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

                                   FORM 10-KSB
(Mark One)
 [|X|] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
       Act of 1934

                   For the fiscal year ended December 31, 1997

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

                          Commission File Number 0-3743
                       ----------------------------------

                       CONTINENTAL INVESTMENT CORPORATION
                 (Name of small business issuer in its charter)

          Georgia                                                58-0705228

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

                     10254 Miller Road, Dallas, Texas 75238
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (214) 691-1100

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

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


                          Common Stock, $0.50 par value
                                (Title of class)

     Indicate 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 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| ]

         Issuer's revenues for its most recent fiscal year $2,280,317.

         The aggregate  market value of the voting stock held by  non-affiliates
as of April 14, 1998, is approximately  $74,885,643,  based upon the closing bid
price of  $11.50  per share as  reported  for such date by  Trading  and  Market
Services of The Nasdaq Stock Market, Inc.
     As of April 14, 1998, the issuer had outstanding  12,442,938  shares of its
Common Stock, $0.50 par value.

                                       1

<PAGE>



                                      
                                                      PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

Background

       Continental   Investment   Corporation  ("CICG"  or  the  "Company")  was
incorporated  on October  3, 1958,  in the State of  Georgia,  as a real  estate
investment and development  company. In 1965, the Company purchased 133 acres of
land located approximately 10 miles southwest of downtown Atlanta, Georgia. From
1966 to 1993,  65 acres of the land along with  mineral  rights were leased to a
mining and quarrying  company unrelated to CICG. The lease and rights to extract
minerals from the property expired in 1993.  Subsequently,  CICG participated in
reclamation activities in preparation for an alternative use of the land. During
fiscal  1996,  the Company  purchased  an  additional  96 acres  adjacent to the
133-acre  site.  A study  of the  property  has  indicated  its  viability  as a
potential  multi-use waste disposal,  waste transfer and recycling  facility.  A
study of the Property has indicated its viability as a potential multi-use waste
disposal,  waste transfer,  and recycling facility.  

       In a series of  transactions  in fiscal 1994,  1995 and 1996, the Company
acquired all of the operating assets of FIBER-SEAL  Holdings,  Inc.,  FIBER-SEAL
Services International, Inc. and FIBER-SEAL of Dallas, including all trademarks,
servicemarks, logos, and tradenames of or related to FIBER-SEAL.

       During fiscal 1997, the Company  acquired an operating  construction  and
demolition  ("C&D")  landfill in metropolitan  Atlanta,  Georgia in exchange for
consideration totaling $2.74 million.

       During  fiscal  1997,  the  Company  also  acquired  108 acres of land in
another area of  metropolitan  Atlanta,  Georgia in exchange  for  consideration
totaling  $1,999,990.  The  Company  intends  to  develop  such  site into a C&D
landfill.

       During  fiscal  1997,  the  Company  acquired  two  landfill  sites  from
WasteMasters,  Inc. (in Kirksville,  Missouri and Walker County,  Georgia) along
with substantial securities holdings in WasteMasters, Inc.

The Atlanta Quarry Site Property (the "Property")

       The Company owns 229 acres of land in Fulton County, Georgia. The land is
located  within the Atlanta  city limits  approximately  10 miles  southwest  of
downtown  Atlanta.  Fulton  County is one of the nine  individual  counties that
comprise the "Atlanta Region" which includes Fulton (City of Atlanta), Gwinnett,
DeKalb, Rockdale,  Henry, Clayton,  Fayette,  Douglas, and Cobb. The Property is
effectively at the epicenter of the 9-county region.

       A section of the  westerly  portion  of the  Property  underwent  granite
surface mining from 1966 to 1993.  Approximately 20 acres have been excavated to
depths in excess of 500 feet (maximum depth of 641 feet).  A smaller  excavation
on the  Property  has been  mined to a depth of  approximately  150  feet.  Soil
borings  evidence  significant  amounts of overburden that can be used for cover
material in landfill  operations,  as well as large amounts of granite.  Granite
mining  activities  are presently  being  evaluated as an income source from the
Property.  The potential  resumption of granite mining  activities  represents a
possible double benefit to the Company that may also increase potential landfill
capacity in the future. 

       A study of the  Property  has  indicated  its  viability  as a  potential
multi-use waste disposal,  waste transfer and recycling facility. The Company is
presently  evaluating  the various  potential  uses for the  Property as a waste
disposal site  consisting  principally  of the  possibilities  discussed  below.

                                        2

<PAGE>

Because of ongoing potential political,  legal,  bureaucratic and other factors,
there can be no assurance that the Company will be able to accomplish any of its
goals for the Property within a reasonable period of time.

       Municipal Solid Waste Landfill:  Municipal solid waste ("MSW")  landfills
are the primary  depository  for solid waste in North  America.  These  disposal
facilities are located on land with geological and hydrological  properties that
limit the  possibility of water  pollution,  and are operated  under  prescribed
procedures.  A landfill must be maintained carefully to meet federal,  state and
local regulations.  Maintenance  includes  excavation,  continuous spreading and
compacting of waste, and covering of waste with earth or other inert material at
least once a day. Customers are charged disposal charges or "tipping fees" based
on market  factors and the type and volume or weight of solid  waste  deposited.
Long-term  disposal  contracts  typically contain a formula,  generally based on
published price indices,  for automatic adjustment of fees to cover increases in
some, but not all,  operating costs. A municipal solid waste landfill can accept
any waste derived from households,  including garbage,  trash and sanitary waste
in septic tanks.  Household  waste includes solid waste from  single-family  and
multi-family  residences,  hotels and motels,  bunkhouses,  campgrounds,  picnic
grounds,  and day-use recreation areas. The term also includes  commercial solid
waste,  but does not include solid waste from mining,  agricultural  or forestry
operations or industrial processes or operations.

       Construction  and  Demolition  Landfill:  A  construction  and demolition
("C&D")  landfill  may  accept  building  materials  and rubble  resulting  from
construction,  remodeling,  repair,  and  demolition  operations  on  pavements,
houses, commercial buildings, and other structures. Such wastes include, but are
not necessarily limited to, wood, bricks,  metal,  concrete,  wallboard,  paper,
cardboard,  all inert  waste  landfill  material,  and  other  "non-putrescible"
wastes, as these wastes have a low potential for groundwater  contamination upon
decomposition.

       Recycling:  Recycling involves the removal of reusable materials from the
waste stream for  processing  and sale or other  disposition  for use in various
applications.  In response to  increasing  environmental  concerns and expanding
federal and state regulations,  recycling is rapidly becoming a viable business.
Indeed  the U. S.  recycling  rate has grown from 13% in 1988 to over 25% today.
Recycling  fees are  generally  service  based wherein the customer pays for the
cost of removing,  processing and disposing of potentially recyclable materials.
In many  cases,  mixed waste  materials  are  received  at a materials  recovery
facility  ("MRF") which is often  integrated  into our  contiguous to a transfer
operations. Materials such as paper, cardboard, glass, plastic, and aluminum and
other metals are sorted, separated, accumulated, bound, or placed in a container
and readied for  transportation  to a third party which will reuse the separated
materials.  The purchaser  generally pays for the materials based on fluctuating
spot-market  prices.  Materials  for  which  there is no market or for which the
market price is insufficient to warrant processing are disposed of at a landfill
or  other  disposal  facility.  The  Company  would  seek to avoid  exposure  to
fluctuating  commodity prices by passing through substantially all of the profit
or loss from the sale of recyclables to its customers.

       Transfer Station: A transfer station is a waste management facility where
solid waste is received from  collection  vehicles and then  transferred  to and
compacted   in  large,   specially   designed  and   constructed   trailers  for
transportation to distant disposal facilities.  Transportation can be by road or
rail. A transfer  station  operation can effectively  reduce costs by positively
impacting the utilization of personnel and equipment and by reducing fuel costs.
The greatest benefit of transfer  stations is the quick turnaround  obtained for
route collection vehicles. The Property is potentially well suited to serve as a
waste  transfer  station for  transfer of waste  outside the nine county  region
because a railroad line is located just outside of the Property's boundary.  The
Company  will  seek  to  acquire  a rail  spur  to the  Property.  Although  the
Property's  proximity  to a major  rail  line  provides  for a  viable  transfer
station,  complications exist with regard to interstate  transport (e.g., states
trying to collect per ton confiscatory fees on incoming waste,  etc.).

                                       3

<PAGE>

     There is also an effort by some state  legislators to restrict the disposal
of out-of-state  wastes in their state's  landfills.  Although most  legislative
efforts to date have been rejected by the courts,  there is a  possibility  that
these laws may eventually pass.

FIBER-SEAL Operations

       FIBER-SEAL brand services and products  provide  customers with cleaning,
stain removal and lasting  protection for carpets and other fine interior fabric
coverings and surfaces and cleaner, newer looking interiors.  These products and
services have been provided since 1971 under the FIBER-SEAL  brand trademark and
servicemark.  The  products and services  are  currently  being  provided in the
United  States  and  other   countries   through   licensing   agreements   with
approximately  60 service  centers now in operation  through FSSI.  With over 25
years  of  continuous  operations,   the  FIBER-SEAL  business  has  established
long-term  relationships,  credibility  and  brand  awareness  with  architects,
interior  designers and  manufacturers.  Customers'  premises include individual
residences,  real estate  developments,  restaurants,  offices,  and  commercial
aircraft.

       The  Company has made a  strategic  decision  to convert  its  FIBER-SEAL
Fabric Care System(R) business from a licensing mode to a franchising  operation
during fiscal years 1998. It is the Company's  opinion that the conversion  will
not  result in the  creation  of any  material  risks that could have an adverse
impact upon the Company's financial position and results of operations. Further,
the  Company  intends to  institute a program for the  expansion  of  FIBER-SEAL
operations in all unexploited  geographic  areas in the U.S. during fiscal years
1998 and 1999.  It is the Company's  opinion that the revenues  derived from the
FIBER-SEAL  business can be  significantly  enhanced.  However,  as the business
areas in which  FIBER-SEAL  competes  are  highly  competitive,  there can be no
assurance  that the  Company  will be able to  accomplish  its  goals  regarding
FIBER-SEAL.

Operating Construction and Demolition Landfill

       During the third  quarter of 1997,  the  Company  acquired  an  operating
construction and demolition ("C&D") landfill in metropolitan Atlanta, Georgia in
exchange for consideration  totaling $2.74 million. The purchase price consisted
of immediate cash consideration of $2.5 million and an obligation to make future
cash payments  totaling  $240,000.  A construction  and demolition  landfill may
accept building  materials and rubble resulting from  construction,  remodeling,
repair, and demolition  operations on commercial buildings,  pavements,  houses,
and other structures.  Such wastes include,  but are not necessarily limited to,
wood, bricks, metal, concrete,  wallboard, paper, and cardboard. The acquisition
was  accounted  for as a purchase  and the  operating  results  of the  acquired
landfill have been included in the financial statements of the Company since the
acquisition.  The  following  pro forma  information  compares  the  results  of
operations as if the  acquisition  had been  consummated  as of the beginning of
each of the 12 month periods ended December 31, 1997 and December 31, 1996.

                               Twelve months ended
                                  December 31,
                             1997                         1996
                          -------------                ----------

       Revenue            $3,610,793                   $2,246,091

       Net Loss            ($850,712)                 ($1,064,080)

       Net loss per
           common share        ($.07)                       ($.09)


                                       4

<PAGE>

       The pro  forma  financial  information  is  presented  for  informational
purposes only and is not necessarily  indicative of operating results that would
have occurred had the  acquisition  been  consummated as of the beginning of the
above periods, nor is it necessarily indicative of future operating results.

Proposed Construction and Demolition Landfill

       During  fiscal  1997,  the  company  also  acquired  108 acres of land in
another area of  metropolitan  Atlanta,  Georgia in exchange  for  consideration
totaling  $1,999,990.  The purchase price consisted of 119,047 restricted shares
of Common Stock of the Company.  The Company intends to develop such site into a
C&D landfill. A maximum of 119,047 additional  restricted shares of Common Stock
of the Company may be paid as  additional  consideration  upon the issuance of a
final and non-appealable construction and demolition landfill permit.

Transactions With WasteMasters, Inc.

       During the  quarterly  period  ended  September  30,  1997,  the  Company
purchased from  WasteMasters,  Inc. 100% of the issued and outstanding shares of
two corporations which had been wholly-owned subsidiaries of WasteMasters,  Inc.
Such  corporations,  Trantex,  Inc.  (which owns a landfill site in  Kirksville,
Missouri)  and  WasteMasters  of Georgia,  Inc.  (which owns a landfill  site in
Walker  County,  Georgia,)  are now  wholly-owned  subsidiaries  of  Continental
Technologies  Corporation of Georgia, which is itself a wholly-owned  subsidiary
of Continental Investment Corporation. As per another provision of its agreement
with  WasteMasters,  Inc., the Company acquired  4,500,000  restricted shares of
newly-issued  Common  Stock  and  5,000,000  shares  of  newly-issued  Series  A
Preferred  Stock of  WasteMasters,  Inc.  directly  from  WasteMasters,  Inc., a
publicly traded corporation engaged in the waste disposal business.  Such shares
comprise 3.93% of the total number of shares of WasteMasters'  Common Stock that
are currently outstanding and 100% of the total number of shares of WasteMasters
Series A Preferred Stock that are currently outstanding. Each share of Preferred
Stock is entitled to one vote on any matter on which shareholders will vote, and
is  convertible  into 5.1 shares of  WasteMasters  Common Stock (i.e. a total of
25,500,000 shares of restricted  WasteMasters Common Stock). If Continental were
to fully  convert the Series A Preferred  into Common Stock,  Continental  would
then own, ceteris paribus, approximately 21.43% of the total number of shares of
WasteMasters Common Stock that would then be outstanding. In addition, a Warrant
for  the  Purchase  of  Shares  of  WasteMasters  Common  Stock  was  issued  by
WasteMasters,  Inc. to Continental Investment Corporation giving Continental the
option,  exercisable  until  August  29,  1999,  to  acquire  up to  100,000,000
restricted  shares of WasteMasters  Common Stock in exchange for up to 1,000,000
restricted shares of Continental  Common Stock based upon an exchange ratio of 1
share of Continental  Common Stock for 100 shares of  WasteMasters,  Inc. Common
Stock.  In the event that  Continental  exercises  in full its Warrant and fully
converts  its  WasteMasters  Preferred  Stock into  WasteMasters  Common  Stock,
Continental would own, ceteris paribus,  approximately 54.17% of the then issued
and  outstanding  shares  of  Common  Stock of  WasteMasters.  All of the  above
calculations  of  potential  percentage  ownership  positions  of the Company in
WasteMasters, Inc. assume that no additional shares of WasteMasters common stock
will  be  issued  other  than  those  shares  issued  in  the  various   Company
transactions   described  above.  The  total   consideration   for  all  of  the
transactions with WasteMasters,  Inc.  described above was $9,540,000,  of which
$6,080,000 was applicable to the acquisition of the WasteMasters  securities and
$3,460,000 was applicable to the acquisition of the two landfill subsidiaries.

                                       5

<PAGE>



Waste Industry Background

       According to the National Solid Waste Management  Association  ("NSWMA"),
the North  American  solid waste industry was projected to have revenues of more
than $37  billion in 1997.  The  industry  is highly  fragmented,  with the four
largest companies accounting,  in 1995, for approximately 30% of revenues, seven
mid-sized public  companies,  accounting for  approximately 4% of revenues,  and
several thousand  municipalities and independent collection firms accounting for
approximately  66% of revenues.  The industry has been  consolidating  in recent
years as a result of  increased  capital  requirements  arising  primarily  from
stringent environmental and other governmental regulations.  The Company expects
the trend  toward  consolidation  to continue as many  independent  landfill and
collection  operators,  including  municipalities,  lack the capital  resources,
management  skills and  technical  expertise  necessary to operate in compliance
with such regulations.

       The Company believes that  approximately 70% of solid waste landfills are
owned by  municipalities,  25% by private  companies  and 5% by the  federal and
state  governments.  These  landfills  vary  greatly in size and  capacity.  The
Company  believes  that the estimated 800  privately-owned  landfills  represent
approximately  50% of the  remaining  disposal  capacity  in the United  States.
Subtitle D regulations  ("Subtitle D") of the Resource Conservation and Recovery
Act ("RCRA") require landfill operators to upgrade existing disposal  facilities
by imposing requirements in the areas of facility design and operating criteria,
closure  and  post-closure  requirements,   financial  assurance  standards  and
groundwater monitoring as well as corrective action standards.  Trade group data
indicate  that the number of municipal  solid waste  landfills  decreased by 62%
from  1988 to 1995 and that the  remaining  number  of such  landfills  is under
2,,900.

       As a result of these regulatory changes, a number of independent landfill
operators and  municipalities  are  discontinuing  or  privatizing  landfill and
collection  operations.  In  some  instances,   industrial  companies  that  had
previously  operated  landfills have decided to close such landfills rather than
bring  them  into  compliance  with the new,  more  demanding  regulations.  The
increasing requirements for capital,  skilled management and technical expertise
are, for small operators who cannot achieve  economics of scale and integration,
reducing  margins and causing  them to sell or close  existing  landfills.  As a
result,  the Company expects continued  availability of opportunities to acquire
solid  waste  collection  and  disposal  businesses.  However,  there  can be no
assurance  of  such  continued  availability  or of  the  Company's  ability  to
consummate any such potential acquisitions.

       Pricing in the waste management industry has become increasingly  complex
as wastes have been  sub-divided/categorized  by regulation changes, and charges
or "tipping  fees" are being  calculated  as to specific  transport and disposal
requirements.  Revenues  are  generated  through  charges or tipping fees to the
collection  and  hauling  companies  and are  calculated  by volume  or  weight.
Transfer  stations  consolidate  and compact the waste for  transport to distant
sites  where  tipping  fees may be  lower,  while  collecting  a fee per ton for
consolidation,  compaction,  transportation,  and disposal.  The prices that are
charged  for  disposal  or  transfer  of waste are  determined  by the volume or
weight,  the type of waste disposed of and prices  charged for similar  disposal
services by competitors.  Long term disposal and collection  contracts typically
contain a formula,  generally  based on published  price indices,  for automatic
adjustment of fees to cover increases in some, but not all, operating costs.

Competition

     The solid waste  industry is highly  competitive  and requires  substantial
amounts of capital.  The waste industry is currently dominated by several large,
national waste management companies -- Waste Management,  Inc.,  Browning-Ferris
Industries,  Inc. ("BFI"), U.S.A. Waste Services, Inc., Allied Waste Industries,
Inc. and Republic Industries,  Inc. (In early 1997, U.S.A. Waste Services,  Inc.

                                       6

<PAGE>

and Waste Management,  Inc.  announced their intention to merge.)  Additionally,
there are a number of regional  companies and numerous local  companies.  All of
these  companies have  significantly  larger  operations  and greater  financial
resources  than  CICG.  The  Company  also  competes  with  those  counties  and
municipalities   that  maintain  their  own  waste  collection  and/or  disposal
operations.

       The Company competes for landfill  business on the basis of tipping fees,
geographical location and quality of operations. The Company's ability to obtain
landfill  business is limited by the fact that some major  collection  companies
also own or operate landfills to which they send waste that they collect.

Solid Waste Disposal Business Risks

       There are potential,  often  unforeseen,  business risks and certain cost
exposures  associated with the  establishment,  ownership and operation of solid
waste  landfill  sites.  Such risk  factors  include,  but are not limited to: a
reduction in the volume of solid waste available for landfill disposal resulting
from legislative or regulatory  action focused on the reduction of waste volume;
public concern regarding the potential for adverse effects on public health, the
environment,  and land property  values  attributable  to wastes  disposed of at
landfills;  the difficulty of obtaining permits to expand or establish  disposal
sites and public and private opposition to the location, expansion and operation
of  landfills;   expanding  governmental  actions  attempting  to  restrict  the
interstate  movement  of  waste  for  disposal;   costs  associated  with  liner
requirements, groundwater monitoring, leachate and landfill gas control, surface
water  control,  post-closure  monitoring,  site  clean-up,  site remedial work,
maintenance and long-term care obligations; the obligation to manage any adverse
affects  on  the  environment  that  may  materialize;   possible  judicial  and
administrative  proceedings  regarding alleged adverse  environmental and health
effects occasioned by landfill operations; and potential regulations requiring a
landfill operator to demonstrate financial strength that would enable compliance
with  prescribed  or changing  standards  and methods of  operation,  as well as
closure and post-closure care requirements.

       The Company purchases and maintains  environmental  impairment  liability
insurance policies on its landfills that provide coverage against clean-up costs
and bodily  injury to  non-employees  and  property  damage  caused by  off-site
pollution emanating from the landfills. However, if the Company should be unable
to obtain  adequate  insurance,  or  decides  to operate  without  insurance,  a
partially or completely  uninsured  claim against the Company,  if  successfully
prosecuted  and of sufficient  magnitude,  could have a material  adverse effect
upon the  Company's  business or financial  condition.  Difficulty  in obtaining
insurance  could also impair the Company's  ability to secure future  contracts,
which may be conditioned upon the availability of adequate coverage.

       Municipal and governmental waste management  contracts  typically require
performance bonds or bank letters of credit to secure performance.  In addition,
the Company may be required to demonstrate  satisfactory financial assurances to
secure its  closure  and  post-closure  care  obligations  with  respect to each
landfill  cell,  some of which may be in the form of a surety  bond or letter of
credit.  If the Company is unable to obtain surety bonds or letters or credit in
sufficient  amounts or at acceptable  rates,  it may be precluded  from entering
into disposal contracts or obtaining or retaining landfill operating permits.

Environmental and Other Regulations

       Authority to issue  Georgia  permits for  construction  and  operation of
municipal  solid waste  landfills,  provided they are issued subject to facility
compliance with Subtitle D of The Federal Resource Conservation and Recovery Act
of 1976 (the "RCRA"),  rests with the Environmental  Protection  Division of the
State of Georgia Department of Natural Resources ("EPD"). The Company intends to
prepare an application  for the Property that meets the  requirements of the EPD

                                       7

<PAGE>

and that demonstrates  facility  compliance with RCRA,  Subtitle D requirements.
Locally,  the City of Atlanta  will be  requested  to issue a Special Use Permit
granting the Company authority to operate a landfill on the Property.

       Landfills  are  required  to comply  with  RCRA,  Subtitle  D  standards.
Further, in granting a Special Use Permit, the city of Atlanta may require other
operating  protocols with which the Company will be required to comply.  Once in
operation,  both the city and the state may inspect  landfills on an unannounced
basis to investigate  for regulatory and permit  compliance.  Once a landfill is
full, post-closure care operations and maintenance are required for 30 years.

       The  Company  is  subject  to  comprehensive  federal,  state  and  local
environmental,  health and safety laws and  regulations.  These  regulations are
administered by various federal,  state and local environmental,  zoning, health
and safety  agencies.  All of these  agencies are  empowered to monitor  Company
compliance   with  such  laws  and  regulations  via  periodic  and  unannounced
inspections.

       Operation of landfills requires that costs be incurred, some significant,
related to liner requirements, groundwater monitoring, leachate and landfill gas
control,  surface water control,  post-closure  monitoring,  site clean-up, site
remedial work,  maintenance and post-closure care  obligations.  These costs may
adversely  impact the profit potential of the Company's  landfill  operations by
increasing the costs of  construction  and operation of landfills over the short
and long term.  The Company will  require  substantial  additional  financing to
develop the  Property.  There can be no assurance  that such  financing  will be
available.

       Resource  Conservation and Recovery Act ("RCRA"),  Subtitle D regulations
require landfill operators to demonstrate financial  responsibility enabling the
operator to comply with landfill  construction and operation standards,  as well
as closure and post-closure care requirements. The Company is required to obtain
insurance  and  performance   bonds  at  potentially  high  cost  to  meet  this
requirement.

       Governmental  agencies have the power to enforce compliance with landfill
regulations and permit  conditions and to obtain  injunctions or impose fines in
the event violations are evidenced. During the ordinary course of its operation,
the  Company  may from  time to time  receive  citations  or  notices  from such
governmental  agencies  that  its  facility  is  not  in  full  compliance  with
applicable environmental or health and safety regulations.  Upon receipt of such
citations  or notices,  the Company  will work with  agency  representatives  to
attempt resolution of the matters cited.  Failure to correct the problems to the
satisfaction  of the  agencies  could  lead  to  monetary  penalties,  curtailed
operations,  criminal prosecution,  facility closure, or the inability to obtain
further permits.

       The  Company  is  subject  to  liability  for any  nuisance  or  trespass
resulting from the operation of its landfills.  A person  bringing a nuisance or
trespass  action  against the Company may seek an injunction to curtail or limit
the Company's  operations.  Further,  any person pursuing a nuisance or trespass
cause of action may petition for actual and  punitive  damages.  The awarding of
such damages  could  negatively  impact the  Company's  financial  condition and
business operations.

       Recycling and other waste minimization  efforts can be expected to reduce
waste  generation  rates  not only as more  recyclables  are  regulated,  but as
manufacturers  take more  responsibility  for the recyclability of the packaging
that they use. Recycling  regulations and procurement  requirements for recycled
goods will continue to create  business  opportunities  in the  recycling  field
while  simultaneously  serving to  diminish  the volume of waste  available  for
disposal in landfills.

       The  waste  disposal  industry  is  subject  to  extensive  and  evolving
environmental  laws and  regulations  that  have been  enacted  in  response  to
technical advances and the public's increased concern over environmental issues.
These regulations are administered by the United States Environmental Protection

                                       8

<PAGE>

Agency and various  other  federal,  state and local  environmental,  health and
safety agencies.  The Company  believes that there will be increased  regulation
and legislation related to the solid waste collection and disposal industry.  In
light of these  developments,  the Company  will  attempt to  anticipate  future
regulatory  requirements that might be imposed and plan accordingly to remain in
compliance with the regulatory framework.

       In order to operate a landfill or transfer station, the Company typically
will have to go through several  governmental review processes and obtain one or
more  operating  permits and often  zoning and other land use  approvals.  These
permits and zoning or land use approvals  are  difficult  and time  consuming to
obtain and are usually opposed by various local elected  officials and citizens'
groups.  Once obtained,  in some states (but not in Georgia),  operating permits
generally  must be  periodically  renewed  and are subject to  modification  and
revocation by the issuing agency.

       The  Company's  landfill  business  subjects  it to certain  operational,
monitoring,  site maintenance,  closure and post-closure and financial assurance
obligations  which  change  from time to time and could  give rise to  increased
costs for monitoring and corrective  measures.  In connection with the Company's
possible acquisition of existing landfills, it will often be necessary to expend
considerable  time,  effort and money in complying with the governmental  review
and permitting  process  necessary to maintain or increase the capacity of these
landfills.  Governmental  authorities have the power to enforce  compliance with
these laws and regulations and to obtain injunctions or impose civil or criminal
penalties  in case of  violations.  The  Company's  operations  are  subject  to
regulation, principally under the following federal statutes:

       The Solid Waste Disposal Act ("SWDA"), as amended by the
       Resource Conservation and Recovery Act of 1976, as amended ("RCRA")

       The SWDA and its  implementing  regulations  establish  a  framework  for
regulating the handling,  transportation,  treatment,  and disposal of hazardous
and non-hazardous wastes. They also require states to develop programs to ensure
the safe disposal of solid wastes in landfills.

       Subtitle D of RCRA establishes a framework for federal,  state, and local
government  cooperation in controlling  the  management of  non-hazardous  solid
wastes.  While the role of the EPA is to provide overall  regulatory  direction,
the actual planning and  implementation of solid waste programs under Subtitle D
are  largely  state  and local  functions.  In  October  1993,  the EPA  adopted
regulations  under  Subtitle D with  respect to solid  waste  disposal  facility
criteria,  which include  location  standards,  hydrogeological  investigations,
facility design requirements (including liners and leachate collection systems),
enhanced operating and control criteria, groundwater and methane gas monitoring,
corrective action standards, closure and extended post-closure requirements, and
financial assurance standards,  many of which have not commonly been in place or
enforced at  landfills.  All Subtitle D  regulations  are in effect,  except for
financial responsibility  requirements,  which were to take effect in April 1997
although  many states have already  implemented  financial  assurance  programs.
These federal regulations must be implemented by the states, although states may
impose  requirements for landfill sites that are more stringent than the federal
Subtitle D standards.  Once a state has an approved program,  it will review all
existing  landfill  permits to ensure that they comply with the new regulations.
Although  the  states  were  required  to submit  proposed  permitting  programs
designed to implement the Subtitle D regulations to the EPA by April 1993,  some
states have not  submitted  their  programs to the EPA and others have not fully
completed their implementation.  Because the new regulations did not take effect
until late 1993 and have not been fully  implemented  by the states,  their full
impact  may  not  be  apparent  for  several  years.  The  Company  could  incur
significant costs in complying with such regulations.

                                       9

<PAGE>


     The Federal Water Pollution Control Act of 1972 ("The Clean Water Act")

       This Act establishes  rules regulating the discharge of pollutants from a
variety  of  sources,  including  solid  waste  disposal  sites,  into  streams,
groundwater or other surface or subsurface  waters. If runoff from the Company's
potential  landfill or transfer  station is discharged into surface waters,  the
Act would  require  the  Company  to apply for and  obtain a  discharge  permit,
conduct  sampling and monitoring  and, under certain  circumstances,  reduce the
quantity of  pollutants  in such  discharge.  Also,  virtually all landfills are
required  to comply  with the new federal  storm  water  regulations,  which are
designed to prevent possibly  contaminated storm water from flowing into surface
waters.  The Company works with the  appropriate  regulatory  agencies to ensure
that its  facilities  are in  compliance  with  Clean  Water  Act  requirements,
particularly  as they apply to  treatment  and  discharge  of leachate and storm
water. In addition,  where development may alter or affect  "wetlands," a permit
must be obtained before such  development may be commenced.  This requirement is
likely to affect the  construction  or  expansion  of many solid waste  disposal
sites.  The Act provides for civil,  criminal and  administrative  penalties for
violations of specified sections of the Act.


    The Comprehensive Environmental Response, Compensation and Liability Act
    of 1980, as amended ("Superfund" or "CERCLA")

       CERCLA  established a regulatory and remedial program intended to provide
for the investigation and cleanup of facilities from which there has been, or is
threatened, a release of any hazardous substance into the environment.  CERCLA's
primary  mechanism  for  remedying  such  programs is to impose strict joint and
several  liability for cleanup of facilities on current  owners and operators of
the land, former owners and operators of the land at the time of the disposal of
the hazardous substances,  as well as the generators of the hazardous substances
and  the  transporters  who  arranged  for  disposal  or  transportation  of the
hazardous substances.  The costs of CERCLA investigation and cleanup can be very
substantial.  Liability  under  CERCLA  does not depend  upon the  existence  or
disposal of "hazardous waste" but can also be founded upon the existence of even
very small  amounts of the more than 700  "hazardous  substances"  listed by the
EPA, many of which can be found in household waste. If the Company were found to
be a responsible party for a CERCLA cleanup, the enforcing agency could hold the
Company completely  responsible for all investigative and remedial costs even if
others may also be liable.  CERCLA also  authorized  the imposition of a lien in
favor of the United  States upon all real  property  subject to or affected by a
remedial action for all costs for which a party is liable. The Company's ability
to obtain  reimbursement  from  others for their  allocable  share of such costs
would be limited by the Company's ability to find other responsible  parties and
prove the extent of their  responsibility and by the financial resources of such
other parties. In the past, legislation has been introduced in Congress to limit
the  liability  of  municipalities  and others under  CERCLA as  generators  and
transporters  of municipal solid waste.  Although such  legislation has not been
enacted,  if it were to pass it would limit the  Company's  ability to seek full
contribution  from  municipalities  for CERCLA  cleanup  costs even if hazardous
substances  that were  released and caused the need for cleanup at the Company's
landfills were  generated by or  transported to the landfill by a  municipality.
Depending  upon whether and how Congress acts, it is possible that each of these
laws may be changed in ways that may  significantly  affect the Company's  waste
disposal business.

    The Occupational Safety and Health Act of 1970 (the "OSHA Act")

       The OSHA Act authorizes the Occupational Safety and Health Administration
to  promulgate  occupational  safety  and  health  standards.  Various  of these
standards,  including standards for notices of hazards, safety in excavation and

                                       10

<PAGE>

demolition  work,  and  the  handling  of  asbestos,   apply  to  the  Company's
operations.

                  The Clean Air Act

       The Clean Air Act provides for regulation,  through state  implementation
of  federal  requirements,  of the  emission  of  air  pollutants  from  certain
landfills based upon the date of the landfill  construction  and volume per year
of emissions of regulated pollutants.  The EPA proposed a New Source Performance
Standard and Emission  Guidelines for municipal solid waste  landfills.  Current
regulations impose limits on air emissions from municipal solid waste landfills.
The New Source  Performance  Standard  will apply to all  municipal  solid waste
landfills  that  commence  construction  after  the  date of the  proposal.  The
Emission  Guidelines  are a set of standards  that must be adopted by the states
and will apply to all municipal  solid waste landfills that received waste after
November 8, 1987. The EPA may also issue  regulations  controlling the emissions
of particular  regulated air pollutants  from municipal  solid waste  landfills.
Landfills  located in areas with air  pollution  problems may be subject to even
more extensive air pollution controls and emission limitations.

                  Proposed Federal Legislation

       In  the  future,  the  Company's  landfill  operations  (along  with  any
potential  collection  and/or  transfer  operations)  may  also be  affected  by
legislation currently pending before Congress that would authorize the states to
enact discriminatory legislation governing waste shipments. The Company believes
that if any such federal  legislation is enacted, it may have a material adverse
effect on the Company's potential operations.

                  State and Local Regulation

       Each state in which the  Company  may  operate in the future has laws and
regulations   governing   the   generation,    storage,   treatment,   handling,
transportation and disposal of solid waste, water and air pollution and, in most
cases,  siting,  design,  operation,  maintenance,  closure and  post-closure of
landfills  and transfer  stations.  There has also been an  increasing  trend in
various states seeking to regulate the disposal of  out-of-state  waste in their
landfills.  Legislative  and regulatory  measures to mandate or encourage  waste
reduction at the source and waste recycling have been adopted by many states and
are also under consideration by Congress and the EPA.

       The  Company's  landfill  operations  may be affected by the trend toward
laws requiring the  development of waste reduction and recycling  programs.  For
example,   California,    Georgia,   Florida,   Illinois,   Indiana,   Kentucky,
Pennsylvania, Ohio, South Carolina and West Virginia have enacted laws that will
require  counties  to adopt  comprehensive  plans to reduce  the volume of solid
waste deposited in landfills,  through waste planning,  composting and recycling
or other programs,  within the next few years. A number of states have taken, or
are  considering,  steps to ban the landfilling of certain wastes,  such as yard
wastes, beverage containers,  newspapers,  unshredded tires, lead-acid batteries
and "white goods", such as refrigerators.  The enactment of regulations reducing
the  volume and types of wastes  available  for  transport  to and  disposal  in
landfills could affect adversely the Company's ability to operate its facilities
at their full capacity.

       Many  municipalities  also have  ordinances,  local laws and  regulations
affecting the waste disposal industry.  These include zoning and health measures
that limit solid waste  management  activities to specified sites or activities,
flow  control  provisions  that direct the delivery of solid wastes to specified
facilities,  and bans or other restrictions on the movement of solid wastes into
a municipality.

                                       11

<PAGE>


       The permits or other land use  approvals  with respect to a landfill,  as
well as state or local regulations,  may (i) limit a landfill to accepting waste
that  originates  from a  specified  geographic  area  and/or  (ii)  specify the
quantity of waste that may be accepted at a landfill  during a given time period
and/or (iii) specify the types of waste that may be accepted at the landfill.

       Proposed Atlanta  municipal solid waste landfills must file for a Special
Use Permit  ("SUP")  with the City of  Atlanta,  and a Permit to  Construct  and
Operate a Landfill  ("PCO") with the  Environmental  Protection  Division of The
State of  Georgia  Department  of  Natural  Resources  ("EPD").  Notice  of such
applications  must be filed with counties lying  contiguous to the county within
which the Property is located. These permits, if granted, would give the Company
authority  to  accept  municipal  solid  waste  as  well  as  inert  waste,  and
construction  and  demolition  debris.  Although  there are  presently  no known
insurmountable  impediments  to  the  approval  of  these  permit  applications,
significant  opposition  may arise from city of Atlanta and  surrounding  county
residents regarding environmental and quality of life issues. Indeed, some local
residents and community activists have already indicated their opposition to the
potential use of the property as a waste disposal  site. It is anticipated  that
the city of Atlanta may impose operating  protocols on which the SUP permits are
contingent.  Once in  operation,  both the city and state would be at liberty to
inspect the  Property,  without  notification  to the operator,  to  investigate
regulatory  and permit  compliance.  Compliance  issues  covered in the required
permits include liner  installation,  leachate  collection system  installation,
periodic  cover  requirements  and  groundwater  monitoring  systems.   Landfill
operators may also petition the various  permitting  authorities,  provided that
there is sufficient  justification,  for regulatory  variances that eliminate or
reduce some requirements outlined in the petitions. In the case of the Property,
this would include  petitioning to  diminish/lessen  the liner  requirement,  as
based   on   water   levels,   there   will   be   little   or  no   groundwater
seepage/contamination.  A variance would  significantly  reduce costs associated
with the construction of the landfill.

Disclosure Regarding Forward Looking Statements

       This Annual Report on Form 10-KSB  includes  forward  looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended ("Forward Looking
Statements").  All statements  other than statements of historical fact included
in this  report are  Forward  Looking  Statements.  In the normal  course of its
business, the Company, in an effort to help keep its shareholders and the public
informed  about the  Company's  operations,  may from time to time issue certain
statements,  either in writing or orally,  that  contain or may contain  Forward
Looking  Statements.   Although  the  Company  believes  that  the  expectations
reflected in such Forward  Looking  Statements  are  reasonable,  it can give no
assurance  that such  expectations  will prove to have been correct.  Generally,
these  statements   relate  to  business  plans  or  strategies,   projected  or
anticipated benefits or other consequences of such plans or strategies (past and
possible  future),  acquisitions  and  projected or  anticipated  benefits  from
acquisitions  made by or to be made by the  Company,  or  projections  involving
anticipated revenues,  earnings,  level of capital expenditures or other aspects
of operating  results.  All phases of the Company's  operations are subject to a
number of uncertainties,  risks and other influences,  many of which are outside
the  control of the  Company and any one of which,  or a  combination  of which,
could  materially  affect the results of the Company's  proposed  operations and
whether Forward Looking  Statements made by the Company  ultimately  prove to be
accurate.  Such important factors ("Important  Factors") and other factors could
cause actual results to differ materially from the Company's  expectations.  All
prior and subsequent written and oral Forward Looking Statements attributable to
the Company or persons  acting on its behalf are  expressly  qualified  in their
entirety  by the  Important  Factors  described  below that could  cause  actual
results to differ materially from the Company's expectations as set forth in any
Forward Looking Statement made by or on behalf of the Company.

                                       12

<PAGE>


       (1) Competition:  The waste  collection/disposal  business and the fabric
are  business are both highly  competitive  and require  substantial  amounts of
capital.  The  Company's  existing  and  potential  facilities  do, may or would
compete  with  numerous  enterprises,  many of which have  significantly  larger
operations  and greater  resources  than the Company.  The Company does,  may or
would also compete with those  counties and  municipalities  that maintain their
own waste collection and disposal operations.  Forward Looking Statements assume
that the Company will be able to effectively compete with these other entities.

       (2)   Availability  of  Acquisition   Targets:   The  Company's   planned
acquisition  program is a key element of its  expansion  strategy.  In addition,
obtaining landfill permits has become increasingly difficult, time consuming and
expensive. There can be no assurance,  however, that the Company will succeed in
obtaining landfill permits or locating appropriate  acquisition  candidates that
can be acquired at price levels that the Company considers appropriate.

       (3) Ongoing Capital Requirements: In order to satisfy the liquidity needs
of the Company for the following  twelve  months,  the Company will be primarily
dependent upon proceeds from the sale of the Company's stock,  revenues from the
operating  construction  and  demolition  landfill  described  on Page 4 of this
report and revenues generated from the operation of its fabric care business. If
the  Company  is unable to obtain  adequate  funds from the sale of its stock in
public offerings,  private placements,  the exercise of warrants, or alternative
financing  arrangements,  it may be necessary to delay the potential  permitting
and development of its landfill  properties and potential  landfill  properties.
Because of potential political,  legal,  bureaucratic,  and other factors, there
can be no assurance that the Company will be able to accomplish any of its goals
within a reasonable period of time.

       (4) Economic  Conditions:  The  Company's  existing and  potential  waste
disposal  businesses  may or would be affected by general  economic  conditions.
There can be no  assurance  that an  economic  downturn  would  not  result in a
reduction  in the  potential  volume of waste that might be  disposed  of at the
Company's  facilities  and/or the price that the  Company  would  charge for its
services.  Additionally,  the demand for FIBER-SEAL's  services may be adversely
affected by an economic downturn.

       (5)  Weather  Conditions:  Protracted  periods of  inclement  weather may
adversely affect the Company's existing and potential  operations by interfering
with  collection and landfill  operations,  delaying the development of landfill
capacity and/or reducing the volume of waste generated by the Company's existing
and potential customers. In addition,  particularly harsh weather conditions may
result in the  temporary  suspension  of certain of the  Company's  existing and
potential  operations.  The Forward  Looking  Statements do not assume that such
weather conditions will occur.

       (6) Dependence on Senior Management: The Company is highly dependent upon
its senior  management team. In addition,  as the Company continues to grow, its
requirements  for  management  personnel  with  franchising  and waste  industry
experience  will also  increase.  The future  availability  of such  experienced
management personnel cannot be predicted.  The Forward Looking Statements assume
that  experienced  management  personnel  will be  available  when needed by the
Company at compensation  levels that are within industry norms.  The loss of the
services of any member of senior  management or the inability to hire additional
management personnel could have a material adverse effect on the Company.

       (7)  Influence  of  Government  Regulation:  The  Company's  existing and
potential  operations are and would be subject to and substantially  affected by
extensive federal, state and local laws, regulations,  orders and permits, which
govern environmental  protection,  health and safety,  zoning and other matters.

                                       13

<PAGE>

These  regulations  may impose  restrictions  on operations that could adversely
affect the Company's  results,  such as limitations on the expansion of disposal
facilities,  limitations on or the banning of disposal of out-of-state  waste or
certain  categories of waste or mandates  regarding the disposal of solid waste.
Because of heightened public concern, companies in the waste management business
may become subject to judicial and administrative proceedings involving federal,
state or local agencies. These governmental agencies may seek to impose fines or
to revoke or deny renewal of operating  permits or licenses  for  violations  of
environmental  laws or  regulations or to require  remediation of  environmental
problems at sites or nearby  properties,  or resulting  from  transportation  or
predecessors'  transportation and collection operations, all of which could have
a material adverse effect on the Company.  Liability may also arise from actions
brought by individuals or community  groups in connection with the permitting or
licensing of operations,  any alleged violations of such permits and licenses or
other  matters.  The  Forward  Looking  Statements  assume that there will be no
materially negative impact on its operations due to governmental regulation.

       (8) Potential Environmental  Liability: The Company may incur liabilities
for the  deterioration  of the  environment  as a  result  of its  existing  and
potential  operations.  Any substantial liability for environmental damage could
materially adversely affect the operating results and financial condition of the
Company.  Due to the  limited  nature of  insurance  coverage  of  environmental
liability,  if the Company were to incur liability for environmental damage, its
business and financial condition could be materially adversely affected.

Inflation and Prevailing Economic Conditions

       To date,  inflation  has not had a  significant  impact on the  Company's
operations.  Consistent with industry practice,  most of the Company's contracts
will  provide  for a pass  through  of certain  costs,  including  increases  in
landfill  tipping  fees and, in some cases,  fuel costs.  The Company  therefore
believes it should be able to implement  price  increases  sufficient  to offset
most cost increases resulting from inflation.  However,  competitive factors may
require the Company to absorb cost  increases,  resulting  from  inflation.  The
Company  is unable to  determine  the  future  impact  of a  sustained  economic
slowdown.

Year 2000 Compliance

       Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field.  These date code fields
will need to accept four digit  entries to  distinguish  21st century dates from
20th century dates. As a result,  computer  systems and/or software used by many
companies may need to be upgraded to comply with such "Year 2000"  requirements.
The Company is currently in the process of evaluating its information technology
infrastructure  for Year 2000  compliance.  The Company does not expect that the
cost to  modify  its  information  technology  infrastructure  to be  Year  2000
compliant will be material to its financial  condition or results of operations.
The Company does not anticipate  any material  disruption in its operations as a
result of any failure by the Company to be in  compliance.  The  Company's  Year
2000  issues  relate  not  only to its own  systems  but  also to  those  of its
customers and  suppliers.  The Company does not currently  have any  information
concerning  Year 2000 compliance  status of its customers and suppliers.  In the
event that any of the  Company's  significant  customers or  suppliers  does not
successfully and timely achieve Year 2000 compliance,  the Company's business or
operations could be adversely affected.

Employees

       As of April 14, 1998, the Company employed a total of 36 persons, none of
whom are subject to a collective bargaining agreement. The Company considers its
relations with its employees to be satisfactory.

                                       14

<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY.

       The  principal  fixed  asset  of  the  Company  is the  Atlanta  Property
described in Item 1. that the Company  proposes to develop into a landfill.  The
Company also owns 283.5 acres of real estate located approximately 50 miles from
Dallas in Ellis County,  Texas. This property is held for future  development or
resale. The Company has no timetable for such development or resale.

       The Company also owns 89 acres of land at its  operating  C&D landfill in
metropolitan  Atlanta,  Georgia  and  108  acres  of  land  at  another  site in
metropolitan  Atlanta,  Georgia  on which it intends to  construct  another  C&D
landfill.

       The  Company  also  owns  65  acres  of  land  at its  landfill  site  in
Kirksville,  Missouri  and 225  acres  of land at its  landfill  site in  Walker
County, Georgia.

       The  Company  leases  approximately  9,612  square  feet  of  office  and
warehouse space in Dallas,  Texas and approximately  2,766 square feet of office
space in Atlanta, Georgia.


ITEM 3.  LEGAL PROCEEDINGS.

       Sterritt  Properties,  Inc. v. Raymond  Donner,  et al, District Court of
Dallas  County  Texas:  On September 19, 1996  Sterritt  Properties,  Inc.,  the
majority shareholder of the Company,  filed an original Petition and Application
For  Temporary  Restraining  Order and  Temporary  Injunction  (the  "Petition")
against Raymond Donner,  Ronnie  Davidson,  Richard Jepson  Egglishaw,  Business
Ventures,  Inc. ("BVI"),  Hilvick Investments  Limited and Strachens  Management
Services, Ltd. The Petition, as amended,  alleges that the defendants breached a
contract with the plaintiff and committed fraud in connection with a transaction
whereby the plaintiff  transferred to BVI an $800,000  promissory  note from the
Company which was  convertible  into  1,600,000  shares of the Company's  Common
Stock.  The Note  subsequently  was converted by BVI and  1,600,000  shares (the
"Disputed  Shares") of the Common  Stock were issued to BVI.  The  Petition,  as
amended,  seeks recision,  monetary and injunctive relief against the defendants
other than the Company,  and that the Company be enjoined from  transferring the
Disputed Shares and ordered to cancel the Disputed  Shares.  On October 14, 1996
the District Court of Dallas entered an Agreed  Temporary  Injunction  enjoining
the sale  transfer  or  assignment  of any of the  Company's  Common  Stock held
directly  or  indirectly  by any of the  defendants.  On  November  22, 1996 the
Company was named as a defendant  to this action in order that it would be bound
by any order of the District Court  concerning  the ultimate  disposition of the
Disputed Shares.  The Company is not alleged to have breached any contract with,
or to have  participated  in any fraud against,  the plaintiff.  Thus far, based
upon the nature of the allegations of the Petition, the Company has not taken an
active role in this matter.  As and if  necessitated  by the  development of the
facts  underlying  this  dispute,  the Company will take any action  against any
party it deems  necessary and  appropriate to protect its interests and those of
its shareholders.  The Company will comply with any final orders of the District
Court (or any appropriate appellate court) concerning the Disputed Shares.

       The Company also is currently a party to routine litigation incidental to
its business.  Based upon the scope and magnitude of these actions,  the Company
does not believe these claims,  if  determined  adversely to the Company,  would
have a material adverse effect on the Company.

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

       No matters were  submitted to a vote of the  Company's  security  holders
during the fourth quarter of fiscal year 1997.

                                       15

<PAGE>

                                     PART II

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

       The  Company's   Common  Stock  is  registered  with  the  United  States
Securities  and  Exchange  Commission  under  Section  12(g)  of the  Securities
Exchange  Act of 1934 but is not quoted on a  national  or  regional  securities
exchange or on the National  Association of Securities  Dealers,  Inc. Automated
Quotation System.  The Common Stock is traded on the  Over-the-Counter  Bulletin
Board.

       The  following  table sets forth the  quarterly  high and low closing bid
prices per share for the Company's Common Stock for the periods indicated. These
prices  represent  prices  between  dealers,  do  not  include  retail  mark-up,
mark-down or commissions and may not necessarily represent actual transactions.

                        Year Ended                       Year Ended
                     December 31, 1997               December 31, 1996
                     -----------------               -----------------
    Quarters         High            Low               High         Low

   OCT-DEC          $22.00         $15.125          $27.13           $20.50
   JUL-SEP          $25.00         $21.375          $30.50           $16.50
   APR-JUN          $23.00         $20.50           $26.00           $ 3.50
   JAN-MAR          $23.50         $20.50           $ 5.00           $ 4.13

       Due in part to the high  level of public  awareness  of the  business  in
which the  Company  is  engaged,  regulatory  enforcement  proceedings  or other
potentially  unfavorable  developments  involving  the  Company's  operations or
facilities  including those in the ordinary course of business,  may be expected
to engender  publicity which could from time to time have an adverse impact upon
the market price for the Company's Common Stock.

       There  were 1,264  holders of record of the Common  Stock as of April 13,
1998. This number does not include an indeterminate number of shareholders whose
shares are held by brokers in "street  name." The Company has not  declared  any
cash  dividends on its Common Stock during fiscal 1997,  1996 or 1995. The Board
of  Directors of the Company has made no  determination  to date to declare cash
dividends  during  the  foreseeable  future.  There are no  restrictions  on the
Company's  present  or future  ability  to pay cash  dividends  other than those
restrictions imposed by law on all Georgia corporations.


ITEM 6.  MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS.

        Results of Operations

        Fiscal Year Ended December 31, 1997 Compared to Fiscal Year Ended 
        September 30, 1996

Revenues

       During the fiscal year ended  December 31, 1997,  revenues of the Company
were derived  primarily from the operating  construction and demolition  ("C&D")
landfill  described  on Page 4 of this  report,  that was  acquired  during  the
quarterly  period ended  September 30, 1997 and from the FIBER-SEAL  fabric care
and  treatment  business.  Revenues for the fiscal year ended  December 31, 1997
increased  $1,461,339  (178.43%) to $2,280,317 from $818,978 for the fiscal year
ended September 30, 1996.

                                       16

<PAGE>

     While  FIBER-SEAL  revenues  increased  $128,652  (15.71%) from $818,978 to
$947,630,  the increase in revenues was primarily a result of the acquisition of
the aforementioned C&D landfill which generated revenues of $1,332,687 in fiscal
1997 as  compared  with zero  Company  landfill  revenues in fiscal  1996.  (The
acquisition was accounted for as a purchase. Therefore, the operating results of
the acquired  landfill  have been  included in the  financial  statements of the
Company  beginning  with,  and  not  prior  to,  the  date  of  acquisition.)  A
construction  and demolition  landfill may accept building  materials and rubble
resulting from construction,  remodeling,  repair, and demolition  operations on
commercial  buildings,  pavements,  houses,  and other  structures.  Such wastes
include,  but are not necessarily  limited to, wood,  bricks,  metal,  concrete,
wallboard,  paper, and cardboard.  FIBER-SEAL  revenues consist of: (1) licensee
fees based upon monthly  sales,  (2) product sales to licensees,  and (3) direct
product and service sales from the Dallas,  Texas  territory  (which is owned by
the  Company).  The  Company  has  made a  strategic  decision  to  convert  its
FIBER-SEAL  business  from a licensing  mode to a franchising  operation  during
fiscal year 1998.  Further,  the Company  intends to institute a program for the
expansion of FIBER-SEAL operations in all unexploited geographic areas in the U.
S. during  fiscal  years 1998 and 1999.  It is the  Company's  opinion  that the
revenues  derived from the FIBER-SEAL  business can be  significantly  enhanced.
However,  as  the  business  areas  in  which  FIBER-SEAL  competes  are  highly
competitive,  there  can be no  assurance  that  the  Company  will  be  able to
accomplish its goals regarding FIBER-SEAL.

Cost of Revenues

       Cost of revenues for the fiscal year ended  December  31, 1997  increased
$739,240 (200.10%) to $1,108,675 (representing 48.62% of revenues) from $369,435
(representing  45.11% of revenues) for the fiscal year ended September 30, 1996.
The increase in the cost of revenues was  primarily a result of the  acquisition
of the operating C&D landfill described on Page 4 of this report.

Selling, General and Administrative (SG&A) Expenses

       Selling,  general and administrative  (SG&A) expenses for the fiscal year
ended  December  31,  1997  increased   $960,609  (70.70%)  to  $2,319,328  from
$1,358,719 for the fiscal year ended September 30, 1996. The increase was due to
a variety of factors  including  those related to the  development and potential
use of the Company's primary Atlanta, Georgia property as a solid waste disposal
site (e.g.,  consulting fees,  increased legal fees,  increased personnel costs,
the rental of office space in Atlanta,  increased  travel  expenses,  etc.), the
expenses incurred as a result of the acquisitions  described on Pages 4 and 5 of
this report,  and additional  expenses for FIBER-SEAL related to the development
of a plan to convert from the current licensing method to a franchise operation.

Operating Loss

       Operating  loss for the fiscal year ended  December  31,  1997  increased
$238,510  (26.23%)  to  $1,147,686  from  $909,176  for the  fiscal  year  ended
September 30, 1996.  This was due to an increase in revenues for the fiscal year
ended  December 31, 1997 of $1,461,339 (a 178.43%  increase) to $2,280,317  from
$818,978 for the fiscal year ended  September  30, 1996,  an increase in cost of
revenues  for the fiscal  year ended  December  31,  1997 of $739,240 (a 200.10%
increase) to $1,108,675  from  $369,435 for the fiscal year ended  September 30,
1996, and an increase in selling, general and administrative (SG&A) expenses for
the fiscal year ended  December  31, 1997 of  $960,609  (a 70.70%  increase)  to
$2,319,328 from $1,358,719 for the fiscal year ended September 30, 1996.


                                       17

<PAGE>


Interest Income

       Interest  income of $207,279 for the fiscal year ended  December 31, 1997
increased by $198,333, as compared with the fiscal year ended September 30, 1996
during which period the Company had $8,946 of interest income. Such increase was
due to the  Company's  significantly  increased  holdings of cash and short term
investments  during the fiscal  1997  period as  compared  with the fiscal  1996
period.

Interest Expense

       Interest expense for the fiscal year ended December 31, 1997 increased by
$63,460 to $71,932 from $8,472 for the fiscal year ended September 30, 1996. The
increase was  primarily due to the note payable  issued in  connection  with the
September 1996 acquisition of additional FIBER-SEAL assets.

Net Loss

       The net loss for the  fiscal  year  ended  December  31,  1997  increased
$103,637 (11.4%) to $1,012,339 from $908,702 for the fiscal year ended September
30, 1996.  Such  increase was  primarily due to  significantly  higher  selling,
general and  administrative  expenses  offset to a great extent by earnings from
the  operating  C&D landfill  described  on Page 4 of this report and  increased
interest income.

         Liquidity and Capital Resources

Cash and Short-Term Investments

       Cash and short-term  investments as of December 31, 1997 were $1,701,480,
a decrease of $1,520,106 as compared  with the cash and  short-term  investments
position of $3,221,586 at December 31, 1996.  Such decrease was primarily due to
the  expenditure  of $2,500,000 of cash in the  acquisition of the operating C&D
landfill  described  on  Page 4 of this  report,  and the  $1,012,339  net  loss
experienced by the Company during the fiscal year ended December 31, 1997 offset
primarily by proceeds from the exercise of warrants and  increased  amortization
and depreciation.

Investment in WasteMasters, Inc.

       As of April 14, 1998, the Company owned various restricted,  unregistered
securities of WasteMasters, Inc., a publicly-traded corporation whose registered
common stock is traded on the Nasdaq  SmallCap  Market under the trading  symbol
WAST (see Page 5,  "Transactions  With  WasteMasters,  Inc.").  Such  securities
consist of 4,500,000 shares of restricted  WasteMasters Common Stock,  5,000,000
shares of  WasteMasters  Series A Preferred  Stock (which are convertible at the
Company's option into 25,500,000 shares of restricted WasteMasters Common Stock)
and an option to  exchange  up to  1,000,000  shares of  restricted  Continental
Investment  Corporation  Common Stock for up to 100,000,000 shares of restricted
WasteMasters  Common  Stock  (as  per a  fixed  exchange  ratio  of 1  share  of
Continental  for 100 shares of  WasteMasters).  Such  securities  are  currently
valued on the Company's balance sheet at their cost basis of $6,080,000.

Capital Expenditures

     The Company currently has no material commitments for capital expenditures.
The Company expects to continue to explore  opportunities  to acquire  landfills
and related waste disposal industry assets in the future. 

                                       18

<PAGE>


Capital Resources

       Heretofore,  the primary  source of capital has been provided by the sale
of shares of common stock of the Company in private  sales.  In order to satisfy
the liquidity needs of the Company for the following twelve months,  the Company
will be primarily  dependent upon proceeds from the sale of the Company's stock,
revenues from the operating  construction and demolition  landfill  described on
Page  4 of  this  report  and  revenues  generated  from  the  operation  of its
FIBER-SEAL  fabric care  business.  If the Company is unable to obtain  adequate
funds from the sale of its stock in public offerings,  private  placements,  the
exercise of warrants, or alternative financing arrangements, it may be necessary
to delay the potential permitting and development of its landfill properties and
potential  landfill   properties.   Because  of  potential   political,   legal,
bureaucratic, and other factors, there can be no assurance that the Company will
be able to accomplish  any of its goals within a reasonable  period of time. The
Company has issued  shares of its Common  Stock from time to time in the past to
satisfy certain  obligations,  and expects in the future to also acquire certain
services,  satisfy  indebtedness and/or make acquisitions  utilizing  authorized
shares of stock of the Company.  $2,720,000  of common stock  purchase  warrants
were exercised during the fiscal year ended December 31, 1997.

     As of December 31, 1997, the Company had working  capital of $1,540,507 and
a current ratio of 2.33 to 1.


ITEM 7.  FINANCIAL STATEMENTS.

<TABLE>
<CAPTION>
<S>                                                                             <C>                         <C>

                                           INDEX TO FINANCIAL STATEMENTS
                                                                                                            Page

Report of Independent Certified Public Accountants---------------------------------------------------------  F-1

Consolidated Balance Sheet as of December 31, 1997-----------------------------------------------------------F-2

Consolidated Statements of Operations
   for the fiscal year ended December 31, 1997, the three months
   ended December 31, 1996, and the fiscal year ended  September 30, 1996------------------------------------F-3

Consolidated  Statement  of  Stockholders'  Equity  for the  fiscal  year  ended
   December 31, 1997, the three months
   ended December 31, 1996, and the fiscal year ended September 30, 1996------------------------------------ F-4

Consolidated Statements of Cash Flows
   for the fiscal year ended December 31, 1997, the three months
   ended December 31, 1996, and the fiscal year ended September 30, 1996 ----------------------------------- F-5

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

                                       19

<PAGE>



                                                 



                                                














               Report of Independent Certified Public Accountants



Board of Directors and Stockholders
Continental Investment Corporation

We have  audited the  accompanying  consolidated  balance  sheet of  Continental
Investment  Corporation (a Georgia  corporation) and Subsidiaries as of December
31, 1997, and the related consolidated  statements of operations,  stockholders'
equity and cash flows for the year ended  December  31,  1997,  the three months
ended December 31, 1996, and the year ended September 30, 1996.  These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position of  Continental
Investment  Corporation  and  Subsidiaries  as of  December  31,  1997,  and the
consolidated  results of their operations and their  consolidated cash flows for
the year ended  December 31, 1997, the three months ended December 31, 1996, and
the year ended  September  30,  1996,  in  conformity  with  generally  accepted
accounting principles.





Dallas, Texas
April 6, 1998

                                      F-1


<PAGE>


                                                     
               Continental Investment Corporation and Subsidiaries

                           CONSOLIDATED BALANCE SHEET

                                December 31, 1997

                                     ASSETS
<TABLE>
<CAPTION>
<S>                                                                                                      <C>


CURRENT ASSETS
    Cash                                                                                                 $  217,383
    Note receivable                                                                                       1,484,097
    Receivables - Wastemasters, Inc.                                                                        433,734
    Accounts receivable, net of allowance for doubtful accounts of $17,011                                  268,793
    Inventories                                                                                              59,423
    Accrued interest receivable                                                                              82,628
    Prepaid expenses and other assets                                                                       156,595
                                                                                                           --------

                 Total current assets                                                                     2,702,653

PROPERTY AND EQUIPMENT - AT COST
    Landfill sites under development                                                                     14,682,572
    Active landfill sites, net of accumulated amortization of $307,203                                    2,572,500
    Fixtures and equipment, net of accumulated depreciation of $81,114                                      764,903
                                                                                                           --------
                                                                                                         18,019,975

INVESTMENT IN WASTEMASTERS, INC.                                                                          6,080,000

                 Total assets                                                                           $26,802,628


                                       LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
    Note payable - related party                                                                           $ 98,707
    Accounts payable - trade                                                                                561,090
    Accrued expenses                                                                                        283,317
    Current maturities of long-term debt                                                                    219,032
                                                                                                           --------

                 Total current liabilities                                                                1,162,146

LONG-TERM LIABILITIES
    Long-term debt                                                                                        1,154,542
    Deferred income taxes                                                                                   747,000
                                                                                                          1,901,542

                 Total liabilities                                                                        3,063,688

COMMITMENTS      -

STOCKHOLDERS' EQUITY
    Preferred stock, $1.00 par value; 10,000,000 shares authorized;
       no shares issued or outstanding                                                                           -
    Common stock, $.50 par value; 90,000,000 shares authorized;
       12,367,055 issued and outstanding                                                                  3,309,528
    Additional contributed capital                                                                       24,881,530
    Accumulated deficit                                                                                  (4,452,118)
                                                                                                        -----------

                 Total stockholders' equity                                                              23,738,940

                 Total liabilities and stockholders' equity                                             $26,802,628

</TABLE>

         The accompanying notes are an integral part of this statement.

                                      F-2