,209)                 (    129,209)

Changes in operating assets and liabilities:
  (Increase) decrease in prepaid expenses                  (   117,566)  (     55,552)  (    173,118)
  Increase in accounts payable and accrued expenses          2,600,837        992,136      4,093,894
  Increase (decrease) in payroll taxes payable                 191,093         11,932        209,073
  Increase (decrease) in accounts receivable               (    26,089)                 (     26,089)

Changes in other assets and liabilities:
  Increase (decrease) in cash from affiliated companies:
    R.C. Land Company, Inc.                                     28,600
    American Bio-AG Corp.                                      185,000   (    165,000)
    American Soil Company, Inc.                                175,000   (    175,000)
    Select Acquisitions, Inc.                                   54,160                        78,060
    Deferred offering costs                                     20,564   (     20,564)              
                                                            ----------    -----------    -----------

    Net cash provided from (used in) operating activities  (   685,759)  (    439,887)  (  1,471,467)
                                                            ----------    -----------    -----------

Investing activities:
  Purchase of restrictive covenant                                                      (    250,000)
  Purchase of construction in progress, Compost project    ( 1,222,485)  (  1,679,484)  (  4,667,041)
  Purchase of land, property and equipment                 (   874,976)  (  7,528,975)  (  8,406,871)
  Purchase of organizational costs                        (      1,580)                 (      5,925)
  Reduction (purchase) of equity in American BIO-AG
   Corporation                                                 624,636                       624,636
  City of Miami performance fee                            ( 1,000,000)                 (  1,000,000)
  Lease acquisition cost                                   (   463,361)                 (    463,361)
  Reserve for land replacement                                                 85,375         85,375
  Increase (decrease) in deposits receivable                    12,440   (     16,746)  (      5,831)
  Return (purchase) of option deposits                     (    37,500)       100,000   (     37,500)
  Increase in cost in excess of assets acquired            (   475,085)  (    584,849)  (  1,253,244)
                                                            ----------    -----------    -----------

    Net cash used in investing activities                  ( 3,436,331)  (  9,626,259)  ( 15,379,762)
                                                            ----------    -----------    -----------

Financing activities:
  Increase in advances from affiliated company, VRH 
   Construction Corp.                                          555,167      2,869,116      4,064,355
  Increase in notes payable, officers                           90,000                        90,000
  Increase in loans from Foundations Systems, Inc.             321,159                       321,159
  Increase in notes payable, bank                                              50,000        100,000
  Increase in notes payable, other                             606,050                       606,050
  Increase in mortgage payable                                              2,100,000      2,100,000
  Increase in other long-term debt                           1,885,563      3,730,871      6,004,154
  Payments on long-term debt                               (    68,489)  (     55,612)  (    127,900)
  Proceeds from issuance of common stock                       737,154      1,365,860      3,701,423
                                                            ----------    -----------    -----------

    Net cash provided by financing activities                4,126,604     10,060,235     16,859,241
                                                            ----------    -----------    -----------

Net increase (decrease) in cash                                  4,514   (      5,911)         8,012

Cash, beginning of period                                        3,498          9,409              0
                                                            ----------    -----------    -----------

Cash, end of period                                         $    8,012    $     3,498    $     8,012
                                                            ----------    -----------    -----------
                                                            ----------    -----------    -----------

Supplementary disclosure of cash flow information
  Interest                                                  $  239,804     $  284,231    $   534,288
  Taxes                                                     $        0     $        0    $         0

Supplemental schedule of non-cash investing and 
 financing activities

</TABLE>

                                 See notes to consolidated financial statements.

                                                                             F-8
<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1.  Nature of business:

    The Company is in the process of developing the business of converting and
    recycling organic waste into compost and other soil products, which it
    sells to a multitude of users.  The process which the Company will employ
    is composting, or the controlled decomposition of organic matter into humus
    (a component of soil).  Like a landfill or an incinerator operator, the
    Company will be paid "tipping fees" to accept waste from generators of
    these materials.  In selected markets like New Jersey, where the disposal
    costs are high, the economic opportunity of taking in and processing large
    volumes of waste is significant.

    The Company will operate a vegetative and selected food waste compost
    facility in New Jersey and will continue the development of the indoor
    composting projects currently in progress, which will convert organic
    materials ordinarily disposed of in landfills or incinerators into a
    valuable end product which is beneficial to the environment.

2.  Business organization:

    Compost America Holding Co. Inc., formerly known as Alcor Energy and
    Recycling Systems, Inc. (Alcor) was incorporated on August 20, 1981 in the
    state of New Jersey, with 1,000,000 authorized shares at no par value.  On
    February 1, 1984 Alcor conducted an offering under Regulation A, an
    exemption from registration under the Securities Act of 1933.  On that
    date, 300,000 shares of common stock were issued at $1.00 per share.  

    On June 29, 1992, Alcor was authorized to amend its Certificate of
    Incorporation to increase authorized common stock shares from 1,000,000 to
    7,500,000 shares.

    On June 29, 1992, Alcor issued 3,000,000 shares of common stock to Capital
    Pacific Management, Inc. for all the outstanding shares of the Gilbert
    Spruance Company and 750,000 shares to Peter English and his affiliates in
    return for all outstanding shares of the English Group, Inc.

    On December 10, 1992 and January 1993, Alcor disposed of three subsidiaries
    due to the lack of sufficient capital needed to continue the operations of
    each.  Alcor sustained losses from both the disposition of the Gilbert
    Spruance Company and The English Group, Inc.

    On September 27, 1994, 650,000 shares issued to Peter English to acquire
    the English Group, Inc. were returned pursuant to the disposal of the
    English Group, Inc.

    On September 29, 1994, Alcor issued 1,500,000 shares to two individuals for
    cancelling $203,720 of loans due to these individuals.



                                                                             F-9


<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





2.  Business organization (continued):

    On October 21, 1994, Alcor amended its Certificate of Incorporation to
    increase its authorized common stock from 7,500,000 shares to  15,000,000
    shares with 5,490,000 shares issued and outstanding.  Alcor, now inactive,
    pursued finding a business partner either through merger or acquisition.

    On November 28, 1994 the majority of Alcor stockholders agreed to a one for
    twenty reverse split which reduced total outstanding shares to 274,500.

    On January 23, 1995, Alcor entered into an Acquisition Agreement and Plan
    of Reorganization with Compost America Company of New Jersey, Ltd.,
    incorporated in the state of Delaware on December 17, 1993.  Compost
    America Company of New Jersey, Ltd. had 5,000,000 shares, .01 par value of
    common stock authorized, of which 1,654,000 shares were issued and
    outstanding.  Alcor exchanged 9,924,000 shares of its common stock for all
    of the outstanding common stock of Compost America Company of New Jersey,
    Ltd.

    On February 8, 1995, Alcor Energy and Recycling Systems, Inc., changed its
    name to Compost America Holding Company, Inc. (Company).

    On December 4, 1995, the directors of the Company approved an amendment to
    the Certificate of Incorporation to increase the authorized shares to issue
    75,000,000 shares of which 50,000,000 shares shall be common stock without
    par and 25,000,000 shares shall be preferred stock with no par value.

    Registration statement:
    On June 7, 1996, the Company became effective as to it's S-1 Registration
    Statement which registered 1,353,100 shares of the Company's common stock
    solely for selling shareholders.

    On June 18, 1997, the Company amended its Certificate of Incorporation to
    designate a class of preferred shares as Series B preferred stock.  The
    designation shall be $2.50 Series B convertible preferred stock, authorized
    5,000,000 shares.  The liquidation value shall be $2.50 per share.  The
    shares will be no par value.  Each share of Series B preferred stock is
    convertible into one share of common stock at any time after September 15,
    1997.


3.  Nature of operations, risks and uncertainties:

    The waste management industry in which the Company plans to operate as a
    processor of municipal solid waste, sewage sludge and commercial organic
    waste, is highly competitive and has been traditionally dominated by
    several large and well recognized national and multi-national companies
    with substantially greater financial resources in comparison to the
    financial resources available to the Company.



                                                                            F-10

<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









3.  Nature of operations, risks and uncertainties (continued):

    There can be no assurance that the Company will be able to obtain the
    required federal, state and local permits necessary to operate its
    composting facilities presently under development.

    The Company plans to contract for and to process, municipal solid waste and
    sewage sludge that meets the Company specifications.  It is possible that
    some of the wastes accepted at a company facility may contain contaminants
    which could cause environmental damage and result in liabilities.


4.  Summary of significant accounting policies:

    Principles of consolidation:
    The accompanying consolidated financial statements include the accounts of
    the Company and its wholly owned subsidiary, Compost America Company of 
    New Jersey, Ltd. and its subsidiaries, Newark Recycling and Composting 
    Co., Inc., Gloucester Recycling and Composting Company, Inc., Monmouth 
    Recycling and Composting Co., Inc., Chicago Recycling and Composting 
    Company, Inc., Miami Recycling and Composting Company, Inc., Compost 
    America Technologies, Inc., Bedminster Seacor Services Miami Corporation, 
    Garden Life Sales Company, Inc., American Soil, Inc. and American BIO-AG 
    Corporation. Inter-company transactions and balances have been eliminated 
    in consolidation.

    Principles of reorganization:
    The acquisition of the Company's subsidiary, Compost America Company of New
    Jersey, Ltd., on January 23, 1995 has been accounted for as a reverse
    purchase of the assets and liabilities of the Company by Compost America
    Company of New Jersey, Ltd.  Accordingly, the consolidated financial
    statements represents assets, liabilities and operations of only Compost
    America Company of New Jersey, Ltd. prior to January 23, 1995 and the
    combined assets, liabilities and operations for the ensuing period.  The
    financial statements reflect the purchase of the stock of Alcor Energy and
    Recycling Systems, Inc., the former name of Compost America Holding
    Company, Inc., by Compost America Company of New Jersey, Ltd. for stock 
    and the assumption of liabilities of $49,094, this amount  being the 
    historical cost of the assets and liabilities acquired.  All significant 
    inter-company profits and losses from transactions have been eliminated.

    Property and equipment:
    Property and equipment are carried at cost.  The Company computes
    depreciation substantially by the straight-line method over the estimated
    useful lives of the related assets.


                                                                            F-11

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









4.  Summary of significant accounting policies (continued):

    Earnings per share:
    Earnings per share has been computed based on the weighted average number
    of shares of common stock outstanding during each period.

    Cash and cash equivalents:
    The Company considers all highly liquid investments with a maturity of
    three months or less at the date of acquisition to be "cash equivalents".

    Construction in progress, Compost projects:
    Project development costs consist of costs incurred for the development of
    the Company's composting facilities.  These costs included the
    architectural, legal, structural and consulting engineering, artist
    rendering, planning board approvals and other construction costs.  Upon
    commencement of operations of a facility, the costs associated with such
    project will be depreciated over the estimated useful life of the 
    facility.

    Inventory:
    Inventory will consist of compost and soil products at various stages of
    conversion and will be stated at the lower of cost or market (first-in;
    first-out).

    Revenue recognition:
    Tipping fees, the Company's principal source of revenue, will be recognized
    upon receipt of the organic waste at the facility sites.  The revenue
    generated from the sale of compost and soil products will be recognized
    upon shipment from facility sites.  In addition the Company will receive
    payments from an affiliate for services rendered relating to the land
    application of bio-solids.

    Investments (equity method):
    The Company accounts for investments in affiliated companies which
    constitute 20% to 50% of the equity of the investor company by the equity
    method.

    Restrictive covenant:
    The Company is amortizing a $250,000 restrictive covenant over an estimated
    life of 15 years with a former employee of Compost Management, Inc., which
    subsequently merged into Compost America Company of New Jersey, Ltd.

                                                                            F-12

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





4.  Summary of significant accounting policies (continued):

    Trademark cost:
    The cost of trademarks acquired are being amortized on the straight-line
    method over their remaining lives of 20 years.

    Organization cost:
    The Company amortizes organization cost over a period of 60 months on a
    straight-line method.

    Research and development:
    The Company charges to research and development project costs associated
    with projects which are not in the process of construction or permitted 
    for operation.

    Impairment:
    As required under FAS 121, effective for fiscal years beginning after
    December 15, 1994, the Company recognizes an impairment loss when the
    excess of the carrying amount of the asset exceeds the fair value of the
    asset.

    Deferred offering expense:
    The Company recorded expenses associated with the registration statement
    for a S-1 filing as a deferred expense and deducted from the proceeds of
    the offering upon being effective.  Any offerings not completed are 
    charges to operations when realized.


5.  Common stock:

    A.  December 28, 1993

    The Company issued 2,160,000 shares of common stock in exchange for the
    original issuance by Compost America Company of New Jersey, Ltd. to Compost
    Management, Inc. of 360,000 shares @ .001 per share for the contribution of
    all ownership interest and development rights in all current composting
    projects throughout the United States.

    B.  January 1, 1994

    The Company issued to Select Acquisitions, Inc. 840,000 shares of common
    stock for the original issuance by Compost America Company of New Jersey,
    Ltd. of 140,000 shares in exchange for technology and the reimbursement to
    Bedminster Bioconversion Corporation, an unrelated company, for all
    expenses of composting projects previously entered into including all
    guarantees, land purchases and development costs.  Select Acquisitions,
    Inc. acquired such technology and right by the issuance of its own 4 1/2%
    cumulative convertible preferred stock in the amount of 200,000 shares at
    $10 per share.  The parties agreed as of December 31, 1993, the settlement
    date, the total cash expended by Bedminster Bioconversion Corporation was
    $1,013,875 including charges for technology. The value of the stock issued
    being the actual cash expended by Bedminster Bioconversion Corporation.




                                                                            F-13

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





5.  Common stock (continued):

    C.  January 1, 1994 - April 30, 1994

    The Company issued 830,400 shares of common stock in exchange for 138,400
    shares of Compost America Company of New Jersey, Ltd. originally issued for
    cash at $5 per share or $692,000 in a "private placement", to raise
    $1,000,000.

    D.  April 30, 1994

    The Company issued Select Acquisitions, Inc. 368,640 shares in exchange for
    61,440 shares of Compost America Company of New Jersey, Ltd. originally
    issued for professional fees for structuring and assisting in the raising
    of $192,000 of capital contributions through a term sheet agreement and
    private placement.

    E.  May 27, 1994

    The Company issued 24,000 shares pursuant to an agreement by Compost
    America Company of New Jersey, Ltd. for 4,000 shares of common stock. 
    According to the agreement, Compost America Company of New Jersey, Ltd.
    made a commitment to be a registered company by certain firm dates.  If on
    those dates Compost America Company of New Jersey, Ltd. was not a
    registered company, 2,000 shares would be issued at the passing of each
    date, not to exceed 4,000 shares.  The shares were valued at Compost
    America Company of New Jersey, Ltd. par value of $.01 per share. 
    Additionally, the investor was also issued 24,000 warrants of Compost
    America Company of New Jersey, Ltd. at the lower of $5.50 per share or the
    price of the next offering.  The warrants expire in five years.

    F.  September 29, 1994

    The Company redeemed 60,000 shares of common stock originally exchanged
    with Compost America Company of New Jersey, Ltd. for 10,000 shares of
    common stock issued to an unrelated Limited Partnership investor.
 
    G.  October 3, 1994

    The Company immediately resold the redeemed stock to the principals of VRH
    Construction Corp. for the same $50,000 and issued 60,000 shares.

    H.  October 11, 1994

    The Company issued 369,600 shares in exchange for 61,600 shares of Compost
    America Company of New Jersey, Ltd. common stock issued under a private
    placement for $325,000.  The private placement was originally offered for
    200,000 shares at $5 per common share.  The offering was oversold by 3,400
    shares of which the individual who purchased a large block of these shares
    waived acceptance of the shares and his right to a refund, therefore, the
    Company received excess funds of $17,000.  This completed the January 3,
    1994 private placement.







                                                                            F-14

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






5.  Common stock (continued):

    I.  November 1, 1994

    The Company issued 120,000 shares for $50,000.  Formerly these were 20,000
    shares of Compost America of New Jersey, Ltd. which were converted at 6 to
    1 in the merger with Alcor.

    J.  December 1, 1994

    The Company, subsequent to the a merger agreement of Compost Management,
    Inc. and Compost America Company of New Jersey, Ltd., exchanged 2,631,360
    shares of its common stock for 438,560 shares of Compost America Company of
    New Jersey, Ltd's common stock.  The value of the shares being the net
    asset value of statement of financial position of Compost Management, Inc.
    at December 1, 1994 which was $122,613.  As a result of the merger of
    Compost America Company of New Jersey, Ltd. and Compost Management, Inc.
    the surviving Company was Compost America Company of New Jersey, Ltd which
    subsequently was acquired  by the Company.

    K.  December 1, 1994

    Exercise of warrants originally issued by Compost America Company of New
    Jersey, Ltd. previously exercised and exchanged with the Company's common
    stock.  Compost Management, Inc. exercised 280,000 warrants or 1,680,000
    shares and the principals of VRH Construction Corp. exercised 150,000
    warrants or 900,000 shares all at a exercise price of $.01 per share. 

    L.  February 8, 1995

    The Company purchased the issued and outstanding stock of Compost America
    Holding Company, Inc., formally Alcor Energy and Recycling Systems, Inc. in
    a reverse acquisition purchase agreement with Compost America Company of
    New Jersey, Ltd.  Alcor, a publicly held company has 15,000,000 shares
    authorized and 5,490,000 shares outstanding.  Prior to the merger, Alcor
    did a 20 for 1 reverse split which left 274,500 shares outstanding. 
    Compost America Company of New Jersey, Ltd. assumed liabilities in the
    purchase of the public stock.  The cost associated with the purchase
    amounted to assumption of a settlement agreement for a law suit between
    Alcor Energy and Recycling Systems, Inc., a former name of Compost America
    Holding Company, Inc. and Reade Advanced Materials, a creditor, for $25,000
    and closing costs of $24,094 for legal and other expenses, total cost being
    $49,094. 

    M.  February 11, 1995

    The Company sold 190,000 shares unregistered restricted common stock at
    $2.50 per share.  These shares were issued by the Company in a private
    transaction for a total of $475,000. 







                                                                            F-15

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5.  Common stock (continued):

    N.  February 11, 1995

    The Board of Directors of Compost America Holding Company, Inc. authorized
    a non-qualified stock option plan (referred to as the performance option),
    to directors and officers of the Company and designated professionals
    employed by the Company who have tendered invaluable assistance in the
    efforts of the Company to become viable.  The option was granted for a
    period of three years from the date of grant (February 11, 1995) and at an
    option price of $.01 per share.  The Company granted 1,913,167 option for
    common stock, all of which were exercised on February 11, 1995 for $19,132.
    Of the 1,913,167 options granted and exercised 400,000 shares were for
    consulting services to be rendered by FRW, L.L.C., principals of the law
    firm of Ehmann, Van Denbergh & Trainor.

    O.  February 11, 1995

    The Board of Directors of Compost America Holding Company, Inc. approved
    the issuance of stock options and warrants in the Company to holders of
    stock options and warrants of Compost America Company of New Jersey, Ltd.
    in exchange for their existing options and warrants.  As a result of the
    merger of Compost America Holding Company, Inc. and Compost America Company
    of New Jersey, Ltd. shareholders of Compost America Company of New Jersey,
    Ltd. holding options and warrants were not considered.  The Board of
    Directors of Compost America Holding Company, Inc. corrected this omission
    and granted options and warrants to those shareholders.

    The Company issued 901,000 options at $.01 per common share with an
    expiration date of February 10, 1999.  As of April 30, 1995, 801,000
    options have been exercised for $8,010 and 100,000 options are still
    outstanding. Of the 801,000 options exercised from the total 901,000
    options granted, 156,000 options were issued to FRW, L.L.C., the principals
    of the law firm Ehmann, Van Denbergh & Trainor, 120,000 were from Compost
    America Holding Company, Inc. for services instrumental in assisting the
    Company to develop.  In addition, the law firm received 36,000 options of
    Compost America Holding Company, Inc. for offset of legal bills of $36,000.

    The Company also issued 784,000 warrants at various exercised prices
    expiring February 10, 1999.  As of April 30, 1996 33,000 warrants @ .92
    have been exercised.

    P.  February 15, 1995

    The Company issued 120,000 shares to three individuals, the principals of
    Foundation Systems, Inc., who entered into a joint venture with Compost
    America Company of New Jersey, Ltd. for the purpose of constructing, owning
    and operating an organic waste processing project to be located in South
    Chicago, Illinois.

    The individuals sold, conveyed, assigned and transferred into Compost
    America Company of New Jersey, Ltd., all of their right, title and interest
    in and to the assets which represented 50% of the venture as well as the
    liabilities associated with the assets.  The total cash expenditures made
    by the individuals toward the joint venture amounted to $100,000.  The
    Company then owned 100% of the Chicago Project.



                                                                            F-16

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





5.  Common stock (continued):

    Q.  May 1, 1995

    The Company issued 100,000 shares upon exercise of options by George Chu,
    an officer of the Company, for services rendered at $.01 per share.

    R.  May 1, 1995 - April 30, 1996

    The Company issued 532,900 shares of its unrestricted common stock to
    private individuals at no par value at an offering price of $2.50 - $3.00
    per share.  The proceeds amounted to $1,316,000 at $2.50 per share and
    $19,500 at $3.00 per share.

    S.  November 1, 1995

    Two individuals exercise part of their warrants for the purchase of 33,000
    shares of unregistered common stock of the Company at $.92 per shares.

    T.  February 1, 1996

    The Company recorded the issue of 500 shares of unregistered common stock
    which were omitted unintentionally as a result of the merger of Compost
    Management, Inc. into Compost America Company of New Jersey, Inc.

    U.  March 1, 1996

    The Company issued 200,000 shares of its common stock in exchange for all
    the issued and outstanding shares of Bedminster Seacor Services Miami
    Corporation owned by Bedminster Bioconversion Corporation.  The fair value
    being the price of the most recent private sales of $2.50 per share. 
    Bedminster Bioconversion Corporation received stock valued at $500,000.

    V.  April 30, 1996

    The Company issued 83,333 shares of its common stock as part of the
    settlement for the assets purchased from R.C. Land and management fees to
    Ronald Bryce as part of the February 15, 1995 assessment.  The fair value
    of stock was valued at $2.50 per share of $208,332.  These shares were
    issued prior to April 30, 1996 before the June 28, 1996 R.C. Land Agreement
    was executed.

    W.  April 30, 1996

    The Company issued to Select Acquisitions, Inc. 267,000 shares of common
    stock for prior services to the Company at a value of $2.00 per share.

    X.  April 30, 1996

    The Company issued Jonathan Frank 25,000 shares of common stock in
    settlement of amounts due to Jonathan Frank of $150,000 on February 28,
    1996.



                                                                            F-17

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







5.  Common stock (continued):

    Y.  April 30, 1996

    The Company issued 40,000 shares of common stock to William Spier, an
    accountant and King and Spalding, a law firm for services rendered in prior
    years and in settlement of past obligation.  25,000 shares for accounting
    services were valued at $50,000 or $2.00 per share.  15,000 shares for
    legal fees were valued at $43,404 or $2.89 per share.

    Z.  April 30, 1996

    The Company issued 17,962 shares of common stock as part of a consulting
    agreement with Robert Tardy and Robert R. Meyers for services in excess of
    their basic service agreement at $5.00 per share.

    AA.  May 17, 1996

    The Company entered into a settlement agreement with Select Acquisitions,
    Inc., Pasquale Dileo, an officer and shareholders of Select Acquisitions,
    Inc. and a consultant and shareholder of the Company, and Michael Papa, the
    former owner and major shareholder of Select Acquisitions, Inc. as a result
    of various disputes agreed to resolve any and all disputes by certain terms
    and conditions.  As a result of services provided, Select Acquisitions,
    Inc. and Pasquale Dileo received stock in the Company.  In settlement with
    the disagreements of the shareholders of Select Acquisitions, Inc., the
    Company issued 80,000 shares of its common stock to the original
    shareholders, 100,000 shares to Michael Papa and 20,000 shares to Gordon N.
    Gemma, Esq. for outstanding legal fees.  In addition, Michael Papa is to
    receive from the Company $60,000 for costs, expenses and other payments as
    a representative of Select Acquisitions, Inc. and the Company.  These
    shares were valued at $2.50 per share.

    BB.  June 28, 1996 

    The Company entered into an agreement to acquire all of the land
    application business and assets of R.C. Land Company, Inc. and its 33 1/3%
    interest in American BIO-AG Corporation by the issuance of 305,000 shares
    of common stock and other payments.  The price of the stock was based on
    $2.50 per share.

    CC.  June 30, 1996 

    The Company issued a total of 3,066 shares to Robert Tardy and 72 shares to
    Robert C. Myers in exchange for overtime compensations per their consulting
    agreements.  The agreed upon value of the shares was $5 per share which was
    the value of the service provided.









                                                                            F-18

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






5.  Common stock (continued):

    DD.  June and July 1996 

    The Company issued 583 shares of its common stock each month as part of a
    consulting agreement dated May 31, 1996 with J.G.R. Associates.

    EE.  July 1, 1996 

    The Company issued 75,000 shares of its common stock valued at $2.50 per
    share to Ronald Bryce for consulting services as part of the asset purchase
    agreement with R.C. Land Company, Inc.

    FF.  July 24, 1996

    The Company entered into a consultant agreement with Edward Rodriguez for a
    term of 2 years.  The consultant is to receive $400,00 by the issuance of
    400,000 shares of the Company's common stock and an option to purchase
    500,000 shares of the Company's common stock immediately exercisable
    expiring December 31, 2001.



    GG.  September 9, 1996 

    The Company issued 52,540 shares of its common stock values at $3.00 per
    share to Select Acquisitions, Inc. for consulting and contract expenses
    paid on behalf of Compost America Holding Co.

    HH.  October 11, 1996 

    The Company issued 51,000 shares at $2.09 per share to Ronald Bryce for
    payment of accounts payable of American BIO-Ag Corporation in the amount of
    $106,761.

    II.  October 11, 1996 

    The Company issued 55,500 shares of stock regarding the Newark Project to
    various individuals.  The agreed upon value of the stock was $102,250 or
    $1.84 per share average price for the services provided.

    JJ.  October 11, 1996

    The Company issued 165,000 shares to attorneys. The agreed upon value was
    $180,000 or $1.09 per share average price for the services provided.

    KK.  October 11, 1996

    The Company issued 110,000 shares to consultants. The agreed upon value was
    $199,500 or $1.81 per share average price for the services provided.






                                                                            F-19
<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







5.  Common stock (continued):

    LL.  October 11, 1996 

    The Company issued 83,500 shares to various engineers, etc.  The agreed
    upon value was $134,250 or $1.22 per share average price for the services
    provided.

    MM.  October 23, 1996 

    The Company issued 3,000 shares of stock to the law firm of Atkinson
    Debartolo & Kalapos regarding an agreement which was terminated at a value
    of $2.00 per share or $6,000.

    NN.  December 1, 1996

    The Company issued 100,000 shares to a former employee as compensation for
    services provided.  The shares were valued at $.09 per share for the
    services provided.

    OO.  December 1, 1996 

    The Company issued 6,500 shares of common stock, 1,000 shares at $1.00 per
    share and 5,500 at $2.50 per share for services.

    PP.  January 8, 1997

    As part of the acquisition agreement for American Soil, Inc., the Company
    issued 150,000 shares of stock to Robert Young, the former owner of
    American Soil, Inc.  The fair value of the stock was valued at $2.65 per
    share based on the asset value of American Soil, Inc.

    QQ. February 17, 1997

    The Company issued 198,594 shares of the Companies common stock for
    consulting services by individuals.  The estimated fair value was $.50 per
    share or $99,297.

    RR. February 24, 1997

    The Company issued 880,000 shares of the Companies common stock for
    services.  The stock was registered in a S-8 Registration and offered for
    sale by the consultants.  The fair value was estimated at $1.00 per share
    or $880,000.













                                                                            F-20

<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







5.  Common stock (continued):

    SS. February 27, 1997

    The Company issued 5,000 shares of the Companies common stock for
    consulting services to Berwyn Capital Corporation.  The fair value is
    estimated to be $.50 or $2,500.

    TT. March 26, 1997

    The Company issued 78,840 shares of common stock to three individuals for
    consulting service regarding the Miami Project.  The fair value is
    estimated to be $.50 or $39,420.



6.  Investment in American BIO-AG Corporation:

    The Company and two other entities formed a joint venture.  The purpose of
    the joint venture is to develop, own or lease, operate and farm biosolids
    beneficial use land application sites.  The joint venture registered to do
    business in Arizona on June 27, 1995.  In addition, Professional Service
    Group desires to support the joint venture company in its efforts to
    secure, develop and permit beneficial use land application sites throughout
    the United States beginning first in the South West where 365 day
    application prevail such as Texas, Arizona, New Mexico and California.  The
    initial land application sites to be developed by the joint venture
    corporation are Arizona, Texas and New Jersey.  Compost America Holding
    Company, Inc. will arrange for a bridge loan in the amount of $750,000
    which will be repaid upon long-term financing.  The loan is anticipated to
    be funded by April 1, 1995 and repaid by June 30, 1995.  As of June 28,
    1996 the bridge loan was not arranged.  Compost America Holding Company,
    Inc. has arranged for short-term funds from February 15, 1995 to June 28,
    1996.  Compost America Holding Company, Inc. will also receive a
    development fee of $125,000 on positive distributable cash flow.  The joint
    venture corporation will sign a 15 year management contract with Mr. Bryce,
    President of R.C. Land Company, Inc. for $150,000 salary per year to manage
    the joint venture beginning February 15, 1995 plus standard benefits in
    addition, upon the Company's generation of positive cash flow.  In April of
    1996 the Company issued 83,333 shares of its common stock as compensation
    for unpaid management fees and expenses to Mr. Ronald Bryce.  The Company
    has valued these shares at a fair value of $2.50 per share or $208,332. 
    This amount














                                                                            F-21

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









6.  Investment in American BIO-AG Corporation:

    has been capitalized as part of the cost of the investment in American
    BIO-AG Corporation by the Company.  A monthly director fee of $4,000 per
    month will be paid to each of the directors after revenues commence.  The
    Board of Directors shall be Ronald R. Bryce, President, Robert Jones III,
    Vice President and Roger E. Tuttle, Secretary.  Roger Tuttle is also an
    officer, director and shareholder of Compost America Holding Company, Inc.

    The Company accounted for its investment in the joint venture on the equity
    method through the period ended June 30, 1996.

    On June 28, 1996 the Company, through its majority owned subsidiary, Newark
    Recycling and Composting Company, Inc., purchased all of the land
    application business assets of R.C. Land Company and all the ownership
    interests of Compost America Holding Company, Inc., Twin River Equities and
    R.C. Land Company, Inc.'s in American BIO-AG Corporation.  Newark Recycling
    and Composting Company, Inc. became the 100% owner of the entity American
    BIO-AG Corporation.  Newark Recycling and Composting Company, Inc. is owned
    75% by Compost America Holding Company, Inc. and 25% owned by Potomac
    Technologies.  For the period October 1, 1996 to April 30, 1997 American
    BIO-AG Corporation has been included in the consolidated financial
    statements of the Company.



7.  Agreements:

    A)  Compost America Holding Company, Inc.:

    1)   Settlement Agreement:

         On May 17, 1996, the Company and Pasquale Dileo, doing business as
         Select Acquisitions, Inc., and Michael Papa entered into a settlement
         agreement.  Select Acquisitions, Inc. was acquired by Pasquale Dileo
         from Michael Papa.  Select Acquisitions, Inc. and Pasquale Dileo have
         provided various services to the Company for which it received
         restricted common stock.  As a result of disputes and in the interest
         of resolving these disputes this settlement agreement was executed. 















                                                                            F-22

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






7.  Agreements (continued):

    A)  Compost America Holding Company, Inc. (continued):

         The settlement consisted of the following:


         A)   Compost America Holding Company, Inc. will issue within 14 days
              of this agreement 80,000 shares of restricted common stock to the
              original shareholders of Select Acquisitions, Inc.

         B)   Within 14 days of this agreement the Company will issue 100,000
              shares of restricted common stock of the Company to Michael Papa
              and 20,000 shares to Gordan N. Gemma, Esq.

         C)   Within 14 days Pasquale Dileo will issue 150,000 shares of Select
              Acquisitions, Inc. to Michael Papa.

         D)   Within 30 days Select Acquisitions, Inc. and/or the Company will
              pay Michael Papa $60,000.



    2)  Shareholder Settlement Agreement:

         On April 27, 1996 the original shareholders of Select Acquisitions,
         Inc. and Compost America Holding Company, Inc. entered into a
         settlement agreement.  All of the conditions of this agreement pertain
         to transactions on the books of Select Acquisitions, Inc. except as
         part of this agreement, 267,000 shares of the Company's common stock
         of which 150,000 is to be included in the S-1 Registration Statement
         to be issued to Select Acquisitions, Inc. in payment for prior service
         to the Company.


    3)   On May 25, 1996, Diana McCarthy revoked her agreement with the Company
         and renounced her rights to any stock options.

    4)  American BIO-AG Corporation:

         On June 28, 1996 Compost America Holding Company, Inc., Prince Georges
         Contractors, Inc. d/b/a Twin River Equities and R.C. Land Company,
         Inc. each a 33 1/3% owner in the Joint Venture, American BIO-AG
         Corporation formed an agreement to sell their ownership in American
         BIO-AG Corporation to Newark Recycling and Composting Company, Inc. 
         In addition, R.C. Land Company, Inc. will sell all of its land
         applications business assets to Newark Recycling and Composting 











                                                                            F-23

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







7.  Agreements (continued):

    A)  Compost America Holding Company, Inc. (continued):

    4)  American BIO-AG Corporation (continued):

         Company, Inc. who will assign these assets and become the 100% owner
         of American BIO-AG Corporation.  Newark Recycling and Composting
         Company, Inc. is owned 75% by Compost America Holding Company, Inc.
         and 25% by Potomac Technologies, Inc.  As consideration, R.C. Land
         Company, Inc., for its contribution of assets and stock ownership of
         American BIO-AG Corporation, will receive 305,000 shares of Compost
         America Holding Company, Inc.'s restricted stock at a fair value of
         $2.50 per share and $50,000 payable $5,000 on June 21, 1996, $20,000
         on June 28, 1996 and $25,000 on July 31, 1996.  Additionally, Newark
         Recycling and Composting Company, Inc. will make a one year loan to
         R.C. Land Company, Inc. in the amount of $150,000 at 15% per annum and
         secured by 60,000 registered shares of Compost America Holding
         Company, Inc. 

         On September 30, 1996 the Company issued 51,000 registered shares of
         common stock to Ronald K. Bryce for a release of $150,000 loan
         provided for in the June 28, 1996 Asset Purchase Agreement and the
         payment of all prior American BIO-AG accounts payables.

         As part of this agreement, Ronald K. Bryce, the 100% owner of R.C.
         Land Company, Inc., received 83,333 shares of common stock of the
         Company and cancelled 75,000 Compost America Holding Company, Inc.
         stock purchase warrants.  The assets acquired from R.C. Land Company,
         Inc. consisted of:

         1)   All plan of operation with all site specific plans with the State
              of Arizona's Department of Environmental Quality
         2)   Various farms lands 5,428 acres
         3)   Intellectual property, name and experience in land application
              business
         4)   Various equipment
         5)   33 1/3% ownership in American BIO-AG Corporation Joint Venture

         The value of the transaction with R.C. land Company, Inc. was computed
         based on the fair value of the 305,000 shares at $2.50 per share plus
         50,000 in cash plus 33 1/3% of the liabilities assumed in the amount
         of $146,604 of American BIO-AG Corporation.  The total fair value
         attributable to the acquisition of R.C. Land Company, Inc.'s assets
         and equity in American BIO-AG Corporation amounted to $2,047,559 less
         the mortgages assumed of $276,829 for a net value of $1,770,730.


                                                                            F-24

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







7.  Agreements (continued):

    A)  Compost America Holding Company, Inc. (continued):

    4)   American BIO-AG Corporation (continued):

         Compost America Holding Company, Inc. and Twin Rivers Equities
         (Potomac Technologies, Inc.) contributed to Newark Recycling and
         Composting Company, Inc. the value being the net book value of the
         assets required.

    5)   Settlement Agreement:

         On July 31, 1996 the Company and Ehmann, Van Denbergh & Trainor, P.C.
         entered into an agreement to settle a disagreement between the Company
         and the law firm concerning the validity of billings from the law firm
         and when and in what amount and manner the Company bills should be
         paid.  The original amount due Ehmann, Van Denbergh and Trainor, P.C.
         amounted to $685,810 and in a desire to settle, agrees to $500,000 as 
         a settlement amount.  Payments to be made as follows:


              $ 50,000 due June 14, 1996
                50,000 due June 28, 1996
               400,000 represented by a note calling for monthly installments
                        of $20,000 commencing November 1996 (except $40,000 per
                        month in January, February and March 1997), or payment
                        in full upon closing of the financing of any compost
                        facility.  The note is secured by a security interest
                        in the assets of the Company and its subsidiaries.



         Ehmann, Van Denbergh & Trainor, P.C. also agreed to give the Company
         an option to purchase back 500,000 shares of its common stock at $4.00
         per share until October 31, 1997 in installments of 50,000 shares.  In
         the event of default the note shall bear interest at 4% over prime
         from date of default.







                                                                            F-25

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS











7.  Agreements (continued):

    A)  Compost America Holding Company, Inc. (continued):

    6)  Registration Statement:

         On June 7, 1996 the Company became effective as to it's S-1
         Registration Statement which registered 1,353,100 shares of the
         Company's common stock solely for selling shareholders.


    7)   On September 15, 1996 the Company entered into a Lock-Up Agreement
         with John B. Fetter, owner of 2,528,612 shares of the Company's common
         stock, who agreed for a period of 12 months not to sell 2,300,000
         shares of his stock and for an additional 12 months will not sell
         2,000,000 shares of his stock.


    8)   On October 1, 1996 the Company and individual shareholders agreed to a
         modified Lock-Up Agreement for shares that they owned for 6 months
         (October 1, 1996 to March  31, 1997) not to sell their shares.  The
         shareholders and shares are as follows:



                                                   Registered
                      Shareholder                    Shares
                      -----------                    ------


            William C. Hurtt, Trustee   (A)         100,000
            William Callari             (B)          80,000



         A)   William C. Hurtt, Trustee will lock-up 37,500 unregistered shares
              with a mutually agreed extension for 3 months for 12,500
              unregistered shares.  Additional extensions may be available;
              during the extension term the shareholder agrees to not sell more
              than 7 1/2% of the registered shares.  As consideration for the
              Lock-Up Agreement the Company will issue 26,000 unregistered
              shares of common stock.






                                                                            F-26

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









7.  Agreements (continued):

    8)  (continued):

         B)   William Callari will lock-up 30,000 unregistered shares with a
              mutually agreed extension for 3 months for 10,000 unregistered
              shares.  Additional extensions may be available; during the
              extension term the shareholder agrees to not sell more than 7
              1/2% of the registered shares.  As consideration for this Lock-Up
              Agreement the Company will issue 20,800 unregistered shares of
              common stock.


    9)   On October 9, 1996 the Company and Bruce Boltuch entered into an
         agreement for a convertible 10% note for $50,000 payable on April 9,
         1997.  The note, at the option of the holder, is convertible 30 days
         prior to the maturity date into unregistered common shares of the
         Company at a conversion price of $3.00 per principal amount of this
         note for one share.  On October 9, 1996, the Company issued a six
         month $50,000 convertible note at 10% to Charles Lanktree with a
         maturity date of April 9, 1997.  Interest to be paid monthly.  The
         note is non recourse on any shareholder or officer of the Company and
         is an obligation of the Company only.  The note is convertible 30 days
         prior to maturity into common shares of the Company at a  conversion
         price of $3.00 per share.  The note is collateralized by 20,000
         registered shares of the Company's common stock held in escrow.  The
         collateral is transferred if the unpaid principal and unpaid interest
         are not paid on the maturity date plus 15 days.  As of April 30, 1997,
         the note was unpaid.  On May 19, 1997 an agreement to extend the
         maturity to July 9, 1997 at 12% interest was agreed to.  On May 19,
         1997, Bruce Boltuch received an option to purchase 7,500 shares of
         registered tradeable stock at $2.00 per share and 2,500 shares of
         registered common stock of the Company for granting the extension for
         payment of the note.


    10)  On October 9, 1996 the Company entered into a Lock-Up of Insiders
         Shares Agreement for a period of 16 months from the date of October 9,
         1996.  The following is a list of shareholders and their respective
         shares as per this agreement.









                                                                            F-27

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









7.  Agreements (continued):

    A)  Compost America Holding Company, Inc. (continued):

   10)        (continued):


                     Shareholder                           Shares 
                     -----------                           ------ 
                                                                  
                     Andrea Wortmann                       150,000
                     Robert E. Wortmann, Jr.               150,000
                     Victor D. Wortmann, Sr.               812,500
                     Roger E. Tuttle                     2,433,509
                     Robert E. Wortmann                    802,500
                     Victor D. Wortmann, Jr.               200,000
                     Elizabeth Tuttle                      100,000
                     Erika Wortmann                        150,000
                     Kristie Tuttle                        100,000
                     Select Acquisitions                 1,308,640
                     Susan Ann Curran                      200,000
                     William Tuttle                        100,000
                     Mary Wortmann                          40,000
                                                         ---------
                                                         6,547,149
                                                         ---------
                                                         ---------


   11)   On October 15, 1996 the Company and Brokerage Services Management,
         Inc. entered into an agreement for a convertible 10% note for $53,000
         with a maturity of December 15, 1996, interest and principal payable
         on maturity.  The note, at the option of the holder, is convertible 6
         days prior to the maturity date into unregistered common shares of the
         Company at a conversion price of $3.00 per principal amount of this
         note for one share.

   12)   On November 24, 1996 the Company and Berwyn Capital Investments, Inc.
         entered into an agreement for Berwyn Capital Investments, Inc., for a
         term of 180 days, to arrange corporate equity, project debt, project
         mortgage debt and project subordinated debt on behalf of the Company. 
         The anticipated equity  financing is to amount to $3,000,000.  As
         compensation for this service:

         A)   A cash payment equal to 6% of any equity funds raised and 3.6% of
              the proceeds of any debt offering.

         B)   Option to purchase common stock of $3.50 per share exercisable
              any time within 5 years from the date of issuance with a value
              equal to 4% (2.4% in the case of debt) of the funds raised.









                                                                            F-28

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






7.  Agreements (continued):

    A)  Compost America Holding Company, Inc. (continued):

   13)   On December 3, 1996 the Company and Ira Russack entered into an
         agreement for a convertible 8% note for $100,000 due June 30, 1997,
         and extended to August 15, 1997, interest and principals payable on
         the maturity date.  On January 16, 1997 the Company and Ira Russack
         entered into an agreement for a convertible 10% note for $100,000 due
         December 15, 1997, interest and principal payable on the maturity
         date. The notes are convertible at $3.00 per share based on the
         remaining principal amount plus any acquired interest at the maturity
         date. 

   14)   In March 1997, the Company and M. H. Meyerson & Co., Inc. entered into
         an agreement for Meyerson to perform investment banking services on a
         non-exclusive basis for a period of three years.  Such services will
         be performed as requested by the Company on a best efforts basis and
         will include assistance in mergers, acquisitions and internal capital
         structuring and the placement of new debt and equity issues. 
         Consideration for the services is an option to purchase 1,000,000
         shares of unregistered common stock of the Company.  The option
         expires on March 31, 2002.  The option shall vest and become
         irrevocable as follows:


         Option to purchase 250,000 common shares at $2.50 per share on date of
         agreement.

         Option to purchase 250,000 common shares at $3.00 per share on October
         1, 1997.

         Option to purchase 250,000 common shares at $3.00 per share on April
         1, 1998.

         Option to purchase 250,000 common shares at $3.00 per share on October
         1, 1998.


    Upon signing of this agreement, the Company will pay Meyerson $25,000 as a
    non-accountable and non-refundable expense allowance.  Meyerson shall be
    entitled to additional compensation to be agreed upon in advance of any
    transaction proposed or executed by Meyerson.












                                                                            F-29

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




7.  Agreements (continued):

    A)  Compost America Holding Company, Inc. (continued):

   15)   On March 20, 1997, the Company issued a $8,500 note to an affiliated
         company of Charles Lanktree at 10% interest due May 8, 1997.  Interest
         and principal payable at maturity.  The note was not paid on May 8,
         1997 and is delinquent.

   16)   On April 30, 1997, the Company issued three $25,000 notes to Mark G.
         Milask, Philip Wagner and Dr. Paul Smalheiser at 8% due September 30,
         1998.  The notes are convertible at $2.00 per common share at any time
         prior to maturity.  In addition, each payee was granted an option to
         purchase 50,000 shares of the Company's unregistered common stock at
         $2.00 per share, expiring March 31, 2002.  Interest payable at date of
         maturity.

   17)   On April 30, 1997, the Company issued a $50,000 note at 10% to Donald
         A. Kaplan with a maturity of September 30, 1998.  Interest is payable
         at maturity.  In addition, the Company granted an option to purchase
         100,000 shares of common stock at $2.00 per share through March 31,
         2002.  The note is convertible into unregistered common shares at
         $2.00 per share at any time prior to maturity.  The holder of the note
         is entitled to registration rights when available and will be able to
         take advantage of any piggy-back registration.

   18)   On February 13, 1996, the Company entered into a master letter
         agreement with Paine Webber Incorporated to act as a sole financial
         advisor and senior managing underwriter for the Company and its
         various subsidiaries in connection with the financing of certain waste
         disposal facilities, certain ancillary equipment and certain related
         development costs (the projects).  As compensation, the Company will
         pay a success fee, equity placement fee, underwriter fee, discount fee
         and out of pocket expenses and in no event shall Paine Webber be
         entitled to less than 10% of all fees and discounts paid in connection
         with the underwriting of bonds for any project financing.  The term of
         the agreement is for twenty four months.  As of September 16, 1996 the
         term has been extended to September 16, 1998.

    B)  Chicago Recycling and Composting Company, Inc.

    1)   Chicago Restructuring Agreement:

         On July 24, 1995, effective as of February 15, 1995, pursuant to an
         agreement between Compost America Holding Company, Inc. and
         Foundations Systems, Inc. to convey, sell and transfer unto Compost
         America Holding Company, Inc. all of Foundation Systems, Inc. rights,
         title and interest in and to the assets of the Chicago Recycling and
         Composting Project.  The interest acquired represented 50% of the
         Joint Venture between the two companies.  The principals of Foundation
         Systems, Inc. as consideration for their interest were issued 120,000
         shares of common stock of Compost America Holding Company, Inc.






                                                                            F-30

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









7.  Agreements (continued):

    B)  Chicago Recycling and Composting Company, Inc. (continued):

    2)  Conditional Agreement of Sale:

         On May 5, 1994 the Indiana Harbor Belt Railroad and Chicago Recycling
         and Composting Company, Inc. entered into an agreement to purchase a
         parcel of land containing 14 acres.  The purchase price shall be
         $420,000 with $42,000 down and the balance at closing.  The price of
         the property is based on $30,000 per acre or fraction thereof.  Any
         differences in actual acreage will amend purchase price to conform. 
         The closing shall be 30 days from completion of due diligence or 365
         days from May 5, 1994.  The contract included many contingencies to be
         satisfied in order to close.

         As of April 30, 1997 the $42,000 deposit was never made but the
         contract was still in effect.

         On September 1, 1995 the agreement of sale was extended to March 31,
         1996.

         On March 31, 1996 the agreement of sale was extended to July 31, 1996,
         subsequently extended to December 31, 1996.  As of April 30, 1997 no
         formal extensions have been granted.

    3)  Real Estate Lease:

         On March 20, 1996 Chicago Recycling and Composting Company, Inc. and
         Hub Cap City entered into a lease agreement for the premises located
         at 13831 Ashland Avenue, Riverdale, Illinois 60627.  The lease is for
         a term of 36 months beginning on the date Chicago Recycling and
         Composting Company, Inc. purchases the property.  The lease will
         automatically renew for a period of three years unless terminated. 
         The lease payment is $500 per month for a total of $6,000 annually,
         any renewals are on the same terms.

    4)   Easement Agreement:

         On March 20, 1996 Chicago Recycling and Composting Company, Inc. and
         Hub Cap City entered into an easement agreement such that Hub Cap City
         gives and conveys an easement for ingress and egress over, upon and
         across two separate 20 foot wide portions of the Hub Cap City parcel
         to provide access for necessary utility lines, sewer and water lines
         or such other access to public facilities as may reasonably be
         necessary, to and from the public roadway.





                                                                            F-31

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7.  Agreements (continued):

    C)   Gloucester Recycling and Composting Company, Inc.:

    1)   Lease Agreement, Gloucester City, New Jersey

         On July 1, 1995 Gloucester City (lessor) and Gloucester Recycling and
         Composting Company, Inc. (lessee) entered into a lease agreement for
         certain real property located in Gloucester City, New Jersey
         containing approximately 7.98 acres and also Parcel No. 2 (Block 120,
         Lot 1) if acquired by Gloucester City.  Approximately 12 acres of
         Parcel No.2  shall be dedicated for the full scale, permanent
         composting facility.  The lease shall commence on March 7, 1996 for an
         initial term of 24 consecutive months.  With the lessor's consent the
         lessee shall have the right and option to extend the term for an
         additional 30 years.  The rent is based on a rent formula.

         For the fist 24 months the rent shall be $100 per month plus all site
         improvements to Parcel No. 1 to develop a "demonstration composting
         facility" for the 30 year extended term.

              1)   Lessee's redemption of Parcel No. 1.

              2)   Lessee's payments to lessor in accordance with the "host
                   community benefit fee schedule" for the extended term.

         The benefit fee payment schedule is as follows:

              1)  Payments in lieu of taxes

                   a)   Taxes due Camden County and District School taxes to be
                        paid by lessee following receipt of the NJDEP full
                        scale, permanent composting facility permit.

                   b)   Municipal purpose taxes beginning twelve months
                        following the date of commercial operation.

                   c)   The initial payment following commercial start-up is
                        $82,745 with annual escalations of 4%.

              2)   Lease payments begin the end of the first full month of
                   commercial operations and shall be equal to the mortgage
                   expense resulting from the acquisition of Parcel No. 2.

              3)   Host Community Benefit

                   Payments are based on tons of all organic waste received at
                   the composting facility at the rate of $2.40 per ton which
                   shall be applied against "site clean-up" costs.  Actual cash
                   payments shall begin after the amount is fully paid except a
                   $.35 per ton shall be paid for the first calendar year. 
                   Following the site clean-up application the rate shall be
                   $2.75 per ton through the tenth year.  After the ten years
                   the payment shall be adjusted annually based on the average
                   tip fee.  There is a maximum fee of $100,000 should tip fees
                   fall below $65.00 per ton.  In addition, $1.25 per ton will
                   be paid to lessor for organic waste in excess of 100,000
                   tons.




                                                                            F-32

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








7.  Agreements (continued):

    D)  Monmouth Recycling and Composting Company, Inc.:

    1)  Option Purchase Agreement:

         On March 1, 1995 Compost America Company of New Jersey, Ltd. (CANJ)
         and Brownfield Environmental, Inc. entered into an agreement to
         purchase a tract of land, together with improvements in Freehold
         Township in the County of Monmouth, described as Lot 37 in Block 92
         which is an area of 15 acres.  The purchase price will be $600,000
         with an estimated closing date of February 14, 1996.  CANJ has the
         exclusive option to extend the closing for an additional 12 months by
         paying $2,500 per month during the extension period.  As of April 30, 
         1996 the contract was extended for the initial 12 months to 
         February 14, 1997.  CANJ has an additional exclusive right to extend 
         the closing for a second extension of 18 months by payment of a 
         $15,000 fee plus a non-refundable option payment per month of $3,500.  
         As of April 30, 1997 no formal extensions have been granted.

    2) Stock Purchase Agreement: 

         On December 4, 1995, the Company entered into a stock purchase
         agreement to acquire 100% of all the issued and outstanding stock of
         American Soil, Inc. with Robert F. Young, Jr. (seller) and American
         Soil, Inc.  American Soil, Inc. has conducted the business of
         composting vegetative waste at the site in the Township of Freehold,
         County of Monmouth, State of New Jersey.  The agreement calls for a
         purchase price of $750,000 payable as follows:


         $ 37,500  On execution of agreement
           12,500  On execution of agreement
          425,000  On closing
          125,000  On closing into an escrow account for the 
         --------  payment of liabilities presently unknown
         $600,000
         --------
         --------

         In addition, at closing, the Company will deposit $150,000 into an
         escrow account for payment of accounts payable liabilities.  After
         nine months any funds remaining will be split 75% for the Company and
         25% for the seller.

         The seller is entitled to receive up to 4,000 cubic yards of screened
         non-sludge compost per year, without charge, for the years 1996
         through 1999.  The major assets acquired are the NJDEP and the
         federal, state and local permits and the lease agreement between the
         seller and Freehold Township, New Jersey.







                                                                            F-33

<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






7.  Agreements (continued):

    D) Monmouth Recycling and Composting Company, Inc. (continued):

    2) Stock Purchase Agreement (continued):

         On April 22, 1996 the agreement for the purchase of American Soil,
         Inc. was terminated by the principals of American Soil, Inc. 
         Negotiations were immediately undertaken and Compost America Holding
         Company, Inc. and American Soil, Inc. retroactively agreed to an April
         1, 1996 amendment to the Stock Purchase Agreement whereby the parties
         agreed to:

              a)   Compost America Holding Company, Inc. paid a non-refundable
                   payment of $37,500.

              b)   Compost America Holding Company, Inc. paid a refundable
                   payment should closing not take place of $12,500.

              c)   Compost America Holding Company, Inc. paid a non-refundable
                   payment of $125,000 on April 1, 1996.

              d)   On or before closing the Company shall pay American Soil,
                   Inc. $310,000 or 85,000 shares of Compost America Holding
                   Company, Inc.

              e)   The Company will make available $150,000 to pay American
                   Soil, Inc.'s account payable liabilities or other
                   indebtedness in excess of $35,000.  Any amounts remaining
                   shall be given to American Soil, Inc. in stock at a price of
                   $5 per share.

              f)   The Company shall provide an additional escrow of $125,000
                   for nine months to pay liabilities in excess of $150,000
                   over the first $35,000.  The escrow is to pay any unknown
                   liabilities and any environmental clean-up.  Any remaining
                   funds shall be distributed to the seller.

              g)   The seller is entitled to receive 4,000 cubic yards of
                   screened non-sludge compost per year at no charge from 1996
                   through 1999.

              h)   The Company will also pay up to $30,000 per month for
                   monthly operating expenses.

              i)   The Company will pay the cost of additional stone freight
                   and bulldozer equipment up to $19,250.

              j)   The firm and final closing date is June 30, 1996.  The
                   Company put up 100,000 shares to guarantee closing in the
                   name of Robert F. Young, Jr.  These shares are to be
                   returned upon closing or forfeited if closing does not
                   occur.  As of September 6, 1996, the Company has not issued
                   the 100,000 shares and has not closed on the purchase of
                   American Soil, Inc.  The contract is still pending and has
                   been extended.




                                                                            F-34


<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




7.  Agreements (continued):

    D) Monmouth Recycling and Composting Company, Inc. (continued):

    2) Stock Purchase Agreement (continued):

         On October 2, 1996 a second amendment to the Stock Purchase Agreement
         was signed between Compost America Holding Company, Inc., Robert F.
         Young, Jr. and American Soil, Inc.  The amendment extended the closing
         date to October 2, 1996.  The closing occurred October 2, 1996.  In
         addition, the following amendments were agreed to:


         a)   Under the first amendment Robert F. Young, Jr. was to be issued
              100,000 shares of unregistered common stock, these shares were
              never issued.  As a result, no sooner than January 5, 1997 and no
              later than January 8, 1997 Robert F. Young, Jr. shall be issued
              150,000 shares of registered stock.  To secure the Company's
              obligation to issue the stock, Roger E. Tuttle has agreed to
              deliver to escrow agent 150,000 shares of the Company which he
              owns.  These shares are valued at $2.65 or a total amount of
              $397,500.

         b)   At closing the Company will place $132,500 cash or 50,000 shares
              of unregistered common stock of the Company owned by Roger and
              Elizabeth Tuttle into an escrow account to be held by the escrow
              agent for 9 months for the payment of any unknown liabilities
              more than 90 days prior to the closing date that are more than
              $5,000 and any environmental clean-up that may be required by
              law.  This provision is in lieu of the $150,000 in the second
              amendment.

         c)   At closing the Company paid Isdaner & Company $20,000 and
              Richards & O'Neil LLP $21,457.

         d)   At the closing the Company paid $325,000 as amended for the first
              amendment of $310,000.

         e)   At closing the Company assumed all assets and liabilities of
              American Soil, Inc.

         f)   The combined investment and advances to American Soil, Inc. was
              $1,019,248 which was allocated as follows:

              Net assets of American Soil, Inc.       $  158,387
              Value of lease with the Town of
              Freehold which expires April 27, 2004      860,861
                                                      ----------
                                                      $1,019,248
                                                      ----------
                                                      ----------

    Financial statements of American Soil, Inc. have not been provided since
    the acquisition does not meet with the test for a significant subsidiary as
    required under Reg Section 210-02 (W).  The combined investment in and
    advances at the proposed acquisition date amounted to $1,019,248 which did
    not exceed 10% of consolidated assets at April 30, 1996.






                                                                            F-35


<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








7.  Agreements (continued):

    D) Monmouth Recycling and Composting Company, Inc. (continued):

    3)   Meher & LaFrance Retainer Agreement:

         On May 29, 1996 the Company entered into a Retainer Agreement with the
         law firm of Meher & LaFrance to provide legal services regarding the
         Township of Freehold, to provide appearances before municipal and
         other governmental boards, committees and agencies, compliance with
         the Monmouth County Solid Waste Management Plan and required
         permitting procedures of the New Jersey Department of Environmental
         Protection, through final site plan approvals.  The Company shall
         maintain a $1,500 retainer deposit and will be billed monthly based on
         an hourly basis of time expended at standard hourly rates.

    E)  Newark Recycling and Composting Company, Inc.

    1)  Retainer Agreement with Fischbein, Badillo, Wagner and Itzler:

         On December 4, 1995 the Company entered into a contract with
         Fischbein, Badillo, Wagner and Itzler to provide legal advice,
         guidance and other legal services in connection with the Newark
         Recycling Project.  As consideration the law firm shall receive a
         monthly retainer fee of $6,000 for a term of ten months.  The first
         two month retainer was paid on December 4, 1995.  The agreement also
         calls for reimbursement of expenses.
    
    2)   Loan Agreement with VRH Construction Corp:

         On December 26, 1995, Newark Recycling and Composting Company, Inc.
         and VRH Construction Corp. signed a loan agreement whereby VRH
         Construction Corp. lent $1,043,866 on a term loan basis.  The Loan was
         due on January 15, 1996 with interest at 10%.  The loan has been
         extended to October 1, 1997.

    3)  Option and Purchase Agreement:

         On July 1, 1994, Newark Recycling and Composting Company, Inc. and
Linde Gases of the Mid-Atlantic, Inc. entered into an agreement for an option to
purchase approximately 11.69 acres of real property together with the buildings
and improvements in the City of Newark, Essex County, New Jersey.  The option
called for a $50,000 option payment on date of agreement for a term from July 1,
1994 to December 31, 1994 with a provision to extend the option term for up to
two











                                                                            F-36

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








7.  Agreements (continued):

    E)  Newark Recycling and Composting Company, Inc. (continued):

    3)  Option and Purchase Agreement (continued):

         additional periods commencing January 1, 1995 and expiring June 30,
         1995 and July 1, 1995 and expiring October 31, 1995.  At each
         extension date an additional  $50,000 option payment was required for
         a total at October 31, 1995 of $150,000.  The purchaser can exercise
         their option at any time during the option period and extensions to
         purchase the property for a purchase price of $3,250,000.  All option
         payments are to be credited against the purchase price.  In the event
         the option is not exercised, all option payments will be forfeited.
 
         On October 20, 1995, an Amendment to Option and Purchase Agreement was
         signed whereby "Praxair" was substituted for the seller, Linde Gases
         of the Mid-Atlantic, Inc. and Newark Recycling and Composting Company,
         Inc. exercised the option and posted as security for the closing a
         security bond.  The purchase price was amended to $3,285,866 less the
         $150,000 in option payments.  At closing a deposit of $1,035,866 plus
         closing costs was paid together with a promissory note and purchase
         money mortgage of $2,100,000 at 8% per annum, payable monthly, with a
         maturity on August 31, 1996 which has been extended to April 1, 1997. 
         As of April 30, 1997, there has been no formal extension.  The
         property was closed on December 15, 1995.

         To accommodate the down payment VRH Construction Corp. loaned Newark
         Recycling and Composting Company, Inc. $1,043,866 on a term loan basis
         on demand.  The loan was due on January 15, 1996 with interest at 10%
         per annum.  The loan has been extended to January 2, 1997.  Compost
         America Holding Company, Inc. has pledged as collateral to VRH
         Construction Corp. all its right, title and interest in and to all
         shares of Newark Recycling and Composting Company, Inc.'s capital
         stock that Compost America Holding Company, Inc. owns.

    F)  Miami Recycling and Composting Company, Inc.

    1)  Letter Agreement with Bedminster BioConversion Corporation:

         On June 9, 1995, the Company entered into a letter agreement, as a
         modification of proposals dated May 3rd and 20th, 1995, for Compost
         America Company of New Jersey, Ltd. to acquire 100% of the outstanding
         stock of Bedminster Seacor Services Miami Corporation, from Bedminster
         Bioconversion Corporation.  Bedminster Seacor Services Miami
         Corporation has agreed to enter into a 30 year "put or pay" solid
         waste service agreement in which the City of Miami Florida and
         Bedminster agree to design, construct and operate a facility having an
         annual capacity of at least 150,000 tons.  The charges will be $52.50
         per ton.






                                                                            F-37

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







7.  Agreements (continued):

    F)  Miami Recycling and Composting Company, Inc. (continued):

    1)  Letter Agreement with Bedminster BioConversion Corporation (continued):

         As consideration for the acquisition of 100% of stock of Bedminster
         Seacor Services Miami Corporation from Bedminster Bioconversion
         Corporation, Bedminster Bioconversion Corporation shall receive:

              200,000   Shares of common stock of Compost America Holding
                        Company Inc.

              300,000   Warrants to purchase shares of the common stock of
                        Compost America Holding Company, Inc. at $6.00 per
                        share for a term of 5 years.


         Bedminster will be the supplier of record of all "Eweson Digesters"
         the bridge crane, "Fecon Turning Equipment" and the floor aeration
         units to the composting project undertaken by the Company pursuant to
         a solid waste service agreement between the City of Miami, Florida and
         the Company.  Such equipment supply agreements will be at the
         equipment cost plus 10%.  The agreement calls for license fees and net
         distributable cash flow allocations.

         As part of the acquisition of Bedminster Seacor Services Miami
         Corporation, Miami Recycling and Composting Company, Inc. acquired the
         contract for real property in Dade County, Florida.  On March 29, 1996
         Miami Recycling and Composting Company, Inc. closed on the real estate
         contract for a purchase price of $4,095,838.


    2)   Stock Purchase Agreement:

         On March 1, 1996 Miami Recycling and Composting Company, Inc., a
         wholly owned subsidiary of Compost America Holding Company, Inc,
         entered into an agreement for all of the issued and outstanding shares
         of common stock of Bedminster Seacor Services Miami Corporation by the
         issuance of 200,000 shares of Compost America Holding Company, Inc.'s
         common stock and 300,000 warrants to purchase shares of Compost
         America Holding Company, Inc.'s common stock at $6.00 per share for a
         term of 5 years from March 1, 1996 from Bedminster Bioconversion
         Corporation.  










                                                                            F-38

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






7.  Agreements (continued):

    F)   Miami Recycling and Composting Company, Inc. (continued):

    2)   Stock Purchase Agreement (continued):

         In addition, Miami Recycling and Composting Company, Inc. agreed to a
         equipment supply arrangement for certain solid waste services at cost
         of equipment plus 10% provided that Miami Recycling and Composting
         Company, Inc. shall be entitled to utilize Curing Technologies
         developed by Bedminster Bioconversion Corporation.  As part of the
         Stock Purchase Agreement Bedminster Bioconversion Corporation will be
         paid a license fee of $200,000 upon financing of the Miami Project, a
         supplemental license fee of $300,000, three years after commencement
         of commercial operation of the Miami Project and an additional
         $300,000, six years after commercial operation.  Bedminster
         Bioconversion Corporation shall also receive 20% of the net
         distributable cash flow allowable to the revenues received. 
         Additionally. Miami Recycling and Composting Company, Inc. agreed to
         pay up to $170,000 within 60 days for accounts payable as part of the
         Stock Purchase Agreement.  Roger Tuttle, President of Miami Recycling
         and Composting Company, Inc., has personally guaranteed the payments
         of these payables.

         On July 11, 1996 and on July 16, 1996 the Stock Purchase Agreement was
         amended to change the stock issued for the purchase of Bedminster
         Seacor Miami Corporation from Miami Recycling and Composting Company,
         Inc. to Compost America Holding Company, Inc. and to change the
         license fee to Bedminster Bioconversion Corporation to $400,000 upon
         financing of the Miami Project, a supplemental license fee of $200,000
         three years after commencement operations and an additional $200,000
         six years after commencement.

         As of March 1, 1996 the condensed balance sheet of Bedminster Seacor
         Services Miami Corporation was as follows:

                                        ASSETS

         Current assets:
          Due to Miami Recycling and Composting
           Company, Inc.                                        $ 17,927
                                                                --------
            Total current assets                                  17,927
                                  
    Construction in progress - compost projects                  482,073
                                                                --------

           Total assets                                         $500,000
                                                                --------
                                                                --------

                         LIABILITIES AND SHAREHOLDERS EQUITY

         Shareholders equity:          
         Common stock                                           $736,036
         Deficit                                               ( 236,036)
                                                                --------
                                                                $500,000
                                                                --------
                                                                --------






                                                                            F-39

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





7.  Agreements (continued):

    F)  Miami Recycling and Composting Company, Inc. (continued):

    3)  Land Purchase Contract:

         On March 29, 1996 Bedminster Seacor Services Miami Corporation, a
         wholly owned subsidiary of Miami Recycling and Composting Company,
         Inc., purchased a parcel of land in the Northwest quarter of Section
         30, Township South, Range 40 East, Dade County Florida for $4,095,838
         plus closing costs from Rinker Materials Corporation.  Rinker
         Materials Corporation gave a mortgage of $3,730,870.75 at 7% per annum
         commencing May 1,1996 and continuing for the next 22 months.  All
         interest and principal is due on April 1, 1998.  As of March 29, 1996
         all contracts have been assigned to Miami Recycling and Composting
         Company, Inc.

    4)   On October 29, 1993 Bedminster Seacor Services Miami Corporation
         entered a Solid Waste Agreement with the City of Miami, Florida to
         provide an efficient and environmentally acceptable method of solid
         waste disposal.  The agreement calls for Bedminster Seacor Services
         Miami Corporation to construct, operate and maintain a facility on a
         designated site which has the capacity to process at least 204,000
         tons of acceptable waste.  During start-up and prior to the
         commencement date of the operation, the city shall pay a service fee
         of $63.50 per ton for waste delivered to and accepted by the facility. 
         Upon commencing of operations Bedminster Seacor Services Miami
         Corporation shall receive the unit billing rate for the first five
         years of $63.50 per ton and thereafter at a rate based on an
         escalation factor.

    5)   On October 20, 1994 the agreement with the City of Miami was amended
         such that the capacity has been reduced from 204,000 to 183,000.

    6)   On November 13, 1995 Bedminster Seacor Services Miami Corporation
         restated the Compost Recycling Agreement between the City of Miami,
         Florida and Bedminster Seacor Services Miami Corporation.  The
         restated agreement set forth for Bedminster Seacor Services Miami
         Corporation to design, construct, operate and maintain the facility on
         the site and to pay the cost of construction.  The facility shall have
         the capacity to process at least 150,000 tons of acceptable waste. 
         During start-up and prior to the commencement of operations, the city
         shall pay Bedminster Seacor Services Miami Corporation a service fee
         of $52.00 per ton for acceptable waste delivered to the facility.  On
         the commencement date of operations, the city will pay Bedminster
         Seacor Services Miami Corporation a service fee for the processing
         capacity equal to the unit billing rate multiplied by the greater of
         (1) the number of tons of waste accepted at the facility and disposed
         at Bedminster Seacor Services Miami Corporation's cost pursuant to the
         terms or (2) 1/12th of the guaranteed annual tonnage minus the bypass
         waste rejected at the facility.  The unit billing rate is equal to
         $52.00 per ton and escalated  yearly in accordance with an escalation
         factor.






                                                                            F-40

<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




7.  Agreements (continued):

    F)  Miami Recycling and Composting Company, Inc. (continued):

    6)   (continued):

         In September 1996, in a first amendment to the restated Compost
         Recycling Agreement, the amendment effective date was changed to
         November 13, 1996 and the initial payment by Bedminster Seacor
         Services Miami Corporation to the City of Miami to secure the
         performance of the Company's obligations under the restated agreement
         shall be one million three hundred and fifty thousand dollars
         ($1,350,000) payable $100,000 in September 1996 and the balance of
         $1,250,000 dollars, plus interest at 10% per annum, payable at the
         earlier of the financial closing of the funding for the Miami Compost
         Project or September 1, 1997.  If payments are not received the City
         of Miami shall have the right to terminate this agreement.

         On November 21, 1996, Miami Recycling and Composting Company, Inc.
         paid $1,000,000 to the City of Miami.  This fulfills the 30 year "put
         or pay" contract requirement between the Company and the City of
         Miami.

         The Company has classified this payment as an other asset under the
         classification "Cost of Miami Contract performance fee" and is being
         amortized over a term of 35 years from the contract date.  The fee is
         an initial payment for service performance of Bedminster Seacor
         Services, Inc. under this agreement.


    7)   All the agreements with Bedminster Seacor Services Miami Corporation
         have been assigned to Miami Recycling and Composting Company, Inc.
         subsequent to the acquisition of Bedminster Seacor Services Miami
         Corporation by Miami Recycling and Composting Company, Inc. and its
         parent company Compost America Holding Company, Inc. on March 1, 1996.

    G)  Compost America Technologies, Inc.

    1)  Teaming Agreement between Compost America Technologies, Inc. and
Compost Industries, LLC.:

         On August 15, 1995, Compost America Technologies, Inc., a wholly owned
         subsidiary of Compost America Holding Company, Inc. and Compost
         Industries, LLC, signed a Teaming Agreement for Compost Industries,
         LLC to supply proprietary composting technology and equipment,
         proprietary shop and field fabrication techniques and installation
         know-how relating to solid waste separating, processing, recycling and
         composting.  Compost Industries is to provide and demonstrate its
         "Earthcycle Composting System" shop and field fabrication techniques
         and equipment engineering and assistance for the Gloucester
         Demonstration Project and if successful for the Gloucester Recycling
         and Composting Project and also if requested for other full scale
         projects.  Compost Industries will provide a demonstration Earthcycle
         Composting System, at its expense, at a cost not to exceed $600,000. 
         At financial closing of the Gloucester full-scale project Compost
         Industries will receive payments for all equipment supplies plus a 



                                                                            F-41

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7.  Agreements (continued):

    G)   Compost America Technologies, Inc (continued):

    1)   Teaming Agreement between Compost America Technologies, Inc. and
         Compost Industries, LLC. (continued):

         15% engineering and equipment fee on the total project costs not to
         exceed $12,200,000.  In addition, Compost Industries shall receive at
         "financial closing" 150% of its documented costs up to $600,000 and 33
         1/3% of net distributable cash flow from the full-scale project upon
         commercial acceptance and 3.5% of the "total tip fee revenue" for the
         life of the Gloucester City Project.


8.  Consulting Contracts:

    A)  Engineering and Technology Agreement:

         On September 15, 1994, an "Engineering and Technology Agreement" for
         the Newark Recycling and Composting Company, Inc., a subsidiary of
         Compost America Company of New Jersey, Ltd. and D.J. Egarian &
         Associates, Inc., was signed, for the right to use the licensed patent
         and engineering services provided by D.J. Egarian & Associates, Inc.
         and David J. Egarian, to construct and operate an organic waste
         composting facility at the Newark, New Jersey site.

         The consulting fee for these services will be paid to either D.J.
         Egarian & Associates, Inc. or David J. Egarian as follows:

             $ 15,000  Upon execution of this agreement

             $167,500  Paid prorata on the percent of completion prior to the
                       close of project financing for engineering drawings.

             $  5,000  Per month after commencement of the construction of the
                       facility through the completion of construction

         Any additional services shall be billed as services are provided.

    B)   Consulting Agreement between Compost America Company of New Jersey,
         Ltd. and Michael J. Marchese dated March 1, 1995:

         Michael J. Marchese will provide consulting services in obtaining
         local and county approvals for the Monmouth County composting site. 
         The following terms for his consulting services are:

         1)  $1,000 month beginning 30 days from this agreement through the
             receipt of local approval from the Township of Freehold to build
             a compost facility on the property but no longer than 12 months.

         2)  $2,000 month thereafter until closing on the property.

         3)  $5,000 month after closing.

         4)  To a maximum of $100,000



                                                                            F-42

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







8.  Consulting Contracts (continued):

    B)   Consulting Agreement between Compost America Company of New Jersey,
         Ltd. and Michael J. Marchese dated March 1, 1995 (continued):

         At April 30, 1997 total advanced payments amounted to $100,000.

         On October 2, 1996 the Company entered into a new agreement with
         Michael J. Marchese, which revised the agreement dated March 1, 1995,
         to assist the Company in obtaining certain agreements with Freehold
         Township and Monmouth County for approval of the Company's Monmouth
         County in-vessel composting project.  The term of the agreement is for
         12 months beginning October 2, 1996 and ending October 2, 1997.  The
         consultant will assist the Company in:


         a)   Obtainment of a minimum 20 year lease from Freehold Township for
              a 350-500 ton per day invessel composting facility on the
              American Soil, Inc. property.

         b)   Secure all required local approvals to develop the "Brownfield"
              property.

         c)   Obtain approval of the Monmouth County Board of Chosen
              Freeholders for an in-vessel composting facility on the American
              Soil, Inc. property.


         The agreed compensation for this service shall be $7,500 per month
         payable for the term of the agreement by the issuance of 18,000 shares
         of the Company's common stock.  In addition consultant shall be paid
         any remaining fees unpaid from the March 1, 1995 agreement.

         As a bonus incentive to the consultant


    C)  Consulting Agreement with Robert Tardy d/b/a Tardy and Associates:

         On December 1, 1995, a Consulting Agreement was signed with Robert
         Tardy d/b/a/ Tardy and Associates and the Company for consulting
         services regarding the technology and operational aspects of the
         production of compost from municipal solid wastes, other organics and
         sewage sludge.  The term is for one year starting December 1, 1995. 
         The consultant is to receive $4,000 per month on the last day of each
         month commencing with the month of December 1995 for six months and
         $6,000 per month for the next six months.  In addition, the consultant
         is to receive expense reimbursement based on Company policy.

         As additional consideration for consulting services in excess of the
         basic services of 40 hours per month the Company shall, on a quarterly
         basis, issue to the consultant one share of common stock for each $5
         of compensation accrued in excess of the basic service.





                                                                            F-43

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8.  Consulting Contracts (continued):

    D)   Underwriter Counsel Agreement, Wolf, Block, Schorr, Solis-Cohen:

         On April 1, 1996 the Board of Directors of the Company approved the
         utilization of Wolf, Block, Schorr, Solis-Cohen as underwriter counsel
         for the Company's proposed project financing anticipated in New Jersey
         and its first five project financing in other states.  Wolf, Block,
         Schorr, Solis-Cohen will be compensated $160,000 for the Newark, New
         Jersey closing which included its Newark and Monmouth Projects.  In
         addition, they shall receive as compensation $110,000 for each of the
         next five non-New Jersey projects.

    E)   Ronald K. Bryce Consulting Agreement:

         On July 1, 1996 the Company entered into a consulting agreement with
         Ronald K. Bryce to provide consulting and advice in the development of
         the Company's composting facilities.  The Consultant shall receive
         $4,000 per month from July 1996 to December 1996 and $6,500 per month
         from January 1997 to June 30, 1997.  Additionally, the Company shall
         issue 75,000 common shares of the Company to be registered before
         September 1, 1996.  Expenses are to be reimbursed not to exceed $1,850
         per month without prior approval of the Company.

    F)   Peter Coker Consulting Agreement:

         On June 24, 1996 the Company entered into an agreement with Peter
         Coker to provide financial consulting services.  The term is for a
         period of 5 years from June 24, 1996 with compensation as follows:

         1)   25,000 shares of unregistered common stock for previously
              rendered services.

         2)   As compensation for current services the following options to
              purchase:

                   100,000 shares at $2.00 per share
                    50,000 shares at $5.00 per share
                    50,000 shares at $9.00 per share

              All options to expire on June 30, 2001.  The Company shall also
              reimburse consultant for out-of-project expenses.





                                                                            F-44

<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






8.  Consulting Contracts (continued):

    G)   Mark Gasarch Consulting Agreement:

         On May 20, 1996 the Company entered into a consulting agreement with
         Mark Gasarch, Esq. to provide legal services in the areas of Corporate
         and Federal Securities Law for a term of one year and for 2 additional
         consecutive one year terms at the option of the Company.  The
         consultant will be paid a one time fee of $10,000 and $8,000 per month
         commencing with the month of private funding by a certain financial
         group or Newark Recycling and Composting Company, Inc. upon financial
         closing.  The consultant shall be reimbursed for out-of-pocket
         expenses.  In addition, for excess services over basic service (60
         hours per month) the consultant will be issued 500 shares of common
         stock for each 10 hours in excess of 60 hours per month.  In addition,
         the Company granted the consultant the option to purchase 200,000
         shares at $2.50 per share for a term of five years.

    H)   Consulting Services:

         On May 31, 1996 Miami Recycling and Composting Company, Inc. entered
         into a consulting agreement with Jose Ferre to provide consulting
         services regarding the tax free bond financing of the Miami Project. 
         Ferre shall receive as compensation a development fee equal to 1% of
         the capital costs of the Miami Composting facility with a minimum fee
         of $400,000.  Additionally, Jose Ferre is granted an option to
         purchase 15% of the Miami Recycling facility for a two year period
         commencing with the start of commercial operations.  The purchase
         price of the option shall be commercially reasonable and in accordance
         with industry standards and norms for projects of this type at date of
         acquisition.

    I)   Consulting Service:

         On May 31, 1996 Miami Recycling and Composting Company, Inc. entered
         into an agreement with Dade County Bioconversion Corporation, which
         superseded the December 28, 1994 agreement with South Florida
         Bioconversion Corporation, to provide consulting services in the
         construction and operation of the Miami Composting facility.  Dade
         County Bioconversion Corporation has selected Mr. Orlando Garcia, Jr.
         as its representative.  Mr. Garcia is to receive 8,000 shares of
         Compost America Holding Company, Inc.'s common stock upon the awarding
         of the contract and commencement of construction of the Miami
         Composting facility certain individuals will be paid a success fee
         equal to 1% of the capital costs of the Miami Composting facility
         subject to a minimum of $400,000 payable $100,000 at financial closing
         and $100,000 at the end of the next three twelve month periods.  In
         addition, unrestricted common stock of Compost America Holding
         Company, Inc. of 25,000 shares will be issued to the same individuals
         upon financial closing of the Miami Composting facility.  Upon
         commercial operation of the Miami Composting facility Dade 






                                                                            F-45

<PAGE>
                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




8.  Consulting Contracts (continued):

    J)   Consulting Service (continued):

         County Bioconversion Corporation will be paid a consulting fee based
         upon the amount of the solid waste processed at the compost plant and
         paid by the City of Miami in the amount of a tipping fee of $1.30 per
         ton of solid waste processed at the compost plant.

    K)   Consulting Services:

         On May 31, 1996 Miami Recycling and Composting Company, Inc. entered
         into a consulting agreement with Antonio Zamura, Ereleo Pena and Pedro
         Roig to provide consulting services to Miami Recycling and Composting
         Company, Inc. for the period beginning with May 31, 1996 and
         terminating on the commencement of commercial operations.  The
         consultants will consult with and advise the Company concerning
         governmental relations, lobbying and public relations with various
         sectors of the community .  The consultant shall assist in the
         financial closing and the commencement of commercial operations. 
         Compensation for the consultants will be $3,500 per month commencing
         on January 1, 1997 through the month of commencement of commercial
         operations.  Thereafter the consultants shall receive 1,752
         unregistered shares of the common stock of Compost America Holding
         Company, Inc. on the last day of each month.

    L)   Consulting Services:

         On May 31, 1996 Miami Recycling and Composting Company, Inc. entered
         into an agreement with J.G.R. Associates to provided consulting
         services in public relations and advertising.  The term of this
         agreement is May 31, 1996 and terminates on the commencement of
         commercial operations.  The Company will pay the consultant $3,500 per
         month which will be paid as follows:  $1,750 in cash each month plus
         583 shares of common stock of Compost America Holding Company, Inc.
         which will be issued each month.  As of April 30, 1997 only 1,166
         shares have been issued and no cash payments have been made.

    M)   On July 24, 1996 the Company entered into a consulting agreement with
         Edward Rodriguez to provide financial consulting services.  The
         consultant will assist the Company in developing, studying and
         evaluating financial, merger and acquisition proposals and assist in
         negotiations.  As compensation the consultant, for a term of two
         years, will receive $400,000 in the form of stock of the Company.

         The consultant will receive 100,000 shares of the Company's common
         stock to be registered under an S-8 filing and 500,000 stock options
         exercisable immediately as follows:


              150,000   @    $4.00     Expiration December 31, 2001

              150,000   @     5.00     Expiration December 31, 2001
 
              200,000   @     6.00     Expiration December 31, 2001





                                                                            F-46

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








8.  Consulting Contracts (continued):

    M)   (continued):

         After the exercise of the options the consultant must complete certain
         mailing of investor packages before stock can be registered under Form
         S-8 filing.  Registration of the stock will be in stages from
         immediately upon completion of mailing of 100,000 packages to
         investors, 3 months after completion and 6 months after completion.


    N)   On October 2, 1996 the Company and Robert F. Young, Jr. entered into a
         consulting agreement.  Robert F. Young, Jr. was the original owner and
         developer of American Soil, Inc. which on October 2, 1996 was acquired
         by the Company.  The consultant is to assist the Company in the
         transition of management control of American Soil, Inc. with the
         Company and to provide the following objectives:



         1)   Obtain a minimum of a 20 year lease from the Freehold Township
              for a 350-500 ton per day invessel composting facility.

         2)   Secure all acquired local approvals to develop the "Brownfield"
              property, directly adjacent to the American Soil, Inc. site, for
              compost storage and blending operations.

         3)   Obtain approval from the Monmouth County Board of Chosen
              Freeholders of an amendment to the Monmouth County district solid
              waste management plan to authorize a 350-500 ton per day
              in-vessel composting facility for source separated organic
              material on the American Soil, Inc. property.



         For services rendered the consultant shall receive $5,000 per month
         for a term of 3 months through January 2, 1997.  If objective (1) is
         achieved within 2 months after the end of the term the consultant
         shall receive a bonus of $15,000 and 10,000 shares of registered
         common stock of the Company.  If objective (2) and/or (3) are achieved
         within 2 months after the end of the term of the agreement, the
         consultant shall receive $15,000 and 10,000 shares of restricted
         common stock of the Company for each objective achieved.

         The Company will also provide health coverage for a six month period
         from October 2, 1996 to April 2, 1997.










                                                                            F-47

<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









8.  Consulting Contracts (continued):

    N)   (continued):

         After the term of this agreement the consultant can be engaged at the
         rate of $100 per hour either in cash or common stock of the Company by
         mutual agreement.

         The consultant shall receive reimbursement for expenses not to exceed
         $1,500 per month.  In addition the consultant has requested the
         Company to pay $15,000 per year for three years to Cornell College of
         Art, Architecture and Planning for research.

         If objective (1) is achieved within 4 months after the beginning of
         the term, the consultant shall receive a bonus payment of $15,000 in
         cash and 8,333 shares of common stock of the Company.  Additionally if
         objective (2) and or (3) are achieved within 4 months after the
         beginning of the term of this agreement $15,000 in cash and 8,333
         shares of common stock of the Company will be paid for each completed
         objective.


    O)   On June 10, 1996, the Company and John B. Fetter, a shareholder in the
         Company, entered into a consulting agreement regard Chicago Recycling
         and Composting Company, Inc. to provide services in developing lowest
         cost electric power contracts with power providers.  The consultant
         will provide, for a term of 5 years, advice concerning the types of
         electrical equipment best suited to operate the Company's composting
         facilities and negotiate the lowest cost electrical power contracts. 
         The consultant will receive $5,000 per month commencing June 10, 1996
         and shall accrue and be deferred until payable from operating revenues
         of the Chicago Composting and Recycling Company, Inc. facility.  At
         this time consultant shall also be reimbursed for accrued expenses
         incurred.


    P)   On February 21, 1997, the Company entered into a consulting agreement
         with Tomas Andres Mestre to provide expert consulting service in the
         management of solid waste and sewer sludge and in business development
         in Florida for a period of 10 years.  As compensation,











                                                                            F-48

<PAGE>
 
                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









8.  Consulting Contracts (continued):

    P)  (continued):

         the Company will pay the consultant as follows:

         1)   On or before February 28, 1997, the Company shall pay $300,000 by
              delivering 200,000 shares of the Company's common stock.  The
              Company is to file a registration statement on Form S-8 covering
              the shares within 30 days.

         2)   On or before February 28, 1997, the Company shall deliver to the
              consultant options to purchase 500,000 shares at $2.00 per share
              through December 31, 2007.

         3)   On or before February 28, 1997, but in no event later than
              issuance of the registered shares in 1) above the Company shall
              pay a fee of $250,000.

         4)   Upon financial closing (sale of bonds, public offerings or such
              other financial arrangements of any composting facility in the
              state of Florida) of the North Dade Composting facility the
              consultant shall be paid a development fee of $500,000 and 50% of
              the total of any and all development fees in excess of $1,000,000
              paid pursuant to financial closing.

         5)   Upon financial closing of the North Dade Composting Facility and
              each and every additional composting facility in Florida, the
              Company shall grant the consultant an option for 100,000 share of
              common stock at $2.00 per share for a period of 10 years.

         6)   Upon the commencement of commercial operations of the North Dade
              Composting Facility and the commencement of commercial operations
              of each and every additional facility in Florida, the Company
              shall grant to the consultant options to purchase an additional
              75,000 shares of common stock at $2.00 per share for 10 years.

         7)   Upon each additional closing (other than North Dade) the
              consultant will be paid a development fee of $250,000 and 50% of
              any and all development fees in excess of $500,000.

         8)   The Company shall exclusively contract with the consultant for
              trucking services in the State of Florida at competitive rates. 
              In addition, the Company shall enter into an exclusive contract
              for agriculture land applications in Florida.








                                                                            F-49

<PAGE>
                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









8.  Consulting Contracts (continued):

    P)   (continued):

         In addition to the above, the Company shall convey to the consultant a
         19.9% equity ownership interest in Miami Recycling and Composting
         Company, Inc., a subsidiary of the Company.  The consultant will also
         receive a management fee equal to 30% of distributable net income of
         Miami Recycling Composting Company and any other business enterprises
         in the State of Florida.

    Q)   On January 23, 1997, the Company entered into an agreement with Quirk
         Carson Peppet to act on a non-exclusive basis to provide financial
         advisory service and be the placement agent for certain financial
         advisory and investment banking services.  As compensation, the
         consultant shall receive the following:

         a)   Upon acceptance, the Company will issue warrants for 100,000
              shares at $2.50 per share for 5 years.

         b)   Upon closing of a private placement of any equity securities, the
              Company will pay the consultant 6% of the aggregate gross
              proceeds.  In addition, the consultant shall receive warrants
              equal to 4% of the common shares or equivalent issued in the
              private placement at the price of the shares issued in the
              private placement for 5 years.

         c)   Upon closing of a private placement of any equity security by
              investors introduced by the Company, the consultant will get 3%
              of the aggregate gross proceeds and 2% in warrants.


9.  Development stage company:

    The Company's operations have been centered around its organizing, 
    evaluating and developing the business of converting organic waste into
    compost and other soil products and the start-up financing of its
    operations, including the construction of the waste management and compost
    facility in Newark, New Jersey and other compost facilities throughout the
    country.  From December 17, 1993 through the period ending April 30, 1997
    the Company has secured required financing through a public offering,
    various private placement offerings and through related companies, Compost
    Management, Inc., Select Acquisitions, Inc. and VRH Construction Corp.  The
    Company has incurred losses in connection with its operations during this
    same period of $8,755,648.










                                                                            F-50

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









9.  Development stage company (continued):

    Projects in development:

    GLOUCESTER CITY - NATIONAL SOURCE SEPARATED ORGANIC WASTE DEMONSTRATION
    PROJECT:

    The Company, with a number of sponsors/partners, is developing an 18-month
    pilot program to demonstrate the process of separating organic waste at its
    source and transforming organic materials into compost at a compost site to
    be operated by the Company.  Sponsors/partners for the demonstration
    project are: 1) The National Audubon Society; 2)  The Grocery Industry
    (including The Food Marketing Institute, Grocery Manufacturers Associates,
    Proctor & Gamble and The New Jersey Food Council); 3) Bedminster; 4)
    Higgins Management, Inc.; 5) U.S. Environmental Protection Agency; 6)
    America Forest & Paper Association; 7) U.S. Conference of Mayors; 8)
    National Association of Counties; 9) Restaurant and Foodservice
    Association; and 10) America Plastics Council.

    The location of the demonstration project is a site located in Gloucester
    City, New Jersey.  A small-scale invessel composting facility will be
    installed in a portable building and will process five to eight tons per
    day of organic materials collected from the cities of Gloucester City and
    Cherry Hill and various commercial accounts.  Upon the successful start up
    and operation of the pilot program it is anticipated that the Company will
    construct a 350 ton per day invessel composting facility at the same site
    in Gloucester City.  

    On June 1, 1995 Gloucester Recycling and Composting Company, Inc. entered
    into a lease with Gloucester City for 7.98 acres ("Parcel No.1") located in
    Gloucester City, New Jersey.  The term of the lease is for 24 months
    commencing on the 7th day of March, 1996 and an option to extend the term
    for an additional 30 years.  Rent for the first 24 months shall be $100 per
    month plus real estate taxes.  The 30 year extension is based on a benefit
    fee payment schedule for the lease payments and the host community benefit
    charges.  Following commercial start-up payments shall begin in the amount
    of $82,745 and increase annually by 4% throughout the tax year with a
    computer price index increase or decrease for the remainder of the term.

    The total project cost at April 30, 1997 amounted to $268,623.  The
    estimated scheduled start for the demonstration project was the first
    quarter of 1996.  This date has been extended.












                                                                            F-51


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









9.  Development stage company (continued):

    CHICAGO PROJECT:

    In April 1993, CACC and Foundations Systems, Inc., as general partners and
    Compost Management, Inc. and others, as limited partners, entered into a
    limited partnership agreement to form an entity called South Chicago
    Recycling and Composting Company, L.P. ("Chicago Partners").  The Chicago
    Partners initiated the development of a 500-1,000 ton per day invessel
    composting facility in South Chicago, Illinois.  The Chicago Partners are
    currently negotiating and entering into contracts and agreements for waste
    handling, site location, marketing and other aspects of composting.  The
    Company through Compost Management, Inc. was a 41.5% limited partner of the
    Chicago Facility.  Funding for the Chicago Partners has been provided by
    loans and advances from Teepak, Inc., commencing January 11, 1993.  Total
    advance at April 30, 1995 amounted to $264,871.

    On May 5, 1994, the Company and Indiana Belt Railroad contracted to
    purchase 14 acres at a price of $420,000.  No closing has taken place as of
    April 30, 1997.

    On July 24, 1995, an agreement was executed whereby, effective as of
    February 15, 1995, the amended and restated agreement date April 6, 1993
    never being filed with the Secretary of State of Pennsylvania, caused the
    limited partnership to be void.  As a result, the individual partners
    agreed to exchange their interest, as did Compost Management, Inc., with
    Compost America Holding Company, Inc.  The individual partners, exclusive
    of Compost Management, Inc., for an assignment of the assets were issued
    120,000 shares of Compost America Holding Company, Inc. common stock at a
    par value of $.01 for their 58.5% of the partnership.  Compost America
    Company of New Jersey, Ltd. became the 100% owner of the Chicago Project. 
    On August 4, 1995, the Company incorporated the Chicago Project under the
    name "Chicago Recycling and Composting Company, Inc.".  Chicago  project
    costs as of April 30, 1996 amount to $462,122 and for April 30, 1997
    amounted to $779,676.
   
    MONMOUTH PROJECT:

    In August 1993, Compost Management, Inc. and Bio-Services entered into an
    agreement in principle to form a joint venture named Monmouth Recycling and
    Composting Company, Inc. ("Monmouth Facility") to develop a 300-500 ton per
    day invessel composting facility in Howell Township, Monmouth County, New
    Jersey.  Bio-Services and the Company would each own 50 % of the Monmouth
    Facility.  On January 31, 1994 the Company and Bio-Services entered into a
    conditional asset purchase agreement whereby the Company would purchase
    Bio-Services' 50% interest in the Monmouth Facility for $92,500.  It is the
    position of management that in accordance with 








                                                                            F-52
<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







9.  Development stage company (continued):

    MONMOUTH PROJECT (continued):

    generally accepted accounting principles that the $92,500 should be
    expended as a deferred project cost chargeable to operations in the current
    period.  The Company paid $17,500 on execution of the agreement and three
    monthly installments of $25,000 each in March, April and May 1994.  In
    addition, $407,500, as a purchase amount, was contingent upon the Company
    acquiring all of the related permits for the Monmouth Facility, and the
    facility being constructed.  

    In addition to this agreement Compost America Company of New Jersey, Ltd.
    agreed to issue to Bio-Services warrants for the purchase of 100,000 shares
    of Compost America Company of New Jersey, Ltd. common stock under the
    following terms (see Note 14):

              January 31, 1994-1995  @  $5.00 per share
              January 31, 1995-1996  @  $6.00 per share
              January 31, 1996-1997  @  $7.00 per share 

    Should Compost America Company of New Jersey, Ltd. issue a public offering
    Bio-Services will have the right to "piggy back" its 100,000 shares in the
    public offering.  On December 1, 1994, Bio-Services released the 100,000
    warrants back to the Company unexercised.  The warrants were in turn
    released to David Egarian, 25,000 warrants, Rob Jones, 12,500 warrants, Ron
    Bryce, 12,500 warrants and the remaining 50,000 were cancelled and
    withdrawn.  On May 10, 1994 the Monmouth Facility was incorporated in the
    State of Delaware as Monmouth Recycling and Composting Company, Inc.

    Should Compost America Company of New Jersey, Ltd. not proceed with the
    project at any time in the future, and decide not to sell the project,
    Bio-Services would have the right to repurchase rights for the sums of
    money previously extended so as to be able to continue the development of
    the project.

    Upon financing closing, all development expenses paid by Bio-Services and
    the Company on behalf of the Monmouth Facility would have been reimbursed
    and a development fee of $250,000 would have been paid to each of
    Bio-Services and the Company.  The Agreement in Principle called for the
    Monmouth Facility, at financial closing, to enter into a technology
    agreement with ComTech Environmental, a company principally owned by the
    Partners of Bio-Services, whereby ComTech would receive a fee equal to
    $2.00 per cubic yard for all finished compost produced at the Monmouth
    Facility for a period of ten years.  In October 1993, Bio-Services entered
    into a real estate contract to purchase approximately 27 acres of land on
    which the Monmouth Facility will be constructed at a price of $900,000. 
    The contract contained provisions for monthly option payments 








                                                                            F-53

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






9.  Development stage company (continued):

    MONMOUTH PROJECT (continued):

    of $1,000 to be made until closing in February 1995 when the balance of
    $900,000 would be due.  Should the closing date be extended, there were
    provisions for additional options payments to be made until closing occurs. 
    In January 1994, Bio-Services assigned the real estate contract to the
    Company.  The site was ultimately disapproved by Monmouth County, and a
    replacement site was recommended in Freehold Township.

    On March 1, 1995 an ASSET PURCHASE REPLACEMENT AGREEMENT was made between
    Bio-Services, Inc., D.J. Egarian & Associates, Inc. and Compost America
    Company of New Jersey, Ltd..  As part of this agreement, the "Asset
    Purchase Agreement" between Compost America Company of New Jersey, Ltd. and
    Bio-Services signed on January 31, 1994 for the purchase of the "Abate
    Property" was canceled as a result of the site disapproval.  A property
    identified as Block 92 Lot 37 located in the Township of Freehold, New
    Jersey was selected as a replacement for the "Abate Property" to allow the
    continued development by Compost America Company of New Jersey, Ltd. of an
    indoor composting facility  in Monmouth County.  Compost America Company of
    New Jersey, Ltd., as part of this agreement, signed an "Option Purchase
    Agreement" with Brownfield Environmental, Inc.  to purchase a replacement
    property.

    In addition, the $407,500 contingent purchase amount identified in the
    January 31, 1994 "Asset Purchase Agreement" will be paid as follows:

    1)   Upon receipt of local approval from the Township of Freehold and
         County approval and New Jersey Department of Environmental Protection
         approval, Compost America Company of New Jersey, Ltd. will pay as
         follows:


              a)  $27,416 to D.J. Egarian Associates, Inc.
              b)  $97,584 to Bio-Services


    2)   The remaining $282,500 will be paid upon receipt of all governmental
         approvals, environmental approvals and building permits.
 

              a)  $61,959 to D.J. Egarian Associates, Inc.
              b)  $220,541 to Bio-Services

 
    The terms of the original agreement were amended such that Bio-Services
    will receive a marketing fee of $1.50 as opposed to $2.00 per cubic yard of
    finished compost produced at the Freehold facility.  This agreement also
    cancelled all previous agreements pursuant to the Monmouth Recycling and
    Composting Company, Inc.  In addition, on March 3, 1995 mutual releases
    were signed by the parties involved in the original Agreement in 




                                                                            F-54

<PAGE>
                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








9.  Development stage company (continued):

    MONMOUTH PROJECT (continued):

    Principle for the purchase and assignment of the "Abate Land Purchase
    Contract".  Abate was paid for his release $2,500 plus engineering, survey
    and other plans provided for in William J. Mehr letter of September 29,
    1994.

    On March 1, 1995, Compost America Company of New Jersey, Ltd. and
    Brownfield Environmental, Inc. entered into an "Option Purchase Agreement"
    to purchase 15 acres in the Township of Freehold, County of Monmouth, State
    of New Jersey.  The purchase price is $600,000 payable in cash on or before
    February 14, 1996.  An extension for 12 months is at the exclusive option
    of the Company.  The Company shall pay a monthly option of $2,500 per month
    during the initial extension period.  The Company has an exclusive right to
    extend for a second extension period of 18 months for a payment of $15,000
    plus a monthly option payment of $3,500 per month.  The Company has a third
    extension for 6 months based on the same terms as the second extension.

    On April 1, 1995 the Company paid $25,000 toward the $407,500 contingent
    liability in order to extend the due date to June 30, 1996.  No further
    payments have been made and no further extension have been granted.

    As part of the Monmouth County composting site, a consulting contract with
    Michael J. Marchese on March 1, 1995 was instituted (see consulting
    agreements).  The total project costs incurred as at April 30, 1997
    amounted to $877,992.


    NEWARK PROJECT:

    On June 16, 1992, as amended December 11, 1993, Compost Management, Inc.
    entered into an agreement in principle with Bedminster and Potomac
    Technologies, Inc. to form a joint venture named Newark Recycling and
    Composting Company, Inc. ("Newark Facility"), incorporated in the State of
    Delaware on May 10, 1994, to develop a 500-1,000 ton per day invessel
    composting facility in Newark, New Jersey ("Agreement in Principle"). 
    Potomac Technologies, Inc. owned 25% and Bedminster and the Company each
    owned 37-1/2% of the Newark Facility, as amended December 11, 1992. 
    Pursuant to the April 14, 1994 Term Sheet Agreement and the February 1,
    1994 Amended Joint Venture Agreement, the Company acquired Bedminster's
    37-1/2%.  Pursuant to the Agreement in Principle, upon financial closing
    all development expenses paid by the partners of the Newark Facility will
    be reimbursed as well as a development fee of $900,000 to be paid to the
    partners in accordance with a predetermined schedule.









                                                                            F-55
<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







9.  Development stage company (continued):

    NEWARK PROJECT (continued):

    In conjunction with the Agreement in Principle, the Newark Facility will
    pay a consulting fee of $6,250 per month to a principal of Potomac
    Technologies, Inc. until financial closing.  In June 1993, on behalf of the
    Newark Facility, Compost Management, Inc., Bedminster and Potomac
    Technologies entered into a Site Development and Consulting Agreement with
    another firm which receives $1,000 per month until financial closing at
    which time the firm will receive a $150,000 development fee and, if
    operating cash flow is available, $38,889 annually in each of the nine
    subsequent years of commercial operations.

    In October 1993, the Company and Potomac Technologies, Inc. d/b/a Passaic
    Valley Management Group, LP, in response to a Request for Qualification
    issued by the Passaic Valley Sewerage Commissioners, submitted a proposal
    for both composting in Newark, New Jersey, and land application of sewer
    sludge in Arizona and New Jersey. 

    On March 21, 1994, Passaic Valley Management Group, LP and R.C. Land
    Company, Inc. (R.C. Land) entered into a sewer sludge land application
    agreement ("Sludge Agreement").  Under the Sludge Agreement, R.C. Land will
    receive a wet ton use and land application fee.  Should Passaic Valley
    Management Group, LP be successful with its proposal to Passaic Valley
    Sewerage Commissioners for composting, R.C. Land will also receive an
    annual fee for consultation services for the length of the Passaic Valley
    Management Group, LP proposal for providing back up land applications
    services (see Note 7 (E)(2)).  As of May 31, 1995, Passaic Valley
    Management Group, LP was advised by Passaic Valley Sewerage Commission that
    it was unsuccessful in its bid efforts.

    On May 1, 1994 Newark Recycling and Composting Company, Inc. entered into a
    marketing agreement with Gardenlife Sales Company, a division of Compost
    America Holding Company, Inc.  Gardenlife Sales Company has the obligation
    to market and distribute all compost and other related products developed
    by Newark Recycling and Composting Company, Inc. for a term of 25 years. 
    Revenues received from the sale of compost is allocated between the parties
    according to an agreed upon formula.  In the event that no revenue is being
    generated from the sale of compost, Newark Recycling and Composting
    Company, Inc. will pay a management fee to Gardenlife Sales Company to
    provide distribution management guaranteeing that all compost is shipped
    from the plant.  A transportation reserve account will be established by
    the Company to provide transportation if required.

    On May 1, 1994 Compost America Company of New Jersey, Ltd. entered into an
    agreement with Potomac Technologies, Inc. to form Newark Recycling and
    Composting Company, Inc.  The Newark Facility was then incorporated in the
    State of Delaware on May 10, 1994 as Newark Recycling and Composting
    Company, Inc.






                                                                            F-56

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







9.  Development stage company (continued):

    NEWARK PROJECT (continued):

    The parties to the letter agreement on May 1, 1994 were changed and a new
    agreement for the joint venture was modified in the "Newark Recycling and
    Composting Company, Inc. Agreement".

    On July 1, 1994, Newark Recycling and Composting Company, Inc. entered into
    a termination of sale agreement with Edward J. Haefeli.  Haefeli agreed to
    terminate his right to purchase 11.69 acres of improved land in order to
    permit Newark Recycling and Composting Company, Inc. to enter into an
    agreement to purchase the premises from Linde Gases.  At closing of the
    purchase of the premises, Newark Recycling and Composting Company, Inc.
    shall pay to Haefeli $250,000 in funds available plus a note in the amount
    of $594,000 payable over 10 years at prime + 1%, not to exceed 8%.

    On July 14, 1994, Newark Recycling and Composting Company, Inc. entered
    into a professional services agreement with R.W. Beck to provide a detailed
    "Engineering Report" on the Newark facility.  Compensation in the amount of
    $23,000 shall be paid and increased as additional consulting is required.

    On July 26, 1994, Newark Recycling and Composting Company, Inc., doing
    business as Passaic Valley Management Group entered into a teaming
    agreement with Professional Services Group, Inc.  At the option of Newark
    Recycling and Composting Company, Inc./Passaic Valley Management Group
    Professional Services Group, Inc. will loan up to $500,000 to Newark
    Recycling and Composting Company, Inc./Passaic Valley Management Group.  In
    return, Newark Recycling and Composting Company, Inc./Passaic Valley
    Management Group will subordinate to Professional Services Group, Inc. the
    management, operations and maintenance portion of any contract awarded from
    the Passaic Valley Sewerage Commissioners.

    On September 15, 1994, Newark Recycling and Composting Company, Inc.
    entered into an engineering and technology agreement with D.J. Egarian &
    Associates.  D.J. Egarian & Associates granted a license to Newark
    Recycling and Composting Company, Inc. to utilize D.J. Egarian &
    Associates's patented technology.  Newark Recycling and Composting Company,
    Inc. did compensate D.J. Egarian & Associates $15,000 upon execution of the
    agreement and a pro rata share of $167,500 based upon completion of
    engineering drawings.  In addition, during construction D.J. Egarian &
    Associates shall receive $5,000 per month site consultation through
    completion of construction.  A separate fee structure will be implemented
    upon commencement of commercial operations of the facility.











                                                                            F-57
<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






9.  Development stage company (continued):

    NEWARK PROJECT (continued):

    In the event the Newark Recycling and Composting Company, Inc. should be
    awarded a 20 year "put or pay" sewer sludge contract from Passaic Valley
    Sewerage  Commissioners, then D.J. Egarian & Associates will receive a
    one-time fee of $150,000.  Based upon the number of tons awarded D.J.
    Egarian & Associates may be able to receive an additional $25,000 for each
    50 tons.

    On January 30, 1995 the Central Planning Board, City of Newark, New Jersey,
    at a special public hearing, voted to grant a FINAL SITE APPROVAL subject
    to compliance with all the conditions stipulated in the Department of
    Engineering memorandum dated January 17, 1995.

    On February 16, 1995, Converse Consultants East submitted their report to
    D.J. Egarian disclosing their findings as to subsurface conditions and
    foundations.

    On March 14, 1995 R.W. Beck submitted an initial draft of the Technical
    Review of the composting facility.

    On March 27, 1995 Newark Recycling and Composting Company, Inc. requested
    financial assistance from the New Jersey Economic Development Authority for
    an in-vessel composting and composting facility in the amount of
    $73,790,000.

    In conjunction with that request, it is expected that the interest on these
    bonds, when issued, will be excludable from gross income of the holders
    thereof for federal income tax purposes under Section 103 of the Code.

    On April 11, 1995, Newark Recycling and Composting Company, Inc. received
    notice from the Permit Coordination Officer III for the State of New Jersey
    Department of Environmental Protection.  Newark Recycling and Composting
    Company, Inc.'s application had been reviewed for and found to be
    administratively complete.  The application was then forwarded to the
    Bureau of Pretreatment and Residuals for technical review.

    On April 11, 1995 the New Jersey Economic Development Authority passed a
    resolution whereby Authority officers and staff are authorized to take all
    actions necessary to proceed with the financing and to issue bonds to
    finance the cost of the New Jersey project.  Within 10 days the resolution
    was deemed approved by the Governor and became effective.

    On April 19, 1995, Newark Recycling and Composting Company, Inc. applied
    for the allocation of $73,790,000 of "volume cap" by the State of New
    Jersey to allow the project described herein to be fully financed on a
    tax-exempt basis.

    On June 26, 1995, Newark Recycling and Composting Company, Inc. received
    notice that its permit application was deemed technically complete.






                                                                            F-58
<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







9.  Development stage company (continued):

    NEWARK PROJECT (continued):

    On November 1, 1995, Newark Recycling and Composting Company, Inc. received
    approval and permit from the New Jersey Pollutant Discharge Elimination
    System to operate sludge process and distribution facilities throughout the
    State of New Jersey.

    The New Jersey Economic Development Authority regarding the Newark
    Recycling and Composting Company, Inc. received a letter of intent from
    Paine Webber to confirm the commitment to act as underwriter in connection
    with the sale by the New Jersey Economic Development Authority of its solid
    waste disposal facility revenue bonds, series 1996 in the approximate
    principle amount of $70,000,000.  In addition, Paine Webber also sent
    letters of intent for Monmouth Recycling and Composting Company, Inc. for
    $30,000,000 and for Gloucester Recycling and Composting Company, Inc. for
    $30,000,000.

    On December  7, 1995, Legg Mason Wood Walker, Inc. sent a letter to the New
    Jersey Economic Development Authority stating that they have agreed to act
    as underwriter in connection with their firm commitment to raise the
    requisite capital for the debt financing component of the composting
    projects proposed by Gloucester Recycling and Composting Company, Inc.,
    Monmouth Recycling and Composting Company, Inc. and Newark Recycling and
    Composting Company, Inc.

    On December 14, 1995, pursuant to Executive Order 185 and PL 1987 c 393 the
    State Treasurer of New Jersey, Brian W. Clymer, allocated to the New Jersey
    Economic Development Authority, $130 million in tax-exempt volume cap
    allocation from the state's 1996 tax allocation.  This allocation is to be
    reserved for the issuance of private activity bonds on behalf of Newark
    Recycling and Composting Company.

    On January 2, 1996 the New Jersey Economic Development Authority informed
    the Company the State Treasurer has allocated to the New Jersey Economic
    Development Authority $130 million in 1996 volume cap allocation on behalf
    of the Company's composting projects for Newark, Gloucester and Monmouth. 
    The allocation will expire on March 29, 1996 in the event bonds are not
    issued but has been extended to September 30, 1996.

    On June 17, 1996 the New Jersey Economic Development Authority reduced the
    volume cap allocation for Newark Recycling and Composting Company, Inc.
    from $130 million to $85 million and extended the effective date to
    September 30, 1996.

    As of April 30, 1997 total project cost for the Newark Project amounted to
    $4,360,463.  In addition the property for the Newark Project has been
    acquired at a cost of $3,310,866.








                                                                            F-59
<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






9.  Development stage company (continued):

    MIAMI PROJECT:

    On November 17, 1995 Compost America Holding Company, Inc. formed it's
    wholly owned subsidiary Miami Recycling and Composting Company, Inc., a
    Delaware Corporation.  On March 1, 1996 Compost America Holding Company,
    Inc. acquired 100% of all the issued and outstanding stock of Bedminster
    Seacor Services Miami Corporation.  The purpose was for Miami Recycling and
    Composting Company, Inc., a subsidiary of Compost America Holding Company,
    Inc., to operate and own a composting facility in Miami, Florida. 
    Bedminster Seacor Services Miami Corporation will be the supplier of all
    "Eweson Digesters", the bridge crane, Fecon Turning Equipment" and the
    floor aeration units to the composting project.  In addition Bedminster
    Seacor Services Miami Corporation will assign all contracts, permits, land
    purchase options and agreements with the City of Miami for composting.

    On March 29, 1996 Miami Recycling and Composting Company, Inc. closed on
    the purchase of a parcel of land in Dade County, Florida from Rinker
    Materials Corporation which it plans to develop into a large scale organic
    waste recycling facility which will process commercial and residential
    food, soils, paper, cardboards, other organic wastes and sewage sludge
    (biosolids) from municipal waste water plants into compost.

    As of April 30, 1997 Miami Recycling and Composting Company, Inc. has
    acquired a land site at a cost of $4,116,246 and construction in progress
    costs of $862,240.


10. Joint Ventures:

    A)   American BIO-AG Corporation was incorporated in the State of Delaware
         on January 11, 1995.  The Corporation is owned  33-1/3% by each of the
         following entities:

                   R.C. Land Company, Inc.
                   Twin River Equities
                   Compost America Holding Company, Inc.


         The three entities are unrelated.  The purpose of the joint venture
         will be to develop, own or lease, operate and farm biosolids
         beneficial use land application sites.  The joint venture registered
         to do business in Arizona on June 27, 1995.  In addition, Professional
         Service Group desires to support the joint venture company in its
         efforts to secure, develop and permit beneficial use land application
         sites throughout the United States beginning first 










                                                                            F-60

<PAGE>
                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








10. Joint ventures (continued):

    in the South West where 365 day application prevail such as Texas, Arizona,
    New Mexico and California.  The initial land application sites to be
    developed by the joint venture corporation are Arizona, Texas and New
    Jersey.  Compost America Holding Company, Inc. will arrange for a bridge
    loan in the amount of $750,000 which will be repaid upon long-term
    financing.  The loan is anticipated to be funded by April 1, 1995 and
    repaid by June 30, 1995.  As of April 30, 1995 the bridge loan was not
    arranged.  Compost America Holding Company, Inc. has arranged for
    short-term funds from February 15, 1995 to April 30, 1996.  Compost America
    Holding Company, Inc. will also receive a development fee of $125,000 on
    positive distributable cash flow.  The joint venture corporation will sign
    a 15 year management contract with Mr. Bryce, President of R.C. Land
    Company, Inc. for $150,000 salary per year to manage the joint venture
    beginning February 15, 1995 plus standard benefits in addition upon
    generation of positive cash flow.  A monthly director fee of $4,000 per
    month will be paid to each of the directors after revenues commence.  The
    Board of Directors shall be Ronald R. Bryce, President, Robert Jones III,
    Vice President and Roger E. Tuttle, Secretary.  Roger Tuttle is also an
    officer, director and shareholder of Compost America Holding Company, Inc.

    The Company accounts for its investment in the joint venture on the equity
    method.

    The joint venture does not meet the test for a significant subsidiary as
    required under REG. Section 210-01 (w) as the total assets are less then
    10% of consolidated assets.

    Compost America Holding Company, Inc. investment account at June 28, 1996
    is as follows:


    Investment in joint venture, loans and advances        $825,239
    Loss for period                                       (  13,603)
                                                           --------
    Equity balance June 28, 1996                           $811,636
                                                           --------
                                                           --------


    Management of the Corporation is shared equally by the three joint venture
    partners.

    As of July 28, 1996 100% of American BIO-AG was acquired by Newark
    Recycling and Composting Company, Inc.











                                                                            F-61

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





10. Joint ventures (continued):


         On June 28, 1996 the Company, through its majority owned subsidiary,
         Newark Recycling and Composting Company, Inc., purchased all of the
         land application business assets of R.C. Land Company and all the
         ownership interests of Compost America Holding Company, Inc., Twin
         River Equities and R.C. Land Company, Inc.'s in American BIO-AG
         Corporation.  Newark Recycling and Composting Company, Inc. became the
         100% owner of the entity American BIO-AG Corporation.  Newark
         Recycling and Composting Company, Inc. is owned 75% by Compost America
         Company of New Jersey, Ltd. and 25% owned by Potomac Technologies. 
         For the period July 1, 1996 to July 31, 1996 American BIO-AG
         Corporation has been included in the consolidated financial statements
         of the Company.

    B)   Newark Recycling and Composting Company, Inc. was incorporated in the
         State of Delaware on May 10, 1994 with Compost America Company of New
         Jersey, Ltd. 75% and Potomac Technologies 25%.  The purpose of the
         Corporation is to continue development activities which were the
         development, construction and operation of a sewer sludge composting
         facility in Newark, New Jersey.  VRH Construction Corp. is a
         shareholder in Compost America Holding Company, Inc. and is the
         exclusive construction manager for the Newark composting facility. 
         Management of the corporation will be by consensus of the Board of
         Directors.  The Company has consolidated the financial statements of
         Newark Recycling and Composting Company, Inc. with Compost America
         Company of New Jersey, Ltd. at July 31, 1996.  The Company reflects
         minority interest as another liability in the balance sheet and as a
         reduction of net income or net loss in the income statements 


11. Minority interest in consolidated subsidiary:     

    Newark Recycling and Composting Company, Inc. was incorporated in the State
    of Delaware on May 10, 1994 with Compost America Company of New Jersey,
    Ltd. 75% and Potomac Technologies 25%.  The purpose of the Corporation is
    to continue development activities which were the development, construction
    and operation of a sewer sludge composting facility in Newark, New Jersey. 
    VRH Construction Corp. is a shareholder in Compost America Holding Company,
    Inc. and is the exclusive construction manager for the Newark composting
    facility.  Management of the corporation will be by consensus of the Board
    of Directors.  The Company has consolidated the financial statements of
    Newark Recycling and Composting Company, Inc. with Compost America Company
    of New Jersey, Ltd. at April 30, 1997.  The Company reflects minority
    interest as another liability in the balance sheet and as a reduction of
    net income or net loss in the income statements.  The minority shareholder
    account has been reduced to zero at April 30, 1997 as a result of loss
    allocations.  The Company has increased its portions of losses from
    subsidiary in excess of capital investment of the minority interest.









                                                                            F-62

<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








11. Minority interest in consolidated subsidiary (continued):

    Compost America Florida Holding Company (Miami Recycling and Composting
    Company, Inc.) was incorporated in the State of Florida on November 17,
    1995 with Compost America Holding Company at 80.1% and Tomas Andres Mestre,
    a consultant located in Miami, Florida owning 19.9% for services rendered. 
    The purpose of the corporation is to develop a composting facility, other
    projects and business enterprises in Florida.  Mestre shall be paid a
    management fee equal to 30% of the distributable net income from all
    Florida facilities.


12. Contingencies and Commitments:

    A)   The Company leased office facilities under an operating lease in
         Doylestown, PA.  The lease was assumed by Compost America Company of
         New Jersey, Ltd. on December 17, 1993 for 6,122 sq. ft. of office
         space.  The lease expired on June 14, 1994 but was continued on a
         month to month basis until December 1, 1994.  The total rental,
         including a percentage of maintenance, real estate taxes and
         insurance, amounted to $59,049 for the period May 1, 1994 to December
         1, 1994.  The lease has been extended to December 31, 1997.  As of
         July 28, 1997 the lease was abandoned and the Company is contingently
         liable to December 31, 1997.  Annual rental for April 30, 1997
         amounted to $18,300.

    B)   On May 1, 1996 the Company entered into a lease agreement for office
         facilities located at 320 Grand Avenue, Englewood, New Jersey  07631
         for a term of five years.  The Company will pay a rental of $4,000 per
         month plus electricity and real estate taxes over the base year.

              The minimum annual rentals are as follows:


                   April 30, 1998           $48,000
                   April 30, 1999            48,000
                   April 30, 2000            48,000
                   April 30, 2001            48,000
         


    C)   The Company leases an automobile under a operating lease.  The lease
         is payable at $474.55 per month for 48 months.  The lease commenced on
         May 25, 1993.  The minimum annual lease payments during the next year
         amount to $5,695.











                                                                            F-63

<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







12. Contingencies and Commitments:

    D)   As part of the "Asset Purchase Replacement Agreement" dated March 1,
         1995, the Company is contingently obligated to pay an additional
         $407,500 toward the acquisition of 50% interest in the Monmouth
         Recycling and Composting Company from Bio Services, Inc.  The
         obligation to pay this amount is based on the "Option Purchase
         Agreement" with Brownfield Environmental, Inc. to purchase the
         Township of Freehold property and upon receipt by Compost America
         Company of New Jersey, Ltd. of local approval from the Township of
         Freehold and County approval from Monmouth County and the N.J.
         Department of Environmental Protection for "Inclusion of the project
         in the Monmouth County Solid Waste Management Plan", which will allow
         Compost America Company of New Jersey, Ltd. to build the indoor
         composting facility.  Further contingencies require that any remaining
         governmental, environmental and building permits related to the
         construction of the "indoor composting facility" be obtained in
         addition to the closing on the property and the project.

         As of April 30, 1997 the Company has advanced $25,000 towards this
         balance as an indication of good faith with Bio-Services, Inc.

    E)   On October 2, 1996 the Company was assigned a lease commitment with
         the Township of Freehold, New Jersey for two parcels of land located
         in the Township of Freehold, County of Monmouth, State of New Jersey. 
         One parcel 10.462 acres and the second parcel 8.296 acres.  The lease
         is for 5 years with a 5 year option.  The cost of the lease is 5% of
         the audited profits net of either state or federal income taxes
         conducted on the above described premises or a minimum of $4,000 per
         year, payable quarterly.  The property shall be used for receiving,
         processing and composting organic materials, and wholesale and retail
         sale of finished horticultural products.  Organic materials shall
         include yard wastes, processing wastes, paper products and wood chips. 
         The Company must maintain $2,000,000 of insurance on the premises.



13. Private Placements and Private Offerings:

    On February 15, 1995, later revised on August 15, 1995, Compost America
    Holding Company, Inc. offered for sale, in a private offering, restricted
    shares of common stock to private individuals, no par value, at an offering
    price of $2.50 per share and $3.00 per share.  From February 15, 1995 to
    April 30, 1997 950,264 shares have been sold for a total of $2,319,592. 
    The offering has no expiration date.











                                                                            F-64

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS










14. Common Stock Purchase Warrants and Options:

    On January 31, 1994, as a provision of the "Asset Purchase Agreement",
    regarding the Monmouth Recycling and Composting Project.  Bio-Services Inc.
    was issued 100,000 warrants for the purchase of 100,000 shares of Compost
    America Company of New Jersey, Ltd. common stock.  The warrants were
    exercisable as follows:



                   $5 per share        Year 1
                   $6 per share        Year 2
                   $7 per share        Year 3



    Upon a secondary issue Bio-Services, Inc. will have the right to "piggy
    back" its 100,000 shares on the secondary issue.

    On December 1, 1994 Bio-Services, Inc. released the 100,000 warrants.  They
    were redistributed as follows:



              David Egarian            25,000              $5/$6/$7
              Robert W. Jones III      12,500              $5/$6/$7
              Ronald K. Bryce          12,500              $5/$6/$7
              Cancelled                50,000
                                      -------
                                      100,000
                                      -------
                                      -------




    On April 29, 1994, Compost America Company of New Jersey, Ltd. issued a
    warrant for 100,000 shares of common stock to Bedminster Bioconversion
    Corporation at an exercised price of $5 per share.  The warrant expires on
    April 29, 1997.

    On February 11, 1995, Compost America Holding Company, Inc., subsequent to
    the merger with Compost America Holding Company of New Jersey, Ltd. on
    February 8, 1995, issued Compost America Holding Company, Inc. warrants 













                                                                            F-65

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








14. Common Stock Purchase Warrants and Options (continued):

    in the amount of 784,000 warrants for its common stock to the following
    individuals and entities:


                                             Exercise
    Warrant Holder                 Amount     Price        Expiration
    --------------                 ------     -----        ----------

    Bedminster Bioconversion (A)  300,000   $     0.83     February 15, 2000
    Bio-Services, Inc.       (B)  300,000    1.00/1.17     January 31, 1996/1997
    B. Michael Pisani              67,200          .92     June 1, 1999
    Robert B. Long                 16,800          .92     June 1, 1999
    Gary Sondermeyer              100,000          .01     February 6, 1999
                                  -------
                                  784,000
                                  -------
                                  -------



    (A)  The 300,000 warrants to Bedminster Bioconversion Corporation were part
         of 360,460 warrants issued to Bedminster Bioconversion.  The 60,460
         warrants of 360,460 were part of those issued by the Board of
         Directors on April 30, 1995.  The 360,460 warrants of Compost America
         Holding Company, Inc. were the result of an agreed exchange of the
         100,000 warrants issued to Bedminster Bioconversion Corporation on
         April 29, 1994.

    (B)  The 300,000 warrants to Bio-Services, Inc. of Compost America Holding
         Company, Inc. were exchanged by agreement for the 100,000 warrants of
         Compost America Company of New Jersey, Inc. issued on January 31,
         1994.

         As a result of the release of the warrants held by Bio-Services, Inc.
         the following individuals received warrants previously issued to
         Bio-Services, Inc. at the converted amounts.

                                       Exercise
    Warrant Holder            Amount    Price    Expiration
    --------------            ------    -----    ----------
    David Egarian            150,000   $1/1.17   January 31, 1996/1997
    Robert W. Jones III       75,000    1/1.17   January 31, 1996/1997
    Ronald K. Bryce           75,000    1/1.17   January 31, 1996/1997
                             -------
                             300,000
                             -------
                             -------











                                                                            F-66

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







14. Common Stock Purchase Warrants and Options (continued):

    On April 30, 1995 the Board of Directors approved the issuance of Compost
    America Holding Company, Inc. warrants in exchange for warrants held by
    individuals and other entities of Compost America Company of New Jersey,
    Ltd.  As a result the Company issued 133,012 warrants at an exercise price
    of $3.00 with an expiration date of June 1, 1999.  The warrants were issued
    to the following:

         Warrant Holder                                         Amount
         --------------                                         ------

         Bedminster Bioconversion Corporation                   60,460
         David Egarian                                          30,230
         Ronald K. Bryce                                        15,115
         Robert W. Jones III                                    15,115
         B. Michael Pisani                                       9,674
         Robert B. Long                                          2,418
                                                               -------
                                                               133,012
                                                               -------
                                                               -------

    These warrants represent the reissuance of the 50,000 warrants cancelled by
    Bio-Services, Inc. on December 31, 1994 which were for Compost America
    Company of New Jersey, Ltd.  All warrants are outstanding at April 30,
    1997.

    On April 23, 1996 the Company's Board of Directors approved the granting of
    stock options for the continued financial support of the Company to:


         Robert E. Wortmann                      300,000 options
         Victor D. Wortmann                      300,000 options


    The options are exercisable immediately at $2.00 per share with an
    expiration date of April 23, 2001.  Robert and Victor Wortmann are both
    principals of VRH Construction Corporation and shareholders as well as
    officers and directors of the Company.  The Company will not recognize
    compensation expense at April 30, 1996 because the fair market value of the
    stock is $2.00 per share which is the same as the option price.

    As part of the employment agreements, the following options were granted: 


    Roger Tuttle             1,000,000           @ $2.50 per share
                                                 Expiration 11/14/00

    On November 26, 1996, the Company issued options to Ira Russack, for loan
    service, of 125,000 common shares at $1.00 per share through November 30,
    2001.  The option price is based on the current value of the stock.









                                                                            F-67
<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





14. Common Stock Purchase Warrants and Options (continued):

    Summary of Warrants and Options Outstanding:

                                                       Exercise
                                           01/31/97      Price     Expiration
                                           --------      -----     ----------
    WARRANTS:

    Bedminster Bioconversion Corp           300,000   $     6.00     03/01/01
                                            300,000          .83     02/15/00
                                             60,460         3.00     06/01/99

    David Egarian                           150,000    1.00/1.17     02/15/00

    Robert W. Jones III                      75,000    1.00/1.17     02/15/00

    B. Michael Pisani                        45,200          .92     06/01/99

    Robert D. Long                            5,800          .92     06/01/99
                                          ---------
                                            936,460
                                          ---------
                                          ---------

    OPTIONS:

    Robert E. Wortmann                      300,000         2.00     04/23/01


    Victor D. Wortmann                      300,000         2.00     04/23/01

    Roger Tuttle                          1,000,000         2.50     11/14/00

    Peter Coker                             100,000         2.00
                                             50,000         5.00
                                             50,000         9.00     06/30/01

    Mark Gasarch, Esq.                      200,000         2.50     05/20/01

    Edward Rodriguez                        150,000         4.00
                                            150,000         5.00
                                            200,000         6.00     12/31/01

    M.H. Meyerson & Co.                   1,000,000         3.00     03/31/02

    Mark G. Milask                           25,000         2.00     03/31/02

    Philip Wagner                            25,000         2.00     03/31/02

    Dr. Paul Smalheiser                      25,000         2.00     03/31/02

    Donald Kaplan                            50,000         2.00     03/31/02
                                          ---------
                                          3,625,000
                                          ---------
                                          ---------






                                                                            F-68

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







14. Common Stock Purchase Warrants and Options (continued):

    The Company has elected to continue use of the methods of accounting
    described by APB-25 "Accounting for Stock Issued to Employees" which is
    based on the intrinsic value of equity instruments and has not adopted the
    principles of SFAS-123 "Accounting for Stock Based Compensation" effective
    for fiscal year beginning after December 15, 1995, which is based on fair
    value.  There is no significant difference between compensation cost
    recognized by APB-25 and the fair value method of SFAS-123.  The Company
    has not recognized compensation on the granting of options or warrants to
    employees and consultants since the fair value of warrants or options is
    the same as or less than the exercise price.


15. Related Party Transactions:

    The Company has various transactions with related stockholders and
    affiliates of the Company.
 
    The shareholders of VRH Construction Corp. are also shareholders in Compost
    America Holding Company, Inc. as well as VRH Construction Corp. VRH
    Construction Corp. as of April 30, 1996 has advanced $640,072 to the
    Company.  The amount due is included in a note payable with interest at 10%
    and was due January 31, 1997.  The note has been extended from the original
    due date to October 1, 1997. In addition, VRH Construction Corp. has
    advanced additional funds amounting to $3,424,283 at January 31, 1997, of
    which $1,543,866 is payable at 10% due October 1, 1997 and $1,880,417 is
    interest bearing at 10% per annum and payable on demand.  The total loans
    and notes outstanding at April 30, 1997 amounted to $4,064,355.  As of
    April 30, 1997 the notes and loans were consolidated with additional loans
    made after April 30, 1997, into two mortgage notes, $2,998,688 for Newark
    Recycling & Composting Company, Inc. plus accrued interest of $600,068 and
    $1,078,000 for Compost America Holding Company, Inc. plus accrued interest
    of $164,254.  The mortgages are collateralized by all inventory, accounts
    receivable, equipment and all the assets of the Company.  All advances are
    anticipated to be paid back upon completion of the Economic Development
    Bond Funding.

    The Company has acquired all composting projects and technology from
    Bedminster Bioconversion, Inc. through Select Acquisitions, Inc., a
    shareholder in Compost America Company of New Jersey, Ltd.  Select
    Acquisitions Inc. has advanced $78,060 at April 30, 1997.  Bedminster
    Bioconversion, Inc., an unrelated corporation, received stock purchase
    warrants as indicated in the notes to consolidated financial statements. 
    There are numerous agreements and intercompany transactions between












                                                                            F-69
<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









15. Related Party Transactions:

    Compost America Holding Company, Inc. and its subsidiary, Compost America
    Company of New Jersey, Ltd. and with its related subsidiaries, Newark
    Recycling and Composting Co., Inc., Gloucester Recycling and Composting
    Company, Inc. and Monmouth Recycling and Composting Co., Inc.  Chicago
    Recycling and Composting Company, Inc. and American BIO-AG Corporation.  At
    April 30, 1997 all intercompany transactions have been eliminated.

    The Company, at April 30, 1997, has received loans from Roger Tuttle, the
    President of Compost America Holding Company, Inc. and Foundation Systems,
    Inc., the Principal of which is John Fetter, an officer and shareholder in
    the Company, in the amount of $90,000 each.  In addition, expenses were
    accrued for advances made by Foundation Systems and amounted to $231,159.


16. Employment Contracts:

    As of May 1, 1996 Roger Tuttle and the Company executed an employment
    agreement, the terms of which supersede all previous agreements.  The term
    is for ten years effective May 1, 1996.  The compensation shall be $225,000
    per annum in monthly payments from May 1, 1996 to April 30, 1997 with
    annual increases during the term of the agreement based on growth of the
    Company but not less than the increase in the consumer price index.  In
    addition, Roger Tuttle shall receive an annual bonus based on 5% of any
    increase in consolidated net income beginning April 30, 1996.  Roger Tuttle
    shall also receive the following:



         1)   Reimbursement of all business related expenses

         2)   An automobile allowance of $500 per month

         3)   A one-time signing bonus of $500,000 upon achieving sales of
              $5,000,000 in any quarter

         4)   Medical and health insurance

         5)   Employer grants employee a 1,000,000 shares option to purchase
              1,000,000 shares of common stock at $2.50 per share for five
              years


    As of April 30, 1997 unpaid accrued wages amounted to $663,500 for all
contract employees.








                                                                            F-70

<PAGE>


                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







17. Income taxes:

    The Company adopted FASB Statement No. 109, "Accounting for Income Taxes"
    as of inception, December 17, 1993.  FASB Statement No. 109 is required for
    all fiscal years beginning after December 15, 1992.  This statement
    requires that deferred taxes be established for all temporary differences
    between book and tax basis of assets and liabilities.  There was no
    cumulative effect of adoption or current effect on continuing operations
    mainly because the Company has been in a development stage since inception,
    December 17, 1993, and has sustained net operating losses during this
    period.  The Company has made no provision for a deferred tax asset due to
    the net operating loss carryforward because a valuation allowance has been
    provided which is equal to the deferred tax asset.  It cannot be determined
    at this time that a deferred tax asset is more likely than not to be
    realized.

    The Company has a loss carryforward of $8,755,648 that may be offset
    against future taxable income.  The carryforward losses expire at the end
    of the years 2009 and 2013.


18. Deposits:

         Minolta Corporation - Business equipment     $  817
         Robert Fellheimer   - Rent security           1,525
         VRH Construction - Rent security              4,000
                                                      ------
                                                      $6,342
                                                      ------
                                                      ------


19. Notes payable, bank:

    The notes payable, bank is due to Summit Bank for $100,000 at 9 1/2%
    interest payable on demand.


20. Notes payable, other:

       Carl Jones, American BIO-AG Corp., loan payable, 
       unsecured on demand                                              $ 75,000

       Ron Bryce, American BIO-AG Corp., loan payable, 
       unsecured on demand                                                35,250

       Charles Lanktree, Compost America Holding 
       Company, Inc., convertible note due July 9, 1997 
       at 10%. The note has been extended through August 1997             50,000











                                                                            F-71

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




20. Notes payable, other (continued):


       Bruce Boltuch, Compost America Holding Company,
       Inc., convertible note due July 9, 1997 at 10%.
       The note has been extended through August 1997                   50,000
   
       Brokerage Service Management, Inc., Compost America
       Holding Company, Inc., note payable due on demand
       and unsecured at 10%                                             77,000
   
       Ira Russack, Compost America Holding Company, Inc.,
       convertible note due June 30, 1997 at 8% and is
       unsecured.  The note has been extended through 
       August 15, 1997                                                 100,000
   
       Ira Russack, Compost America Holding Company, Inc.,
       convertible note due December 15, 1997 at 10% and is
       unsecured.                                                      100,000
   
       Charles Lanktree, Compost America Holding Company,
       Inc., notes payable, unsecured payable on demand at 10%           8,500
   
       Lancaster Consultants, Compost America Holding Company, 
       Inc., loans payable, unsecured on demand at 10% 
       effective rate                                                  110,300
                                                                      --------
   
                                                                      $606,050
                                                                      --------
                                                                      --------

21. Mortgage payable - Praxair Corp.

    The $2,100,000 mortgage is payable at 8% interest payable monthly.  The
    mortgage was due September 1996 and extended to December 1996. Interest has
    been accrued to April 30, 1997 but payments have not been made. Praxair has
    commenced a foreclosure action on the property owned by Newark Recycling
    and Composting Company, Inc. in furtherence of having their note paid as
    well as unpaid interest, expenses and attorneys fees.


22. Due to affiliated company Foundations Systems:

    The Company is obligated on a note payable to John Fetter also known as
    Foundation Systems for a $90,000 note plus miscellaneous charges of
    $231,159 on behalf of the Chicago Project.


23. Notes payable, shareholder:

    The Company is obligated on a note payable to Roger Tuttle, president of
    the Company, for $90,000 which is non-interest bearing, unsecured and
    payable on demand.


24. Payroll taxes payable:

    The Company is in arrears for filing and payment of prior and current years
    payroll taxes to federal and state taxing authorities in the amount of
    $209,073.  Interest and penalties have been accrued on these amounts.  The
    Company is at risk, including the officers, for responsibility for tax
    payment under the trust fund recovery systems.  The Internal Revenue
    Service can cause leins to be recorded and judgements to be filed.





                                                                            F-72
<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








25. Long-term debt:

<TABLE>
<CAPTION>

                                          Rate          Current       Long-term       Maturity
                                          ----          -------       ---------       --------
<S>                                   <C>            <C>            <C>            <C>
    Teepak, Inc.                       Prime & 2%                    $  264,871     Indefinite
    Rinker Materials Corp.                     7%     $3,730,871                      04/01/98
    Jerry L. Montierth                         7%          7,924        261,499       02/01/15
    Equipment notes:
      Center Capital Corp.                 12.34%         14,244         53,415       02/05/02
      Concord Commercial                    8.95%         77,406        154,811       04/09/00
      AT&T Capital Corp.                   12.53%         29,868         62,225       06/10/00
      General Electric Capital             10.75%         18,497         16,955       02/23/99
      Orix Credit Alliance, Inc.            9.50%         29,502         39,337       07/20/99
    Notes payable, others:
      Mark G. Milask                           8%                        25,000       09/30/98
      Philip Wanger                            8%                        25,000       09/30/98
      Dr. Paul Smalheiser                      8%                        25,000       09/30/98
      Donald M. Kaplan                        10%                        50,000       09/30/99
    Lionhart Global Appreciation
      Fund, convertible debenture             10%                     1,000,000       11/26/99
                                                      ----------     ----------
                                                       3,908,312      1,978,113
    Less, unamortized discount                            38,035         35,202
                                                      ----------     ----------

                                                      $3,870,277     $1,942,911
                                                      ----------     ----------
                                                      ----------     ----------

</TABLE>
 
     A)  The loan payable to Teepak, Inc. is for advances to Compost
         Management, Inc. prior to its merger with Compost America Company of
         New Jersey, Ltd. on December 1, 1994 which was subsequently assumed by
         Compost Holding Company, Inc. for the purpose of obtaining necessary
         permits for a compost facility in Riverdale, Illinois.  The loans
         commenced on January 11, 1993 with repayment terms as follows:

          1)  After permits are issued Compost America Holding Company, Inc.
              shall repay the loan in quarterly installments commencing three
              months after the start up of the facility to the extent of 50% of
              available cash flow from the facility.
 
          2)  If the facility does not receive the necessary permits by
              September 15, 1996, the entire amount of the loans will be repaid
              in 24 equal installments.  Any overdue payments shall bear
              interest at a rate equal to the prime rate plus 2%.  As of
              September 15, 1996 the loan has been extended.

     B)  The mortgage payable to Rinker Materials Corporation is secured by land
         which costs $4,095,838 and is payable on April 1, 1998 with all
         principal and accrued interest at 7%.


                                                                            F-73

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







25. Long-term debt (continued):

     C)  The mortgage payable to Jerry L. Montierth is payable in annual
         installments of $26,784 including interest at 7% over 19 years.  The
         mortgage is secured by land located in Meridian, Cochise County,
         Arizona. 
     
     D)  Equipment which cost $53,500 is pledged as collateral for the note
         which is payable in monthly installments of $1,187.

     E)  Equipment which cost $202,995 is pledged as collateral for the note
         which is payable in monthly installments of $6,450.

     F)  Equipment which cost $110,563 is pledged as collateral for the note
         which is payable in monthly installments of $2,489.

     G)  Equipment which cost $59,920 is pledged as collateral for the note
         which is payable in monthly installments of $1,541.

     H)  Equipment which cost $93,104 is pledged as collateral for the note
         which is payable in monthly installments of $2,459.

     I)  Notes payable to the following are due September 30, 1998 and are
         unsecured:

               1)   Mark G. Milask
               2)   Philip Wanger
               3)   Dr. Paul Smalheiser
               4)   Donald Kaplan


     J)  On November 25, 1996 the Company issued a convertible debenture for
         $1,000,000 to Lionhart Global Appreciation Fund under a Regulation D
         offering.  The total offering proceeds amounted to $1,030,000 of which
         $30,000 is a fee to the agent, Kaplan Gottbetter & Levenson, LLP.  The
         debentures are in 10 units of $100,000 each at 10% with a maturity of
         November 26, 1999.  The interest is payable monthly commencing 30 days
         from the agreement and the notes are redeemable after 90 days at
         option of the Company.  As security, the Company will escrow between
         300,000 and 325,000 shares of common stock, pursuant to a registration
         statement declared effective by the commission, to secure the payments
         and shall be held by the escrow agent.  The stock pledged shall be
         without restrictive legend.

         The debenture holder, upon default, has the right to sell, assign or
         deliver shares without notice to or demand upon the Company.  The
         holder is entitled to receive dividends and other distribution but no
         right to vote or subscribe.


                                                                            F-74

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









25. Long-term debt (continued):

     J)  (continued):

         The debenture holder has the right of conversion 150 days following
         date of closing of note.  The debenture is convertible (principal and
         interest) into common stock based on the principal and interest
         outstanding divided by the conversion price,  the conversion price
         being 65% of the average closing bid price for the 5 days preceding
         the closing or 65% of the average closing bid price for the 5 days
         immediately preceding the date of conversion.

         The debentures are automatically converted to each issued and 
         outstanding debenture on the date which is 3 years after closing. 
         Upon 90 days after closing, at the option of the Company, the
         debentures may be redeemed based on the following schedule:



           Number of days                     Shares of
          from Closing Date    Principal     Common Stock
          -----------------    ---------     ------------

            90 - 120          $1,000,000         80,000
           121 - 150          1,000,000         100,000
           150 or more        1,000,000         120,000



     The maturities of the long-term debt summarized as follows:


               Year ended April 30,

                    1998                          $3,870,277
                    1999                             292,653
                    2000                           1,131,624
                    2001                              17,641
                    2002                              12,270
                 Thereafter                          488,723
                                                  ----------

                                                  $5,813,188
                                                  ----------
                                                  ----------


                                                                            F-75

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








26.  Impairment of investment in subsidiary:

     On June 28, 1996, the Company, through its majority owned subsidiary, 
     Newark Recycling and Composting Company, Inc., acquired all the land
     application assets of R.C. Land Company, Inc. for 305,000 shares of the
     Company's common stock, $50,000 in cash and the assumption of a land
     mortgage of $276,829.  The assets acquired at their fair market value are
     as follows:


          1)   All plans, permits and site specific 
               plans from State of Arizona                 $  755,000

          2)   Various farm lands totaling 5,428
               acres                                          580,000

          3)   Machinery and equipment                        125,000
                                                           ----------
                                                            1,460,000
               Less mortgage assumed                      (   276,829)
                                                            ---------

               Net asset value                             $1,183,171
                                                           ----------
                                                           ----------

     Management has determined that the fair value of the stock, due to its
     restricted nature and in relation to comparable sales, is $2.50 per share
     or $762,500.  The acquired cost of the acquisition from R.C. Land Company,
     Inc. was $812,500 ($762,000 plus $50,000 cash).


     In addition, on June 28, 1996, Newark Recycling and Composting Company,
     Inc. assigned these assets to American BIO-AG Corporation and acquired the
     remaining 66 2/3% of American BIO-AG Corporation from R.C. Land Company,
     Inc. and Twin Rivers Equities.  The Company assumed all of the liabilities
     of American BIO-AG Corporation amounting to $464,273 less the assets
     acquired of $132,669 for a net amount of $331,604 less the inter company
     loan of $185,000 or $146,604.

     The total investment in American BIO-AG Corporation by the Company is as
     follows:


               Assignment of R.C. Land                 $  812,500

               Liabilities assumed in acquisition
               of American BIO-AG                         146,604

               Original basis                             811,626
                                                       ----------

               Basis in American BIO-AG                $1,770,730
                                                       ----------
                                                       ----------

                                                                            F-76


<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





26.  Impairment of investment in subsidiary (continued):

     The book value of American BIO-AG Corporation at June 30, 1996 after the
     assignment of the assets of R.C. Land Company, Inc.:

               Common stock        $1,937,263

               Deficit              1,082,563
                                   ----------

               Net worth           $  854,700
                                   ----------
                                   ----------

     The fair value of the assets of American BIO-AG Corporation at the present
     value of the expected future cash flow based on management valuation and
     an outside appraisal indicated a value of $1,460,000 less the mortgage
     assumed of $276,829 plus the net liabilities of American BIO-AG
     Corporation, before assignment of R.C. Land Company, Inc.'s assets, of
     $146,604.  The total fair value of American BIO-AG Corporation is
     $1,329,775 ($1,460,000 - $276,829 + $146,604) which is the value of the
     investment in American BIO-AG Corporation.

     The impairment loss to the Company would be the total cost basis of the
     investment in American BIO-AG Corporation of $1,770,730 less the fair
     value of the assets acquired of $1,329,775.

     An impairment loss of $440,955 would be recognized in the operating
     expenses of the Company under the caption "Impairment loss on investment
     in subsidiary".

     The Company has adopted the provision of SFAS-121 effective for fiscal
     years beginning after December 15, 1995.  As required by the Financial
     Accounting Standards Board which requires recognition of impairment of
     asset when events and circumstances indicate the carrying amount of those
     assets will not be recovered in the future.  The pronouncement further
     states that goodwill identified with assets that are subject to impairment
     loss should be eliminated before the carrying amount of any other assets
     is reduced.

          Basis of acquisition of American BIO-AG
          Corporation                                                 $1,770,730

          Net book value of the assets acquired
          (American BIO-AG Corporation)                                  854,700
                                                                      ----------

          Goodwill (excess of cost over the value of 
          the assets acquired)                                           916,030
                                                                      ----------

          Base of acquisition                          $1,770,730

          Fair value of investment in American
          BIO-AG Corporation                            1,329,775
                                                       ----------

          Impairment loss                                 440,955        440,955
                                                       ----------     ----------

          Goodwill, net excess value over the assets
          acquired                                                    $  475,075
                                                                      ----------
                                                                      ----------


                                                                            F-77

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





27.  Supplemental schedule of non-cash investing and financing activities:

                                                            Year     
                                                            Ended    
                                                       April 30, 1997
                                                       --------------

     Officers compensation

     May 31, 1996 issued 200,000 shares of 
      common stock in settlement with Select
      Acquisitions, Inc.                                 ($  500,000)

     Legal and professional fees                              50,000

     Consulting                                              250,000

     Liquidation of former Select Acquisitions,
      Inc. shareholder disputes for stock of
      the Company                                            200,000

     June 28, 1996 issuance of 305,000 shares
      of common stock in purchase of land
      application assets of R.C. Land Company,
      Inc. by the Company                                (   762,500)

     Property, plant and equipment                           762,500

     June 30, 1996 and July 30, 1996 issued
      479,304 shares of common stock for
      consulting services                                (   606,105)

        Consulting services expense                          606,105

     October 11, 1996 issued 3,000 shares
      for legal services                                 (     6,000)

        Legal and professional fees                            6,000

     October 11, 1996 issued 465,000 shares
      of common stock for services and
      outstanding accounts payable                       (   715,260)

        Consulting, legal and professional 
         fees                                                210,500

        Payment of accounts payable                          106,760

        Construction in progress, compost 
         projects                                            398,000


                                                                            F-78

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





27.  Supplemental schedule of non-cash investing and financing activities
(continued):

                                                                 Year     
                                                                 Ended    
                                                            April 30, 1997
                                                            --------------

     December 1, 1996, issued 256,500 shares 
      of common stock for services rendered
      and consulting agreement                              (   421,250)

        Consulting services                                      10,000

        Investment in acquisition of American
         Soil, Inc.                                             397,500

        Newark Project cost                                      13,750

     February and March 1997, the Company 
      issued 1,012,934 shares of common stock               ( 1,021,217)

       Consulting service and legal                           1,007,920

       Construction in progress                                  13,297


                                                                 Year     
                                                                 Ended    
                                                            April 30, 1997
                                                            --------------

     Issuance of capital stock for management services         ($  1,000)
     Professional fees                                             1,000

     Issuance of capital stock in acquisition of 
      Bedminster Seacor Services Miami Corporation           ( 500,000)   
     Assets acquired                                           500,000    

     Issuance of capital stock in settlement
      of debt to Jonathan Frank                             (  150,000)
     Note due to Jonathan Frank                                150,000    

     Issuance of capital stock for legal,
      accounting and consulting services                     ( 717,214)   
     Legal - accounts payable                                   43,404    
     Accounting                                                 50,000    
     Consulting                                                623,810    

     Issuance of capital stock for investment
      in American BIO-AG Corporation                         ( 208,332)   

     Investment - American BIO-AG Corporation                  208,332    


                                                                            F-79

<PAGE>

                COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








28. Earnings per share:
                                                 1997           1996
                                                Primary        Primary
                                                -------        -------
     Number of shares:
      Weighted average shares
      outstanding                            15,781,015     13,654,892

     Incremental shares for
      outstanding stock 
      warrants                                  936,460        877,960

     Incremental shares for 
      outstanding stock 
      options                                 2,345,833        216,666
                                             ----------     ----------
                                             19,063,308     14,749,518
                                             ----------     ----------
                                             ----------     ----------


    Primary earnings per share amounts are computed based on the weighted
    average number of shares actually outstanding.  Shares that would be
    outstanding assuming exercise of dilutive stock options and warrants, all
    of which are considered to be common stock equivalents.  Fully diluted
    earnings per share are the same as primary earnings per share for 1997 and
    1996.

                                                                            F-80


<PAGE>


                         [LETTERHEAD OF ZELLER WEISS & KAHN]


          REPORT OF INDEPENDENT AUDITORS' ON STATEMENT OF OPERATING EXPENSES
          ------------------------------------------------------------------






Board of Directors
Compost America Holding Company, Inc. and subsidiaries
Doylestown, Pennsylvania



     We have audited the consolidated financial statements of Compost America
Holding Company, Inc. and subsidiaries as of April 30, 1997 and 1996 and for the
periods then ended and for the period December 17, 1993 (inception) to April 30,
1997, our report thereon dated July 31, 1997.  Our audit was made for the
purpose of forming an opinion on those financial statements taken as a whole. 
In connection with our audit of these financial statements, we audited the
statement of operating expenses for the periods ended April 30, 1997 and 1996.

     Such information has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, the statement
of operating expenses for the periods ended April 30, 1997 and 1996 and for the
period December 17, 1993 (inception) to April 30, 1997 present fairly, in all
material respects, the information stated therein, when considered in relation
to the consolidated financial statements taken as a whole.



                                   /s/ Zeller Weiss & Kahn











July 31, 1997
Mountainside, New Jersey


                                                                            F-81

<PAGE>

                       COMPOST AMERICA HOLDING COMPANY, INC.
                           (A Development Stage Company)

                   CONSOLIDATED STATEMENT OF OPERATING EXPENSES






                                                              Cumulative from
                                           Year Ended        December 17, 1993
                                            April 30,         (Inception) to
                                        1997        1996      April 30, 1997
                                        ----        ----      --------------

Operating expenses:
  Salaries                        $  605,289     $   69,279        $  734,317
  Payroll taxes                       28,526         13,736            49,895
                                                                             
  Advertising                         40,000          2,750            48,055
  Amortization                        82,989         18,256           105,412
  Automobile expense                  18,994         35,022            87,814
  Bad debt charges                    55,384         63,190                  
                                                                             
  Bank charges                         2,955          1,897             5,489
  Building rental                     67,300         18,300           155,354
  Carting expense                        394                                 
  Computer expense                                                        849
                                                                             
  Consultants                      1,688,930        560,465         2,273,495
  Depreciation                        78,337         20,411           101,778
  Dues and subscriptions               3,068          2,872            21,470
  Employment Services                                                     600
                                                                             
  Equipment rental                    11,676          1,700            18,431
  Insurance                           93,995         42,801           187,524
  Land lease expense                  11,171                           11,171
  Licenses and permits                 8,892          1,268            10,426
                                                                             
  Impairment loss in consolidated                                            
   subsidiary                        440,955                          440,955
  Miscellaneous                        2,614         13,678            28,462
  Office expense                      15,193         24,464            53,086
  Option expense                      77,475                           84,975
                                                                             
  Outside services                     1,564          1,299             3,734
  Penalties and fines                 11,149                           11,149
  Postage and deliveries               9,494          7,679            22,968
  Printing                            67,024         19,795            86,819
                                                                             
  Professional fees                  699,606        398,224         1,128,123
  Repairs and maintenance             13,758          4,530            18,288
  Research and development            15,000                          475,376
  Settlement of shareholder                                                  
   dispute                           515,000                          515,000
                                                                             
  Stock expense                       15,129                           15,129
  Sitework                             2,731                            2,731
  Supplies                            14,500                           14,500
  Taxes, other                       130,869         47,696           178,960
                                                                             
  Telephone                           75,399         42,304           149,779
  Travel and entertainment            95,431        133,288           279,788
  Utilities                            7,393            791            11,584
                                  ----------     ----------        ----------
                                                                             
                                  $5,007,790     $1,482,505        $7,397,070
                                  ----------     ----------        ----------
                                  ----------     ----------        ----------


                                                                            F-82