U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                                 AMENDMENT NO. 2
                                       to
                                    FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1997

                         Commission File Number 0-17325

                     ENVIRONMENTAL REMEDIATION HOLDING CORP.
                 (Name of small business issuer in its charter)

       COLORADO                                                88-0218499
(State of Incorporation)                                (IRS Employer ID Number)

                         420 Jericho Turnpike, Suite 321
                             Jericho, New York 11753
                     (Address of principal executive office)

Registrant's telephone number, including area code:  (516) 433-4730

Securities  registered  under  12 (b)  of  the  Exchange  act:  none  Securities
registered under Section 12 (g) of the Exchange Act:
                          Common Stock $.0001 par value

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 of 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-K contained  herein,  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-K or any amendment to this
Form10-K [ ]

Issuer's revenue for its most recent Fiscal Year were: $108,944

The  aggregate  market  value of the  12,234,958  shares of voting stock held by
non-affiliates  of  the  Registrant  as of  September  30,1997  was  $36,704,874
(assuming  solely  for the  purpose  of this  calculation  that  all  directors,
officers and greater than 5% stockholders of the Registrant are "affiliated").

The number of shares  outstanding of the  Registrant's  Common Stock , par value
$.0001 per share, as of September 30, 1997 was 22,989,526

                      Documents Incorporated by Reference:
                                      None
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997

                                TABLE OF CONTENTS

                                     PART I
                                                                            Page
Item 1.           Description of Business                                      3

Item 2.           Properties                                                  15

Item 3.           Legal Proceedings                                           15

Item 4.           Submission of Matters to a Vote of Security Holders         16

                                     PART II

Item 5.           Market For The Registrant's Common
                           Stock and Related Security Holders                 17

Item 6.           Selected Financial Data                                     17

Item 7.           Management's Discussion and
                           Analysis of Plan of Operations                     19

Item 8.           Financial Statements and Supplementary Data                F-1

Item 9.           Changes in and Disagreements with Accountants
                           on Accounting and Financial Disclosure             42

                                    PART III

Item 10.          Directors and Executive Officers of The Company             42

Item 11.          Executive Compensation                                      44

Item 12.          Security Ownership of Certain
                           Beneficial Owners and Management                   46

Item 13.          Certain Relationships and Related Transactions              49

                                     PART IV

Item 14.          Exhibits and Financial Statements Schedule                  49
<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         Environmental  Remediation  Holding  Corporation  the  "Company"  is an
independent  oil and gas  company  formed  in 1995 to  focus  on  acquiring  and
servicing  marginally-producing oil and natural gas properties which contain the
potential  for  increased  value  through   workovers  and  secondary   recovery
operations  utilizing the Company's  proprietary  horizontal  drilling tool. The
Company is also focused on providing a full range of  environmental  remediation
and "plug and abandonment" services to the oil and gas industry.  More recently,
the Company has additionally begun to acquire interests in non-producing oil and
gas properties,  particularly  high potential  international  prospects in known
oil-producing  areas.  In May 1997, the Company  entered into an exclusive joint
venture with the Democratic  Republic of Sao Tome & Principe ("Sao Tome"), a set
of islands  located in the Gulf of Guinea off the coast of central  West Africa,
to manage the exploration, exploitation and development of the potential oil and
gas  reserves  on and  offshore  Sao Tome,  either  through  the  venture  or in
collaboration with major international oil exploration companies. The Company is
currently  in the  initial  phase  of  project  development  and  is  conducting
geophysical,  seismic,  environmental and engineering  feasibility  studies. The
Company  believes that this venture  provides it with a significant  foothold in
the  oil-rich  Gulf of  Guinea,  in which  the  venture  is the  largest  single
concession holder in the entire Gulf.

         The  Company  has  entered  into a number  of  recent  transactions  in
connection  with its workover  and recovery  operations.  In October  1997,  the
Company  acquired a 37.5%  interest  in a 49,000  acre  natural gas lease in the
Nueces River area of south Texas,  known as the "Nueces River  Prospect," one of
the largest producing natural gas field areas in the United States. According to
independent reserve reports prepared by David K. Davies and Associates, Inc. and
Gerry Graham of Sandwood Consulting, it is estimated that this area contains 100
billion  cubic feet  ("BCF") of natural  gas per 640 acre  section.  In December
1997,  the Company  re-entered  the first of two existing  shut-in  wells on the
property, and expects to ultimately recover up to 5 BCF per well using 5% of the
estimated inplace  reserves.  The daily production rates from these wells cannot
be determined at this time until the  completion  and  evaluation of the current
well  testing  program in spring  1998.  In  addition,  the Company  acquired in
February  and March  1997 two leases on oil  fields  located in Rusk  County and
Wichita County,  Texas. These oil fields, which together comprise  approximately
1,200 acres and 200 wells,  have proven reserves totaling 2.5 million barrels of
oil as verified by Dr. Joseph Shoaf,  P.E., an independent  reservoir  engineer.
The Company  estimates that, after reworking the wells using various  techniques
including its proprietary  drilling tool,  these wells could produce from 500 to
800 cumulative  barrels of oil per day.  Through  December 29, 1997, the Company
had  recompleted 18 oil wells and is currently  producing and selling "test" oil
from the Wichita County field.

         The Company also holds interests in oil and natural gas leases in Utah.
In July 1997, the Company entered into a joint venture with MIII Corporation,  a
Native  American oil and gas company,  to workover,  recomplete  and operate 335
existing oil and gas wells on the Uintah and Ouray  Reservation in  northeastern
Utah. It is estimated  that the first  approximately  36 wells will be scheduled
for recompletion  and stimulation in early 1998 and, the Company  estimates that
after initial  workover  operations are completed,  these wells could produce in
excess of 3,900 barrels of oil per day. An independent  reserve report  prepared
by Richard  Stephen  Shuster,  P.E.  indicates,  based on a study of 133 of such
wells,  proven and producing  reserves of approximately  5.77 million barrels of
oil and 23.4 BCF of natural gas on these  sites.  In October  1997,  the Company
acquired  net  revenue  interests  ranging  from  80% to 84% (and  100%  working
interest) in oil and gas properties totaling 13,680 acres, located near the MIII
fields,  currently producing approximately 200 barrels of oil per day from eight
producing  wells.  As of  December  29,  1997,  these  are  the  Company's  only
commercially  producing  properties,  which  began  realizing  revenues  for the
Company in November 1997.  Independent reserve reports prepared in 1997 by Ralph
L. Nelms and Gerry Graham of Sandwood  Consulting indicate the gross recoverable
reserves of these  properties total  approximately  2.624 million barrels of oil
and 3.302 BCF of natural gas.

         Another  significant  aspect  of  the  Company's  current  business  is
providing  environmental  remediation services to oil and gas operators.  All of
the  Company's  revenues  during the fiscal year ended  September  30, 1997 were
attributable   to  providing  these   services,   which  include   environmental
engineering, hazardous waste disposal
                                       3
<PAGE>
(including naturally occurring radioactive material),  remediation and disposal,
oil spill, soil  decontamination  and non-hazardous  oilfield waste cleanup,  as
well as "plug and  abandonment"  of oil and gas wells,  all in  accordance  with
strict federal,  state and local environmental  regulations.  In April 1997, the
Company  entered  into a master  service  agreement  with  Chevron  Oil  Company
("Chevron")  to  rework,   in  order  to  draw   additional   production   from,
approximately  400  depleting  oil and gas wells and to remediate  and "plug and
abandon"  these and other  wells  when  depleted,  in  Chevron's  oil  fields in
southern  Louisiana along the Gulf of Mexico. The Chevron agreement provides for
a three-year work schedule,  commencing upon the completion of the Company's 140
foot "plug and  abandonment"  barge.  The Company has designed this  specialized
"plug and abandonment"  barge to remediate  off-shore well locations and it will
be capable of working in coastal  waters as shallow as 19 inches.  In  addition,
through management's  extensive  relationships in the oil and gas industry,  the
Company has obtained a ten-year  concession  with the Panama  Canal  Commission,
through a joint venture with Centram  Marine  Services,  S.A., to supply fuel to
tankers  and  other  commercial  vessels  traversing  the  Panama  Canal.  These
operations are expected to commence in mid-1998,  provided adequate financing is
secured.

         The Company  believes that, at its current stage of development,  it is
more  economical and less  speculative  to rework and recomplete  existing wells
than to drill exploratory wells in search of new oil and gas deposits. Using the
Company's proprietary  fracture-enhancing horizontal drilling tool, known as the
Bass American  Petroleum Company ("BAPCO") Tool, the Company has had,  according
to internal  data, an 80% success  ratio in  increasing  the level of production
from oil and  natural gas wells that are  suitable  for  enhancement  of primary
recovery by use of the BAPCO Tool or  candidates  for  secondary  recovery.  The
Company  believes  that the BAPCO Tool  serves as a  competitive  advantage  for
securing new workover projects from other oil and gas operators,  for attracting
joint  venture  partners in larger  workover  contracts in the United States and
internationally and for use on its own oil and gas properties in Texas and Utah.

         Beginning in the early 1990's,  both secondary recovery of oil reserves
and environmental  remediation of abandoned oil wells have become major items of
interest in the oil and gas industry.  According to current industry statistics,
it is estimated  that only 7.5% to 15% of total oil  reserves  are  recovered in
primary drilling operations due to the significant incremental costs involved in
exploiting  far-reaching  reservoirs  of an  oil  formation.  Following  primary
drilling  operations,  large independent oil companies have typically contracted
some  or all of the  required  "plug  and  abandonment"  work  to  environmental
remediation  firms,  such as the  Company.  By  conducting  enhanced  primary or
secondary  recovery  operations  utilizing  the  BAPCO  Tool  on  the  otherwise
abandoned wells, the Company believes that it is able to effectively  extend the
economic  life of an oil field and increase oil recovery by up to 30%,  prior to
formal abandonment.  The Company, which provides primary and secondary recovery,
"plug and abandonment" and environmental remediation services, believes that, in
the United States alone,  there are hundreds of oil and natural gas fields which
could benefit from these services.

Growth Strategy

         The Company's goal is to maximize its value through  profitable  growth
in its oil and gas  reserves  and  production.  The  Company  has taken steps to
achieve   this   goal   through   its   growth   strategy   of   (i)   acquiring
marginally-producing  oil and gas properties,  at favorable  prices,  with still
significant   resource  recovery  potential  through  workovers   utilizing  the
Company's  proprietary  drilling  technology,  (ii)  managing  the  exploration,
exploitation and development of non-producing  properties in known oil-producing
areas,  such as the Gulf of Guinea in West Africa,  with  industry or government
partners,  and (iii)  continuing  to pursue  environmental  remediation  service
contracts for oil and gas well rework and "plug and abandonment" services in the
United States and internationally.

         Key elements of the Company's growth strategy include:
                                       4
<PAGE>
         Acquire and Exploit Attractive Oil and Gas Properties.  The Company has
an experienced  management and engineering  team that focuses on acquisitions of
marginally-producing  properties which meet its selection criteria including (a)
significant  reserves  with the  potential  for  increasing  production  through
low-risk  workovers,  recompletions,  secondary  recovery  operations  and other
production optimization techniques using its BAPCO Tool, (b) attractive purchase
price and (c)  opportunities  for improved  operating  efficiencies in labor and
other field level costs. This growth strategy has allowed the Company to rapidly
grow its reserves,  and its workover and recovery activities have resulted in an
80% success  ratio for  improved  production  from wells that are  suitable  for
enhanced primary and secondary recovery projects.

         Manage High  Potential  International  Prospects.  The Company seeks to
manage the  overall  exploration  activities  for high  potential  international
prospects in known oil-producing areas. By managing these projects,  the Company
seeks to share the risks  inherent in  exploratory  drilling  with  industry and
government partners. The Company's  international  exploration activities target
significant  long-term reserve growth and value creation,  such as the Company's
joint  venture  with  Sao  Tome.  The  Company  also  plans to  pursue  offshore
transportation   and  logistic   support   services  in   connection   with  its
international prospects.

         Pursue  Additional  Environmental  Remediation  Contracts.  The Company
aggressively  pursues  new  environmental  remediation  contracts  in the United
States and abroad,  directly and through joint ventures. The Company believes it
possesses  competitive  advantages  including the  availability and condition of
equipment to meet both special and general  customer needs,  the availability of
trained and licensed personnel with the required specialized skills, the overall
quality of its  service  and safety  record and the  ability to offer  ancillary
services,  such as "plug and abandonment" services. The Company has specifically
targeted major oil companies with properties located in the Gulf of Mexico which
require "plug and abandonment" services for old and depleted fields.

Summary of Properties

         A summary of the Company's oil and gas properties is as follows:
<TABLE>
<S>           <C>                 <C>        <C>              <C>             <C>
                                                              Anticipated
                                                              Investment
                 Nature of                                       to Make        Anticipated
Property      Interest Acquired     Date          Cost         Operational    Operational Date


Sao Tome      Joint Venture to    May 1997     $5,000,000     $1,500,000 (1)    Undetermined
                 drill and                   concession fee,                    at this time.
               develop fields                $2,000,000  of                     The Company
                                             which has been                    believes that it
                                              paid by the                      will be in a
                                               Company                          position to
                                                                                auction off
                                                                               leases by the
                                                                                end of 1998.

Nueces River   37.5% interest     Oct 1997   $200,000 and          (2)            To be
Prospect,     in a 49,000 acre              50,000 shares of                    determined
Texas         natural gas lease               Common Stock                         upon
                                                                               completion and
                                                                                evaluation of
                                                                               the current well
                                                                               testing program
                                       5
<PAGE>
Rusk and        Two leases in      Feb and    500,000 shares    Currently        18 wells
Wichita County   oil fields       March 1997     of ERHC       operational (3)   currently
Fields, Texas                                  Common Stock                     operational

Uintah and     Joint Venture       July 1997   $55,000 and       Minimum of      Fall 1998
Ouray            with MIII                     contemplated    $1,000,000 to
Reservation,   Corporation to                  issuance of       $1,500,000
Utah            develop and                   250,000 shares
                operate 335                     of Common
                  wells                       Stock to MIII

Unita          Net Revenue         Oct 1997    $250,000 and      Currently        4 wells
Project,        Interests                       1,000,000       operational (4)  currently
Utah           ranging from                    shares of the                    operational
                80% to 84%                       Company's
                (and 100%                       Common Stock
                 working
               interest) in
               oil and gas
              properties of
               about 13,680
              acres, with 24
              wells (22 oil,
              gas and mineral
                 leases)
</TABLE>
(1) The  Company  has spent  (i)  $2,500,000  for data  that had been  purchased
through  cash  and  stock as of  March  1996,  and  (ii)  $250,000  in  expenses
preparatory to drilling.  The Company  anticipates  spending $1,000,000 over the
next 12 months for additional studies needed to determine the location and depth
of the targeted oil deposits.  The costs of further  development of this project
cannot be determined until a more definite development plan is established.  The
costs depend on the Company's  determination to either independently develop the
concession,  take on  operational  partners or lease a portion of the concession
for third-party development.

(2) The Company has already spent  $200,000  reworking the first of two existing
shut-in wells on the property. In 1998, the Company plans to spend approximately
$650,000 to $1,200,000 to bring both wells on line.  The Company is  responsible
for only half the  drilling  cost of each well,  as it shares this cost with its
operational  co-venturer,  Autry Stephens & Co. Providing  financing is secured,
the Company also would like to drill 15 to 20 new wells at this site in 1998.

(3) Providing  financing is secured,  the Company  plans to spend  $1,200,000 to
bring production up to a commercial level.

(4) The Company plans to spend approximately  $1,000,000 on additional equipment
and up to $80,000 per well on well  stimulation  in order to bring 18 more wells
on line in 1998.  Providing additional financing of $5,000,000 to $10,000,000 is
secured,  the Company  would like to  implement  a  recompilation  and  drilling
program.

Managing Exploratory Activities

         The Company is  currently  managing  or in the  process of  negotiating
several  international  exploratory  projects  which,  if  successful,  have the
potential to increase the growth of the Company.  The Company  believes that its
existing  project  in Sao  Tome  has the  potential  to  significantly  increase
reserves.
                                       6
<PAGE>
         Sao Tome

         In May 1997, the Company  entered into an exclusive  joint venture with
Sao  Tome,  a  member  of  the  United  Nations,   to  manage  the  exploration,
exploitation and development of the country's  potential oil and gas reserves in
the Gulf of  Guinea.  Sao  Tome is  comprised  of two  principal  islands  which
straddle the equator in the prolific  petroleum  producing region of the Gulf of
Guinea.  The Sao Tome  islands  are  located  approximately  200  miles  west of
mainland Gabon, and southwest of Equatorial Guinea and Cameroon, and are located
directly on a well-known geologic feature known as the "Cameroon Volcanic Line."

         The  exclusive  25-year  joint  venture  agreement   provides  for  the
establishment  of a national oil and gas company owned jointly by Sao Tome,  the
Company and, as a junior partner,  Procura Financial Consultants,  c.c., a South
African corporation ("Procura").  Under the agreement, the venture has the first
right to select the oil and gas concessions it desires to explore and develop in
an area encompassing approximately 64,550 square miles in the Gulf of Guinea. On
behalf of Sao Tome, the Company has agreed to negotiate with major international
oil and gas companies to grant leases to oil and gas concessions not selected by
the joint venture.  The Company is entitled to receive an overriding  royalty on
the production from those  concessions.  Pursuant to the terms of the agreement,
Sao Tome has the right to terminate the agreement in the event the Company fails
to make the remaining  concession fee payment of $3 million at the time Sao Tome
determines,  and the United Nations accepts and approves, the 200 mile exclusive
economic  zone  boundaries  (expected  to be by March  1998) or fails to  timely
commence  the orderly  development  of the  national  oil and gas joint  venture
company. The Company is currently exploring funding sources for this payment. In
November 1997, the Company made an initial $2 million  payment in respect of the
concession  fee from the proceeds of its 1997 private  placement.  (See Part II,
Item 5.  "Market for  Registrant's  Common  Stock and Related  Security  Holders
Matters" - (b) Recent Sales of Unregistered Securities.")

         The Company is  currently in the initial  phase of project  development
and  is  conducting  seismic  surveys,  processing  existing  seismic  data  and
environmental  and  engineering  feasibility  studies.  The  Company has already
provided to Sao Tome initial feasibility studies including seismic  interaction,
sedimentology biostatgraph,  geochemistry and petrographics and diagnostics. The
Company  expects to expend at least $2.3  million in the  initial  phase of this
project.  Following further studies,  the Company  anticipates  coordinating the
drilling of a "test" well in late 1998. The costs  associated  with drilling and
testing  such a well  cannot  be  determined  until the  seismic  data have been
processed and evaluated in mid to late 1998.

         In September  1997,  the Company  expanded its joint venture  agreement
with Sao Tome. Under the modified agreement, the venture was granted development
rights for an  offshore  logistics  center.  The  projects  contemplated  by the
venture include a helicopter refueling station, seaport with dry dock facilities
and temporary  accommodation  facilities for employees and their  families.  The
Company believes that an offshore logistics base is essential to the development
of West  Africa's  oil and gas  industry.  The  Company has not  determined  the
funding levels required for these projects at this time.

         The Company  believes that this venture  provides it with a significant
foothold in the potentially oil-rich Gulf of Guinea, in which the venture is the
largest single  concession holder in the entire Gulf. The offshore oil potential
of Sao Tome has been studied by numerous oil  companies,  including  Mobil Corp.
and Elf  Aquitaine,  since at  least  the late  1970s.  Over the next 20  years,
industry  experts say, Western oil companies will invest between $40 billion and
$60 billion in the Gulf of Guinea alone.

Workover and Recovery Activities

         The    Company     concentrates    its    acquisition     efforts    on
marginally-producing  properties  which  demonstrate a potential for significant
additional development through workovers,  behind-pipe recompletions,  secondary
recovery  operations  utilizing the Company's BAPCO Tool and other  exploitation
techniques.  The Company has pursued a workover and recompletion  program on the
properties  it has acquired  and intends to commence an  extensive  workover and
recompletion program in the future.

     "Workovers"  refer to the  major  repairs  and  modifications  occasionally
required by producing oil and natural gas
                                       7
<PAGE>
wells. Workovers may be done, for example, to remedy equipment failures,  deepen
a well in order to complete a new producing reservoir, plug back the bottom of a
well to reduce the amount of water being  produced with the oil and natural gas,
clean out and  recomplete a well if production  has declined,  repair leaks,  or
convert a producing well to an injection well for secondary or enhanced recovery
projects.  These extensive  workover  operations are normally carried out with a
well-servicing   type  rig  that  includes  additional   specialized   accessory
equipment, which may include rotary drilling equipment, mud pumps, mud tanks and
blowout  preventers,  depending upon the particular type of workover  operation.
The  Company's  two  workover  rigs are designed and equipped to handle the more
complex  workover  operations.  A workover may last  anywhere from a few days to
several weeks.

         The kinds of activities necessary to carry out a workover operation are
essentially  the same as those that are required to "complete" a well when it is
first drilled.  The "recompletion"  process may involve selectively  perforating
the well  casing at the  depth of  discrete  producing  zones,  stimulating  and
testing these zones and installing down-hole equipment.  Independent oil and gas
production  companies  often  find it more  efficient  to move a larger and more
expensive  drilling rig off  location  after an oil or natural gas well has been
drilled and to move in a specialized  well-servicing rig to perform recompletion
operations.  The Company plans to acquire a well-servicing rig for this purpose.
The recompletion process may require from a few days to several weeks.

         The Company's  staff focuses on maximizing  the value of the properties
within its reserve base. The results of their efforts are reflected in additions
and revisions to reserves.

         For the  fiscal  year  ended  September  30  1997,  the  Company  spent
approximately $53,000 on workover and recompletion operations, involving 9 wells
in Texas. The Company  anticipates  spending in excess of $1,825,000 on workover
and  recompletion  operations  during  fiscal  1998,  although  there  can be no
assurance it will have funding to do so.

         In connection with this focus, the Company  actively pursues  operating
cost  reductions on the  properties it acquires.  The Company  believes that its
cost structure and operating  practices  generally result in improved  operating
economies.

         The following is a brief discussion of significant  developments in the
Company's recent workover and recompletion activities:

         Nueces River Natural Gas Prospect

     The Company  has a 37.5%  working  interest  in a 49,000  acre  natural gas
lease,  known as the  "Nueces  River  Prospect,"  in the  Nueces  River  area of
McMullen  and LaSalle  counties in south Texas,  one of the largest  natural gas
field areas in the United States. A 1997 independent  reserve report prepared by
Gerry Graham of Sandwood  Consultants of  Nacogdoches,  Texas estimated that the
field  contains 100 BCF of natural gas per 640 acre section.  In December  1997,
the Company  re-entered the first of two existing shut-in wells on the property,
and expects to ultimately recover up to 5 BCF per well using 5% of the estimated
inplace  reserves.  The  daily  production  rates  from  these  wells  cannot be
determined at this time until the  completion and evaluation of the current well
testing   program   which  should  be   completed  in  spring  1998.   Following
revitalization,  the Company  estimates that such wells have the  possibility of
producing  in excess of 500 MCF  (million  cubic feet) of natural gas per day. A
20-inch diameter  Transcontinental  Gas Pipeline is located  approximately three
miles from the wells to provide  access to a gas  market.  The  Company  jointly
operates the field with Autry  Stephens & Co., a large  independent  operator in
west and south Texas.  The Company  acquired its interest in the Nueces River in
October 1997 in consideration  for $200,000 and the issuance of 50,000 shares of
Common Stock.

         In 1998,  the  Company  plans on  spending  approximately  $650,000  to
$1,200,000 to bring both wells on line.
                                       8
<PAGE>
Providing  financing  is secured,  the Company  also hopes to drill 15 to 20 new
wells at this site. The Company is responsible  for half of the drilling cost of
each  well,  as it  shares  this cost with its  operational  co-venturer,  Autry
Stephens & Co. The  anticipated  operational  dates of these wells depend on the
amount of funds raised by the Company in 1998.

         Rusk and Wichita County Oil Fields

         The Company holds directly two leases on producing oil fields in Texas,
known as the Gunsite Formation in Wichita County,  north Texas, and the Woodbine
Formation in Rusk County, east Texas. These oil fields together
 comprise  approximately  1,200 acres and 200 wells. A 1997 independent  reserve
report  prepared by Dr.  Joseph  Shoaf,  P.E.  estimated  that  proven  reserves
("behind pipe") total 2.5 million barrels of oil. Through December 29, 1997, the
Company had  recompleted 18 wells and is currently  producing and selling "test"
oil from the  Wichita  County  field.  The Company has located its BAPCO Tool on
site and  expects  to use such  tool  beginning  in  spring  1998.  The  Company
anticipates  spending $1,200,000 in order to bring production on the field up to
a commercial  level.  After  reworking the fields using the BAPCO Tool and other
drilling  techniques,  the Company  believes that these wells could produce from
500 to 800 barrels of oil per day.

         The Company acquired the Rusk and Wichita County oil fields in February
and March 1997, respectively,  in consideration for a total of 500,000 shares of
Common Stock, valued at a total of $14,335,646.

         MIII Project in Utah

         In July  1997,  the  Company  entered  into a joint  venture  with MIII
Corporation  ("MIII"),  a  Native  American  oil and gas  company  based in Fort
Duchesne,  Utah.  Under the  agreement,  the  Company  has  agreed to  workover,
recomplete  and  operate  335 oil and gas wells  located on the  4,000,000  acre
Uintah and Ouray  Reservation  in  northeastern  Utah. It is estimated  that the
first   approximately   36  wells  will  be  scheduled  for   recompletion   and
restimulation  by fall  1998  provided  that the  Company  raises  the  required
funding. After initial workover operations are completed,  the Company estimates
that  these  wells  could  produce  in excess of 3,900  barrels  of oil per day.
Independent reserve report dated 1993 prepared by Richard Stephen Shuster,  P.E.
indicates,  based on a study of 133 of such wells, proven and producing reserves
of approximately 5.77 million barrels of oil and 23.4 BCF of natural gas at this
site. The Company's production estimates at this site are based predominately on
the multiple  sandstone  reservoirs of the Wasatch,  a transition zone and Green
River Formations that can occur at depths of 5,000 to 16,000 feet.

         Under the terms of the joint venture agreement,  once the production of
natural  gas reaches  5,000 MCF,  MIII has agreed to  construct a gas  gathering
plant on such site,  with the Company  retaining a 25% interest in the plant. As
of this date,  there can be no assurance as to when, if ever, such plant will be
constructed.

         The Company has a 37.762% working  interest in the wells located on the
MIII  property,  and is entitled to receive a $2.50 per barrel  operator  fee on
production  in the  fields.  The  Company  also  has the  right  to  receive  an
additional  5%  working   interest  in  the  wells  after   start-up   costs  of
approximately  $1.5 million are repaid to certain  original MIII  investors from
overall  production.  The remaining  working  interests in the MIII property are
held by MIII,  the Ute Tribe and the  allotted  members  of the Ute  Tribe.  The
Company paid $55,000 and contemplates  issuing 250,000 shares of Common Stock to
MIII in connection with entering into this venture.  In 1998, the Company plans,
to recomplete and  restimulate  36 wells and to drill five to seven  development
and extension wells at this site provided adequate financing is secured.

         Unita Project

         In October 1997,  the Company  acquired net revenue  interests  ranging
from 80% to 84% (and 100% working  interest) in oil and gas properties  totaling
13,680  acres  located  near the MIII  fields in the Unita Basin with 24 oil and
natural gas wells, currently producing  approximately 200 barrels of oil per day
from four producing wells. As of
                                       9
<PAGE>
December 29, 1997, this is the Company's only commercially  producing  property,
which began  realizing  revenue for the  Company in November  1997.  Independent
reserve  reports  prepared in 1997 by Ralph L. Nelms and Gerry  Graham  indicate
that gross recoverable  reserves of these properties total  approximately  2.624
million barrels of oil and 3.302 BCF of natural gas. Wells in this field produce
primarily from multiple sandstone  reservoirs of the lower Green River Formation
at depths roughly from 5,500 to 16,000 feet. The remaining net revenue interests
in these properties are held by the Ute Tribe.

    The  Company  plans  on  spending  approximately  $1,000,000  on  additional
equipment  and up to $80,000 per well on well  stimulation  in order to bring 18
more  wells on line.  Provided  additional  financing  of  about  $5,000,000  to
$10,000,000  is secured,  the Company plans  extensive work in this field during
1998,  including  a 20 well  program  to  develop  infill  and  field  extension
locations,  a 40-acre pilot waterflood project and the workover and recompletion
of the 22 existing  wells to test the viability of more shallow  formations  for
potential future development.

Reserves

         The  following  table  sets forth  estimates  of the proved oil and gas
reserves of the Company as of September 30, 1997:
                                                                        Oil
                                                                     Equivalent
                       OIL                       GAS                (millions of
              (millions of barrels)     (billions of cubic feet)       Barrels)

Field       Develop-  Undevel-  Total   Develop-  Undevel-  Total       Total
              ed        oped              ed        oped
Nueces        -          -        -       -          -        -           -
River
Prospect,
Texas

Rusk Co.     1.5         -       1.5      -          -        -          1.5
Field,
Texas

Wichita      1.0         -       1.0      -          -        -          1.0
County 
Field,
Texas

Uintah,       0          0        0       0          0        0           0
Ouray
Reserva-
tion, Utah

Unita         0          0        0       0          0        0           0
Project,
Utah

Total        2.5         0       2.5      0          0        0          2.5

     Estimates of the  Company's  proved  reserves set forth above have not been
filed with, or included in reports to any
                                       10
<PAGE>
Federal authority or agency, other than the Securities and Exchange Commission.

     The Company's  non-producing  proved reserves are largely  "behind-pipe" in
fields which it operates.  Undeveloped proved reserves are predominantly  infill
drilling locations and secondary recovery projects.

     The  reserve  data set forth in this Form 10-K  represent  only  estimates.
Reserve   engineering  is  a  subjective   process  of  estimating   underground
accumulations  of oil and gas that cannot be measured  in an exact  manner.  The
accuracy of any reserve  estimate is a function of the quality of available data
and of engineering  and  geological  interpretation  and judgment.  As a result,
estimates of different  engineers often vary. In addition,  results of drilling,
testing  and  production  subsequent  to the  date of an  estimate  may  justify
revision of such estimate. Accordingly,  reserve estimates often differ from the
quantities  of  oil  and  natural  gas  that  are  ultimately   recovered.   The
meaningfulness  of such  estimates is highly  dependent upon the accuracy of the
assumptions upon which they were based.

     For  further  information  on  reserves,  costs  relating  to oil  and  gas
activities  and results of operations  from  producing  activities.  See Item 7.
"Management's Discussion and Analysis of Plan of Operations."

BAPCO Tool

     The Company's BAPCO Tool, which is used in most of its workover operations,
has two main  functions:  to  provide  a means of  mechanically  cutting  a hole
through the casing and  extending a flexible  tubular  pipe  outward at least 50
feet from the bore hole.  The system is made up of a skid  mounted  surface unit
with a command  module,  filter  system  and  pumping  package,  and a down hole
assembly.  The command module,  which is approximately 10 feet long, 6 feet wide
and 8 feet high, is  air-conditioned,  contains all the  necessary  controls and
data recording equipment and has a special tool storage area. The down hole tool
assembly  is composed  of a filter and filter  body that  removes  the  unwanted
material  and prevents the  material  from  entering the control  section of the
tool. There are no limitations regarding casing thickness and cement sheath when
utilizing the BAPCO Tool.

     According  to internal  data,  the Company has had an 80% success  ratio in
increasing  the level of  production  from oil and  natural  gas wells  that are
suitable for secondary recovery. The Company believes that the BAPCO Tool serves
as a competitive advantage for securing new workover projects from other oil and
gas operators, for attracting joint venture partners in large workover contracts
in the  United  States  and  internationally  and for use on its own oil and gas
properties in Texas and Utah.

     The BAPCO Tool was  acquired  by the Company in  connection  with the stock
acquisition of BAPCO in April 1997. The Company has  constructed two BAPCO Tools
to date and is  currently  in the  process of  constructing  a third  tool.  The
Company plans to construct three additional tools in 1998,  provided it receives
adequate  financing  in the  future.  The BAPCO Tool has been tested on multiple
wells in a variety of formations  during the past 18 months.  The BAPCO Tool has
been  continuously  updated and modified  since the tool was first  designed and
developed  in the early  1990s by Sam L.  Bass,  Jr.,  the  Company's  Chairman,
President and Chief Executive Officer.

Environmental Remediation Services

     The Company provides  environmental  remediation services, to other oil and
gas operators. These services, which the Company is licensed to provide, include
environmental  engineering,  hazardous  material disposal  (including  naturally
occurring radioactive material),  remediation and disposal, and oil spills, soil
decontamination  and  non-hazardous   oilfield  waste  cleanup  related  to  the
production of oil and natural gas, all in accordance with strict federal,  state
and  local  environmental  regulation.  The  Company  also  provides  "plug  and
abandonment"  services  for wells from which the oil and  natural  gas have been
depleted and further production has become uneconomical.
                                       11
<PAGE>
     The  Company's  soil  decontamination  systems  are  capable of  handling a
variety of different contamination problems. The Company utilizes standard Class
1-4  decontamination  machines.  The Class I machine  is used to  process  soils
contaminated  with  gasoline  and  diesel  and which  require  little or no soil
conditioning.  The Class II machine offers increased  temperatures to treat soil
with  contaminants up to No. 6 fuel oil,  lubricating  oils, heavy oil residuals
and crude oils.  The Class III  machines are an upgrade to the Class II machines
and accommodate slightly higher temperatures and add acid gas neutralization for
handling  chlorinated  compounds.  The Class IV  machines  are  hazardous  waste
incinerators.

     The Company's  staff is certified in the use of many types of products used
in tank and pit cleaning services and emergency response spill and clean-up. The
Company uses a "sludge-buster"  robotic water cannon to expedite the cleaning of
tanks.  The  Company's  staff is also  experienced  in the use of a  closed-loop
system for pit cleaning.  The closed-loop  system separates solids from liquids,
chemically treats the liquids and solids in accordance with local  environmental
standards.  The Company can deliver  emergency crews trained in chemical and oil
spill containment and clean-up throughout many parts of the world.

     In April 1997,  the Company  entered into a master  service  agreement with
Chevron  Oil  Company  ("Chevron")  to  rework,  in  order  to  draw  additional
production from,  approximately 400 depleting oil and gas wells and to remediate
and "plug and abandon"  these and other wells when  depleted,  in Chevron's  oil
fields in southern  Louisiana  along the Gulf of Mexico.  The Chevron  agreement
provides for a three-year  work schedule,  commencing upon the completion of the
Company's  140 foot  "plug and  abandonment"  barge.  This barge will be used to
remediate  offshore  oil rigs and be capable  of  working  in coastal  waters as
shallow as 19 inches. A deposit of  approximately  $131,000 has been made by the
Company to secure the barge and  additional  funding is being sought to purchase
and equip the barge.  It is estimated that the Company's  barge will be ready to
operate 60 days  following  funding.  The Company has not  determined as of this
date how much funding will be necessary for this project.  The Chevron agreement
was originally entered into by BAPCO and Bass Environmental  Services Worldwide,
Inc. ("BEW") in September 1996, prior to the acquisition of BAPCO by the Company
in April 1997,  and was  assigned to the Company with  Chevron's  consent at the
time of the  acquisition.  The Company  issued  3,000,000  shares of it's common
stock to BEW in connection with the assignment of this agreement.

     The Company's "plug and  abandonment"  services  involve  shutting down and
discontinuing the use of old, unsafe or marginally-producing  oil or natural gas
wells.  There  are  many  ecological  ramifications  if oil  and gas  wells  are
abandoned without following  federal  Environmental  Protection Agency and state
Department of Environmental Quality mandated guidelines. These ramifications are
caused due to aging equipment and pipe ceilings which can lead to
 "blow
outs," oil and gas seepage into the water and ground water contamination. If not
"plugged," these problems can lead to major environmental problems and expensive
pollution cleanup for the well owners or operators.  "Plug and abandonment" also
involves  delivery  of test  results  indicating  that  well  closure  has  been
completed  in  compliance  with  applicable  regulations.  This  information  is
important to the customer because the operation is subject to future  regulatory
review and audits.  In addition,  the  information  may be required on a current
basis if the operator is subject to a pending regulatory compliance order.

         The  Company's  environmental   remediation  customers  are  major  and
medium-sized  independent  oil  and gas  exploration  and  production  companies
operating in the Gulf Coast areas of Louisiana and Texas. During the fiscal year
ended  September  30, 1997,  approximately  60% of the  Company's  revenues were
derived from three major oil companies,  including Chevron. Given current market
conditions and the nature of the services involved,  management does not believe
that the loss of any single customer would have a material adverse effect on the
Company.  Environmental remediation services are typically performed under short
term time and materials  contracts,  which are obtained by direct negotiation or
bid. As most of the Company's  contracts with its customers are cancelable  upon
limited notice, the Company's backlog is not significant at this time.

         To further penetrate the environmental  remediation  services market in
Louisiana,  the Company has been  negotiating for the purchase of  approximately
70% equity interest in Ven Virotek, Inc., a Louisiana corporation
                                       12
<PAGE>
("Virotek").  These  negotiations  are with  Virotek's  only other  shareholder,
Recycling  Remedies,  Inc. Virotek owns and operates a NORM solid waste disposal
site  in  Houma,  Louisiana  and  holds  permits  from  Louisiana  environmental
authorities  to  dispose  of salt  water  brine and  naturally  occurring  waste
products.  Virotek projects,  for the year ending December 31, 1997,  revenue of
$658,000,  net income of $332,000 and total assets of  $1,035,000.  As currently
negotiated,   the  Company   plans  to  acquire  the   interest  in  Virotek  in
consideration  of  $15,000  in cash and  assumption  of a  $300,000  bank  note.
Providing  funds are secured,  the Company  plans on  acquiring  the interest in
Virotek on February 1998.

Offshore Logistics Services

         Panama Refueling Concession

         In December  1996, the Company  entered into a joint venture  agreement
with Centram Marine Services,  S.A. which was amended in March 1997, pursuant to
which the venture obtained a ten-year concession agreement with the Panama Canal
Commission. The concession grants the joint venture the right to supply fuel and
other petroleum  supplies to tankers and other commercial vessels traversing the
Panama Canal.  Historically,  approximately  45 such vessels traverse the Panama
Canal daily.

         Pursuant to the terms of the joint  venture  agreement,  the Company is
entitled to receive  66.667% of all net  profits of the venture in exchange  for
the  provisions of a tug boat and a 30,000 barrel fuel barge.  The joint venture
is currently in  negotiations to purchase a 1.5 million gallon fuel barge and an
85 foot flat deck tugboat. These operations are expected to commence by mid-1998
provided  adequate  financing is secured.  In connection with entering into such
agreement with the Panama Canal  Commission,  the venture  received a commitment
from Texaco Inc. to provide the venture with the  necessary  fuel to comply with
the  requirements of the concession.  The Company  anticipates  that the venture
would be able to provide a minimum of 500,000 gallons of fuel a day at the start
of the program and increasing to 1,000,000  gallons by the end of the first year
of operation.  Based on a market up of $0.04 per gallon, the Company anticipates
gross sales on 500,000  gallons to be in the range of $250,000 per day resulting
in a gross  profit  of  $20,000  per  day.  There  is no  assurance  that  these
anticipated profits will be attained..

Marketing

     During the fiscal year ended  September 30, 1997,  the Company did not have
any sales of oil or gas.  Commencing October 1997, the Company recorded sales of
crude oil from the Unita  properties  and, in November  1997  recorded  sales of
"test" oil from the  Wichita  County  field in north  Texas.  All such sales are
expected  initially  to be made on the spot market.  In the future,  the Company
intends  to sell its crude  oil and  natural  gas,  and  associated  oil and gas
products,
 on both the spot market and under market-sensitive agreements with a variety of
prospective purchasers.

Raw Materials

         The Company  believes  that its source of supply for any  materials  or
equipment  used in the  business  are  adequate for its needs and that it is not
dependent  upon any one  supplier.  No  serious  shortages  or delays  have been
encountered in obtaining any raw materials.

Governmental Regulation

         Oil and natural gas operations are subject to extensive federal,  state
and  local  laws  and  regulations  relating  to the  exploration  for,  and the
development,  production and  transportation of, oil and natural gas, as well as
safety  matters,  which may be changed from time to time in response to economic
or political  conditions.  Matters  subject to regulation by federal,  state and
local  authorities  include permits for drilling  operations,  road and pipeline
construction, reports concerning operations, the space of wells, unitization and
pooling of properties,  taxation and  alterations  to the Company's  development
plans could have a material  adverse  effect on  operations.  From time to time,
regulatory agencies have imposed price controls and limitations on production by
restricting the rate of flow of oil and natural gas wells below
                                       13
<PAGE>
actual production capacity in order to conserve supplies of oil and natural gas.
Although the Company  believes  that it is in  substantial  compliance  with all
applicable  laws and  regulations,  the  requirements  imposed  by such laws and
regulations  are  frequently  changed  and  subject to  interpretation,  and the
Company cannot predict the ultimate cost of compliance  with these  requirements
or their  effect on  operations.  Significant  expenditures  may be  required to
comply with governmental laws and regulations.

Environmental Regulation and Claims

         The Company's workover and recompletion  services operations  routinely
involve the handling of significant  amounts of waste  materials,  some of which
are classified as hazardous substances.  The Company's operations and facilities
are  subject  to  numerous  state  and  federal  environmental  laws,  rules and
regulations,  including, without limitation, laws concerning the containment and
disposal of hazardous materials,  oilfield waste and other waste materials,  the
use of underground storage tanks and the use of underground injection wells. The
Company employs personnel  responsible for monitoring  environmental  compliance
and  arranging  for remedial  actions that may be required from time to time and
also  uses  outside   experts  to  advise  on  and  assist  with  the  Company's
environmental  compliance efforts.  Costs incurred by the Company to investigate
and remediate contaminated sites are expensed unless the remediation extends the
useful lives of the assets employed at the site.  Remediation  costs that extend
the useful lives of the assets are  capitalized and amortized over the remaining
useful  lives  of such  assets.  Liabilities  are  recorded  when  the  need for
environmental  assessments and/or remedial efforts becomes known or probable and
the cost can be reasonably estimated.

         Laws  protecting the environment  have generally  become more stringent
that in the past and are expected to continue to do so.  Environmental  laws and
regulations  typically  impose  "strict  liability"  which  means  that  in some
situations  the Company  could be exposed to liability  for  clean-up  costs and
other  damages as a result of conduct of the Company that was lawful at the time
it occurred or conduct of, or conditions  caused by, others.  Clean-up costs and
other damages arising as a result of  environmental  laws, and costs  associated
with changes in environmental laws and regulations could be substantial.

         Under  the  Comprehensive  Environmental  Response,   Compensation  and
Liability  Act,  also  known  as   "Superfund,"   and  related  state  laws  and
regulations, liability can be imposed without regard to fault or the legality of
the  original  conduct on certain  classes of persons  that  contributed  to the
release of a "hazardous substance" into the environment.  Changes to federal and
state  environmental  regulations may also negatively impact oil and natural gas
exploration  and  production  companies,  which in turn  could  have a  material
adverse effect on the Company.  For example,  legislation has been proposed from
time to time in Congress  which would  reclassify oil and natural gas production
wastes as "hazardous  wastes." If enacted,  such legislation could  dramatically
increase  operating  costs for domestic oil and natural gas  companies  and this
could  reduce the market for the  Company's  services by making may wells and/or
oilfield  uneconomical  to  operate.  To  date,  such  legislation  has not made
significant progress toward enactment.

Patents and Trademarks

     The Company owns or has exclusive rights to several U.S. patents on designs
for various types of oilfield  equipment and on methods for  conducting  certain
oilfield  activities,  including  discrete  parts of the BAPCO Tool. The Company
uses some of these  designs  and methods to conduct  its  business.  The patents
expire at various times over the next five to fifty years.  The Company also has
several  trademarks  and  service  marks that it uses in various  aspects of its
business.  While  management  believes the Company's patent and trademark rights
are valuable,  the  expiration  or loss  thereof,  other than parts of the BAPCO
Tool,  would  not have a  material  adverse  effect on the  Company's  financial
condition or results of operations.

Competitive Conditions

     Although the number of available  rigs has  materially  decreased  over the
past ten years, the workover and drilling
                                       14
<PAGE>
industry  remains  very  competitive.  The  number of rigs  continues  to exceed
demand,  resulting  in severe  price  competition.  Many of the total  available
contracts  are  currently  awarded  on a  bid  basis,  which  further  increases
competition  based on price. In all of the Company's  market areas,  competitive
factors also include:  the  availability and condition of equipment to meet both
special  and general  customer  needs;  the  availability  of trained  personnel
possessing the required  specialized  skills; the overall quality of service and
safety record; and domestically, the ability to offer ancillary services such as
"plug and abandonment"  services. As an enhancement to its competitive position,
the  Company  has  been  able  to  establish  joint  ventures  in  domestic  and
international markets.

         The  environmental  remediation  market  is  extremely  fragmented  and
composed of hundreds of small firms with one or only few regional offices.

         Currently,  there are a great  number of new and  successful  secondary
recovery programs.  Many of these methods are allowing for a much higher rate of
recovery than shown by the Company. The technique that the Company has chosen to
utilize,  by means of the BAPCO tool,  is that of the lateral  drilling  system.
[This technique, which calls for drilling a 50' long, 2 inch diameter horizontal
drain  hole into the  formation  is  ideally  suited  for both the  Gunsite  and
Woodbine  formations  in  Wichita  and Rusk  Counties  in  Texas,  as they are a
"fractured" type horizon,  and the oil is being drained from existing  fractures
in the  formation.  The  drilling of  horizontal  drainage  holes is expected to
encounter  many  new  fracture  systems  within  the  formation,   resulting  in
significant oil production  increases from each well.  Based on data supplied by
the Schellstede  Company,  production increases from 8 to 10 barrels per day are
common in similar  types of shallow  wells  laterally  drilled using the lateral
drilling system.  The Company believes that if this tool is applied to the wells
in both the Rusk and Wichita  Counties,  production  will be increased to 500 to
800 barrels per day.

Employees

         As of  December  29,  1997,  the Company  had 25  full-time  employees,
including three petroleum engineers and two geologists. None of its employees is
represented  by a  collective  bargaining  unit.  Management  believes  that the
Company's relationship with its employees is excellent.

ITEM 2.           PROPERTIES

         The Company's principal  executive offices are located in Jericho,  New
York in  approximately  1,200 square feet of leased  office  space.  The Company
currently pays $1,200 per month in rent under its lease,  which extends  through
February  1998. The Company also leases  approximately  7,000 square feet of its
main  operational  facility in  Lafayette,  Louisiana  and pays $4,000 per month
under  a lease  extending  through  October  2002.  The  Company  believes  that
additional office and operational space will be required to accommodate  planned
expansion.

ITEM 3.           LEGAL PROCEEDINGS

     Piedra  Drilling  Company,  Inc.  ("PDC")  commenced an action  against the
Company in District  Court,  Denver  Colorado in July,  1997.  PDC brought  this
action to enforce a contract for the issuance of 450,000 shares of the Company's
Common  Stock in  consideration  for the sale by PDC to the  Company  of certain
drilling equipment and designs. The Company did not issue the shares because the
necessary  equipment and designs were not delivered and/or validity  assigned to
the  Company.  PDC obtained a default  judgement in the amount of  approximately
$1.2  million,  which was vacated in November  1997.  Colorado  counsel filed an
answer,  counterclaims  and  discovery  demands in  November  1997.  The company
believes it has a number of meritorious defenses and potential counterclaims and
intends to vigorously defend this action.

         Connecticut Bank of Commerce commenced an action against the Company in
Lafayette Parish,  Louisiana,  on or about March 15, 1997. The Plaintiff brought
this action to enforce collection of a note in the principal amount of
                                       15
<PAGE>
$175,000.  The Company did not pay the note because of a dispute with respect to
the amount of  interest  and other  charges  that were due.  The Company and the
Plaintiff  resolved such issues.  Funds have been set aside in an escrow account
for payment of an amount agreed upon by Plaintiff and the Company. Final payment
is to be made upon execution of the settlement papers.

         Other than the above legal  proceedings and claim, the Company is not a
party to any other material pending or threatened legal proceeding or claim.

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

         NONE.

                                     PART II

ITEM 5.           MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDERS MATTERS

     (a) Market  Information.

         (1) Shares of the  Company's  Common  Stock have been traded on the OTC
Bulletin  Board under the symbol  "ERHC" since August 23,  1996.  The  following
table sets forth the high and low sales  prices of the Common Stock as quoted on
the OTC Bulletin Board for the periods indicated.  The high and low sales prices
for the Common Stock below reflect inter-dealer prices,  without retail mark-up,
mark-down, or commission, and may not necessarily represent actual transactions.

                                                          High             Low
Fiscal Year 1996
4th Quarter (August 23 - September 30, 1996)........     $5-3/4           $5-1/4

Fiscal Year 1997
1st Quarter (October 1 - December 31, 1996).........      5-1/2            1/4
2nd Quarter (January 1 - March 31, 1997)............      2-1/2            5/16
3rd Quarter (April 1 - June 30, 1997)...............       5/8             7/32
4th Quarter (July 1 - September 30, 1997)...........      5-3/8            5/16

Fiscal Year 1998
1st Quarter (October 1 - December 29, 1997)..........     3-3/8            1-3/8

     (2) Holders.  The number of record holders of the Company's common stock as
of December 29, 1997, was 1,967 based on the records of the transfer agent.

     (3) Dividends.  Holders of the Company's  Common Stock are entitled to such
dividends  as may be  declared by the Board of  Directors  and paid out of funds
legally  available  therefor.  The Company has never paid any  dividends  on the
Commons Stock.  The Company intends to retain  earnings,  if any, to finance the
development  and expansion of its business and does not  anticipate  paying cash
dividends in the foreseeable future. Future determinations regarding the payment
of dividends  are subject to the  discretion  of the Board of Directors and will
depend  upon  a  number  of  factors,   including   future   earnings,   capital
requirements,   financial  conditions  and  the  existence  or  absence  of  any
contractual limitations on the payment of dividends.
                                       16
<PAGE>
     (b) Recent Sales of Unregistered Securities

     During the period from October 1, 1996,  through  September  30, 1997,  the
Company  raised  approximately  $1,103,000 in a private  placement of the Common
Stock of the Company in exchange for 1,391,898 shares of its common stock.

     During the period from October 1, 1996,  through  September  30, 1997,  the
Company issued 10,792,981  shares of its common stock in consideration  for: (i)
appraisals  and  engineering  services  for  the  Sao  Tome  project  valued  at
$2,000,000; (ii) Services of directors and officers valued at $3,829,106;  (iii)
oil  wells/leases  valued at $ 12,500,000;  (iv) assignment of Chevron  contract
valued at $3,000,000; and, (v) BAPCO acquisition valued at $2,250,000.

      From  October to December  1997,  the  Company  raised  gross  proceeds of
$4,300,000  in a private  placement of the  Company's  5.5%  convertible  senior
subordinate secured notes due 2002 (the "Notes") and warrants to purchase Common
Stock  (the  "Warrants")  to a  limited  number  of  "accredited"  institutional
investors.  The maximum  number of shares of Common Stock which may be issued by
the Company upon the conversion of the Notes (at a base conversion rate of $1.25
per share,  subject to  certain  limited  conditions)  and the  exercise  of the
Warrants (at an exercise price of $2.83 per share) is up to 3,440,000 shares and
283,800 shares, respectively.  This Form 10-K does not cover the up to 3,723,800
total shares of Common Stock which will be issuable upon conversion of the Notes
and the  exercise of the Warrants for which  registration  or an exemption  from
registration  under the Act will be required.  See Part III, Item 12.  "Security
Ownership of Certain  Beneficial Owners and Management" - "Selling  Shareholders
Pursuant  to  Mandated  Form S-1." The  Company  used a portion of the total net
proceeds of approximately $3,800,000 of the private placement to make an initial
concession  fee  payment of  $2,000,000  in  connection  with its Sao Tome joint
venture.  See Part I, Item 1.  "Description  of Business - Managing  Exploratory
Activities.";  Part II, Item 7. "Management's Discussion and Analysis of Plan of
Operations" - "Results of Operations: Capital Expenditures."

         Such common stock was issued in reliance  upon Section 4(2) and Section
506 of Regulation D.

ITEM 6.           SELECTED FINANCIAL DATA

         The  selected  financial  data of the  Company  presented  below  as of
September  30, 1995,  1996 and 1997,  have been  derived  from the  Consolidated
Financial  Statements of the Company,  which Consolidated  Financial  Statements
have been  audited  by  Durland  &  Company,  CPA's,  P.A.,  independent  public
accountants,  and are included  elsewhere in this Form 10-K.  The data set forth
below should be read in conjunction  with the Company's  Consolidated  Financial
Statements,  related notes thereto and "Management's  Discussion and Analysis of
Plan of Operations."

                               Fiscal Years ended
                                  September 30,

Statement of         1995(1)             1996(2)              1997(3)
Operations
Data:

Revenues:
Environmental        $0                  $0                   $108,944
remediation
services

Crude Oil Sales       0                   0                    0

Cost of sales
and expenses:
Environmental         0                   0                    53,991
remediation
services

Crude Oil             0                   0                    0

Operating             3,404               714,938              16,860,262
expenses

Other income          0                   60,477               (33,456)
and expenses

Income before        (3,404)             (714,938)            (16,845,495)
taxes and
extraordinary items

Provision             0                   0                    0
(benefit)for
income taxes

Net income           (3,404)             (654,461)            (16,838,765)
(loss) (4)

Net income           (0.01)              (0.27)               (1.60)
(loss) per share

Weighted             398,643             2,469,511            10,500,293
average
Common Stock
outstanding

Balance Sheet Data
(at end of period)

Property and         0                   2,431,987            2,733,724
Equipment

Total Assets         0                   2,436,987            17,749,231

Total Liabilities    3,316               6,730                1,748,376

Stockholders        (3,316)              2,430,257            14,000,855
equity
                                       18
<PAGE>
(1) Reflects the operations of  Environmental  Remediation  Funding  Corporation
("ERFC").  the  Company's  predecessor,  from the date of its  incorporation  on
September 5, 1995. See Part I, Item 1.  "Description of Business - Environmental
Remediation Services."

(2) The Company  acquired  100% of the issued and  outstanding  common  stock of
ERFC,  effective August 19, 1996, in a reverse triangular merger, which has been
accounted for as a  reorganization  of ERFC. See Note 1 to Notes to Consolidated
Financial Statement.

(3) On April 9, 1997,  the Company  acquired 100% of the issued and  outstanding
common stock of Bass American  Petroleum  Company,  which was accounted for as a
purchase. See Part I, Item 1. "Description of Business - BAPCO Tool."

(4) The net cash  operating  loss of the Company was  $1,283,900 and $83,700 for
the fiscal years ended September 30, 1997 and 1996, respectively.  See Part III,
Item 7. "Management's Discussion and Analysis of Plan of Operations."

ITEM 7.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS

         The  following   Management's   Discussion  and  Analysis  of  Plan  of
Operations  includes  forward-looking  statements  with respect to the Company's
future financial  performance.  These forward-looking  statements are subject to
various  risks  and   uncertainties,   including  the  factors  described  under
"Forward-Looking  Statements"  contained in this item and other sections of this
Form 10-K, that could cause actual results to differ  materially from historical
results or those currently anticipated.

OVERVIEW

         The  Company  is an  independent  oil and gas  company  engaged  in the
exploration,  development,  production  and sales of crude oil and  natural  gas
properties with current  operations  focused in Texas, Utah and Sao Tome in West
Africa.

     The Company's  goal is to maximize its value through  profitable  growth in
its oil and gas reserves and production.  The Company has taken steps to achieve
through its growth  strategy of (i) acquiring  marginally-producing  oil and gas
properties,  at  favorable  prices,  with still  significant  resource  recovery
potential  through  workovers  utilizing  the  Company's   proprietary  drilling
technology,  (ii) managing the  exploration,  exploitation  and  development  of
non-producing  properties  in  known  oil-producing  areas,  such as the Gulf of
Guinea  in  West  Africa,  with  industry  or  government  partners,  and  (iii)
continuing to pursue environmental remediation service contracts for oil and gas
well  rework  and "plug and  abandonment"  services  in the  United  States  and
internationally.

          The  Company  has  acquired  substantially  all of  its  oil  and  gas
properties within the past year. The Company's current development plans require
substantial capital expenditures in connection with the exploration, development
and exploitation of oil and natural gas properties. The Company has historically
funded capital  expenditures through a combination of equity contribution and sh
ort-term financing arrangements.

         The  following  discussion  should  be read  in  conjunction  with  the
Consolidated  Financial  Statements  and Notes  thereto  referred to in "Item 8.
Financial  Statements and  Supplemental  Data", and "Items 1 and 2. Business and
Properties.
                                       19
<PAGE>
RESULTS OF OPERATIONS

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

         During the fiscal year ended September 30, 1997, the Company incurred a
net loss of  16,838,765,  compared  to a net loss of $654,461 in the fiscal year
ended  September  30, 1996.  In fiscal 1997,  Common Stock was issued in lieu of
cash compensation to Directors and outside consultants valued at $12,303,512. In
fiscal 1997,  Common Stock was issued to acquire  geological data concerning Sao
Tome valued at $2,000,000,  which was immediately  charged to expense. In fiscal
1997, a total of $960,000 was accrued,  but not paid in cash, as compensation to
three executive officers of the Company.  Depreciation and amortization amounted
to  $366,213.  The  Company's  net  cash  operating  loss  for  fiscal  1997 was
$1,283,900, compared to $83,700 for fiscal 1996.

         The Company had revenues of $108,944 in fiscal  1997,  compared to none
in 1996.  Cost of sales were $53,991 in fiscal 1997 and none in fiscal 1996. All
such  revenues and costs of sales were  attributed  to  providing  environmental
remediation   services  to  oil  and  gas  operators.   Such  services  included
environmental engineering, hazardous waste disposal, oil spill and non-hazardous
oil field waste clean-up.

         The Company had no oil and gas production during fiscal 1997.

Liquidity and Capital Resources

         Historically,  the Company has financed its operations from the sale of
its debt and equity  securities  (including  the issuance of its  securities  in
consideration for services and/or products) and bank and other debt. The Company
expects to finance its  operations and further  development  plans during fiscal
1998 primarily through cash flow from operations.

         The Company  presently intends to utilize any cash flow from operations
as follows:  (i) recompletion of wells in the Unita Basin;  (ii) gas drilling at
the Nueces River Prospect; (iii) seismic studies and fees for the Sao Tome joint
venture;  (iv) purchase of refueling  barge/tug for Panama Canal; (v) working of
oil fields in Texas;  (vi) completion of Chevron "plug and  abandonment"  barge;
(vii)  construction  of additional  BAPCO Tools;  and (viii) working capital and
general corporate purposes.

Capital Expenditures and Business Plan

     In May 1997, the Company  entered into an exclusive  joint venture with Sao
Tome to manage the  exploration,  exploitation  and development of the potential
oil and gas reserves  onshore and offshore Sao Tome,  either through the venture
or in collaboration with major international oil exploration companies.  At that
time,  the Company was  required to pay a $5,000,000  concession  fee to the Sao
Tome  government.  In  September  1997,  the Company  received a  Memorandum  of
Understanding  from the Sao Tome government which allows the Company to pay this
concession  fee  within  five days after Sao Tome  files the  relevant  official
maritime claims maps with the United Nations and the Gulf of Guinea  Commission.
The Company paid $2,000,000 of this concession fee to Sao Tome from the proceeds
of the  convertible  note  offering.  See  Part  II,  Item 4.  ""Market  for the
Registrant's  Common Stock and Related  Security  Holders Matters" - (b) "Recent
Sales of Unregistered Securities.".

         The Company is  currently in the initial  phase of project  development
and  is  conducting  seismic  surveys,  processing  existing  seismic  data  and
reviewing environmental and engineering feasibility studies. During fiscal 1997,
the Company issued 1,000,000 shares of its Common Stock to acquire geologic data
concerning Sao Tome. The Company anticipates spending  approximately  $1,000,000
over the next 12 months  for  additional  studies  necessary  to  determine  the
location and depth of the targeted oil  deposits.  The Company has spent to date
$250,000 in preparatory  expenses  including  determining  the boundaries of the
concessions  and  facilitating  the passage of a law in Sao Tome  regarding  the
boundaries  of the  country.  The costs of further  development  of this project
cannot be determined until a more definite development plan is established.  The
costs depend on the Company's  determination to either independently develop the
concession,  take on  operational  partners or lease a portion of the concession
for third-party development.
                                       20
<PAGE>
         Revenues  from the Company's  operations in Sao Tome and  substantially
all raw material  purchases for use in Sao Tome will be U.S.  dollar-denominated
and managed through the Company's Louisiana  operational  facility.  The Company
believes  that  it  will  not  be   significantly   affected  by  exchange  rate
fluctuations  in local  African  currencies  relative  to the U.S.  dollar.  The
Company believes that the effects of such  fluctuations will be limited to wages
for local  laborers and operating  supplies,  neither of which is expected to be
material to the Company's  results of operations  when the joint venture  begins
more substantial operations in Sao Tome.

         In October 1977, the Company acquired a 37.5% interest in a 49,000 acre
natural gas lease,  known as the "Nueces  River  Prospect",  in the Nueces River
area of south Texas.  The Company paid  $200,000 and issued 50,000 shares of its
Common  Stock to acquire the lease.  The  Company  has spent more than  $200,000
reworking the first of two existing shut-in wells on the property.  In 1998, the
Company plans on spending  $650,000 to $1,200,000 to make the wells  operational
providing financing is secured. The Company is currently  considering whether to
conduct geophysics surveys to aid in the selection of future drilling locations.
The Company  believes that,  assuming the entire lease is productive,  there are
about 75 locations to be drilled.  In 1998,  depending  on the  availability  of
funds,  the Company  expects to drill 15 to 20 new wells at this site, at a cost
of approximately $650,000 to $1,200,000 per well. The Company is responsible for
only half of the  drilling  cost of each well,  as it shares  this cost with its
operational co-venturer,  Autry Stephens & Co. The operational dates, as well as
the  daily  production  rate,  of these  wells  cannot be  determined  until the
completion  of the  evaluation  of the well testing  program  which is currently
underway and should be completed in spring 1998.

         The  Company  acquired  in  February  and March  1997 two leases in oil
fields, which together comprise approximately 1,200 acres and 200 wells, located
in Rusk County and Wichita County,  Texas.  The Company issued 500,000 shares of
its Common Stock to acquire the leases.  Through  December 29, 1997, the Company
recompleted 18 wells, and hopes to have all of them operational by March,  1998.
The Company  plans to locate its BAPCO Tool on site and expects to use such tool
beginning in April 1998. The Company anticipates spending $1,200,000 in order to
bring production on the fields up to a commercial level.

         In July  1997,  the  Company  entered  into a joint  venture  with MIII
Corporation,  a Native American oil an gas company, to workover,  recomplete and
operate 335  existing oil and gas wells on the Uintah and Ouray  Reservation  in
northeaster  Utah.  None of the wells are  operational at this time. The Company
has  designed a  development  program,  under which it plans to  recomplete  and
restimulate 36 wells and to drill five to seven  development and extension wells
at this  site.  This plan will  require  spending  a minimum  of  $1,000,000  to
$1,500,000.  Subject to the availability of such funds, the Company  anticipates
that the first wells will be on line by fall 1998.

     In October 1997, the Company  acquired net revenue  interests  ranging from
80% to 84% (and 100% working interest) in oil and gas properties totaling 13,680
acres,  located  near the MIII fields in the Unita basis with 24 oil and natural
gas wells. These wells are currently producing  approximately 200 barrels of oil
per day from four producing wells which began realizing revenues for the Company
in November  1997.  The Company  plans on spending  approximately  $1,000,000 on
additional  equipment and up to $80,000 per well on well stimulation in order to
bring 18 more  wells on line in  1998,  provided  financing  is  secured.  Also,
provided  additional  financing of $5,000,000  to  $10,000,000  is secured,  the
Company plans to implement a recompiliation and drilling program in 1998.
 
        During fiscal 1997 the Company  issued  3,000,000  shares of its Common
Stock to acquire the Chevron master service agreement for "plug and abandonment"
work. The Company is in the process of  determining  what amount will need to be
spent to develop this contract, which amount will be subject to the availability
of additional funding.

         During fiscal 1997 the Company  issued  4,000,000  shares of its Common
Stock to acquire BAPCO, a non-operating oil production  company with significant
well rework equipment assets.
                                       21
<PAGE>
         The Company's  current  development plans require  substantial  capital
expenditures in connection with the exploration, development and exploitation of
its oil and  natural  gas  properties.  Historically,  the  Company,  has funded
capital   expenditures   through  a  combination  of  equity  contributions  and
short-term financing  arrangements.  The Company believes that it will require a
combination of additional  financing and cash flow from  operations to implement
future development  plans.  Although Company management is exploring the private
and/or public equity markets as potential capital sources in connection with its
development  plans, the Company  currently does not have any  arrangements  with
respect to, or sources of, additional  financing,  and there can be no assurance
that any additional  financing will be available to it on reasonable terms or at
all.  Future cash flows and the  availability  of financing will be subject to a
number of variables, such as the level of production from existing wells, prices
of oil and natural gas and success in locating and producing  new  reserves.  To
the extent that future financing requirements are satisfied through the issuance
of equity  securities,  shareholders of the Company may experience that could be
substantial.  The  incurrence  of debt  financing  could result in a substantial
portion of operating  cash flow being  dedicated to the payment of principal and
interest on such  indebtedness,  could  render the Company  more  vulnerable  to
competitive  pressures and economic  downturns and could impose  restrictions on
operations. If revenue were to decrease as a result of lower oil and natural gas
prices,  decreased production or otherwise,  and the Company had no availability
under a bank  arrangement  or other  credit  facility  the Company  could have a
reduced ability to execute current  development  plans,  replace  reserves or to
maintain  production levels,  any of which could result in decreased  production
and revenue over time.

Reserves and Pricing

         Oil and natural gas prices  fluctuate  throughout  the year.  Generally
higher natural gas prices prevail during the winter months of September  through
February.  A significant  decline in prices would have a material  effect on the
measure of future net cash flows which,  in turn,  could impact the value of the
Company's oil and gas properties.

         The Company's  drilling and  acquisition  activities have increased its
reserve base and its  productive  capacity and,  therefore,  its potential  cash
flow.  Lower gas prices may adversely  affect cash flow. The Company  intends to
continue to acquire and develop oil and gas  properties in its areas of activity
as dictated by market  conditions  and financial  ability.  The Company  retains
flexibility  to  participate  in oil  and  gas  activities  at a  level  that is
supported by its cash flow and financial ability.  Management  believes that the
Company's  borrowing  capacities  and  cash  flow  are  sufficient  to fund  its
currently  anticipated  activities.  The  Company  intends  to  continue  to use
financial  leverage to fund its  operations as investment  opportunities  become
available on terms that management  believes warrant investment of the Company's
capital resources.

         The  Company  expects to utilize  the  "successful  efforts"  method of
accounting  for its oil and gas  producing  activities  once it has  reached the
producing  state.  The Company  expects to regularly  assess  proved oil and gas
reserves for possible  impairment on an aggregate  basis in accordance with SFAS
No. 121.

Net Operating Losses

     The Company has net operating  loss  carryforwards  of  $17,496,630,  which
expire in the years 2010 through 2012. The Company has a $6,998,652 deferred tax
asset resulting from the loss carryforwards, for which it has established a 100%
valuation  allowance.  Until the Company's  current  operations begin to produce
earnings,  it is unclear  as to the  ability  of the  Company  to  utilize  such
carryforwards.

Year 2000 Compliance

         The Company is currently in the process of evaluating  its  information
technology 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.
                                       22
<PAGE>
Forward-Looking Statements

     This Form 10-K 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.  All  statements,  other  than
statements of historical  facts,  included or  incorporated by reference in this
Form 10-K which address  activities,  events or  developments  which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof),  wells to
be  drilled  or  reworked,  oil and gas  prices  and  demand,  exploitation  and
exploration  prospects,  development and infill potential,  drilling  prospects,
expansion and other  development  trends of the oil and gas  industry,  business
strategy,  production  of oil and gas  reserves,  expansion  and  growth  of the
Company's  business and  operations,  and other such matters are  forwardlooking
statements.  These statements are based on certain assumptions and analyses made
by the  Company in light of its  experience  and its  perception  of  historical
trends,  current  conditions and expected  future  developments as well as other
factors it believes  are  appropriate  in the  circumstances.  However,  whether
actual results and developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general economic,
market or business conditions; the business opportunities (or lack thereof) that
may be presented to and pursued by the Company;  changes in laws or  regulation;
and  other  factors,  most of which  are  beyond  the  control  of the  Company.
Consequently  all of the  forward-looking  statements made in this Form 10-K are
qualified by these cautionary  statements and there can be no assurance that the
actual results or  developments  anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequences to
or effects on the Company or its business or operations.  The Company assumes no
obligations to update any such forward-looking statements.































                                       23
<PAGE>
ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                          INDEX TO FINANCIAL STATEMENTS


                                                                            Page

Independent Auditors' Report   ..............................................F-2

Balance Sheets   ............................................................F-3

Statements of Operations  ...................................................F-4

Statements of Stockholders' Equity  .........................................F-5

Statements of Cash Flows   ..................................................F-6

Notes to Financial Statements  ..............................................F-7

Supplementary information  .................................................F-12






























                                       F-1
<PAGE>







                         REPORT OF INDEPENDENT AUDITORS



TO:  The Board of Directors and Stockholders
     Environmental Remediation Holding Corporation
     Jericho, New York


We have audited the  accompanying  balance sheets of  Environmental  Remediation
Holding Corporation, (the "Company") as of September 30, 1995, 1996 and 1997 and
the related  statements of operations,  stockholders'  equity and cash flows for
the  period  since  inception  and the two years  then  ended.  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.

Except as  discussed in the  following  paragraph,  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.

As more fully  described in notes 1f and 3, the Company  acquired two East Texas
oil leases in February 1997. The Company  recorded these  transactions  based on
the reserve report provided them at the time and updated more recently.  We have
engaged another independent  petroleum engineer to evaluate the data and produce
another reserve report.  The Company expects to adjust the recorded valuation to
this new report basis if any material differences exist.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of the Company as of September 30,
1995, 1996 and 1997 and the results of its operations and its cash flows for the
the period since inception and two years then ended in conformity with generally
accepted accounting principles.




                                                /s/Durland & Company, CPAs, P.A.
                                                   Durland & Company, CPAs, P.A.

Palm Beach, Florida
December 12, 1997

                                       F-2
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                           Consolidated Balance Sheets
                                  September 30,
<TABLE>
<S>                                                             <C>                 <C>                 <C>
                          ASSETS                                      1995               1996                  1997

CURRENT ASSETS
  Cash                                                       $                0                  0                327,743
  Prepaid expenses and other current assets                                   0                  0                215,708
                                                                ---------------     --------------      -----------------
    Total Current Assets                                                      0                  0                543,451
                                                                ---------------     --------------      -----------------
PROPERTY AND EQUIPMENT
  Equipment (note 1b)                                                         0          2,431,987              2,733,274
                                                                ---------------     --------------      -----------------
    Total Property and Equipment                                              0          2,431,987              2,733,274
                                                                ---------------     --------------      -----------------
OTHER ASSETS
  Deposits on fixed assets                                                    0              5,000                136,560
  Crude oil reserves, net (note 1f)                                           0                  0             14,335,646
  Chevron P&A master service agreement (note 1h)                              0                  0                    300
                                                                ---------------     --------------      -----------------
    Total Other Assets                                                        0              5,000             14,472,506
                                                                ---------------     --------------      -----------------
Total Assets                                                 $                0          2,436,987             17,749,231
                                                                ===============     ==============      =================
           LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accrued expenses and other current payable                 $            3,316                  0                111,054
  Stockholder loans (note 1c)                                                 0              6,730                465,094
  Accrued interest (note 1c)                                                  0                  0                 37,228
  Accrued salaries (note 4)                                                   0                  0                960,000
  Short term bank loan (note 1c)                                              0                  0                175,000
                                                                ---------------     --------------      -----------------
    Total Current Liabilities                                             3,316              6,730              1,748,376
                                                                ---------------     --------------      -----------------
LONG-TERM LIABILITIES
  Long-term debt                                                              0                  0                      0
                                                                ---------------     --------------      -----------------
    Total Long-Term Liabilities                                               0                  0                      0
                                                                ---------------     --------------      -----------------
Total Liabilities                                                         3,316              6,730              1,748,376
                                                                ---------------     --------------      -----------------
Common stock issued under a repurchase agreement;
1,000,000 shares (note 1i )                                                   0                  0              2,000,000

STOCKHOLDERS' EQUITY
  Common stock, $0.0001 par value; Authorized
    950,000,000 shares: issued and outstanding 1,639,450
    at September 30, 1995; 3,239,374 at September 30,
    1996 and 21,989,526 at September 30, 1997 (note 3)                      164                324                  2,199
  Preferred stock, $0.0001  par value, authorized
    10,000,000 shares; issued and outstanding 0 at
    September 30, 1995, 1996 and 1997.                                        0                  0                      0
  Additional paid in capital in excess of par                           499,924          3,515,298             32,658,586
  Stock subscriptions receivable                                              0                  0               (913,300)
  Deferred compensation, net (note 1d)                                 (500,000)          (427,500)              (250,000)
  Retained earnings (deficit)                                            (3,404)          (657,865)           (17,496,630)
                                                                ---------------     --------------      -----------------
Total Stockholders' Equity                                               (3,316)         2,430,257             14,000,855
                                                                ---------------     --------------      -----------------
Total Liabilities and Stockholders' Equity                   $                0          2,436,987             17,749,231
                                                                ===============     ==============      =================
</TABLE>
     The accompanying notes are an integral part of the financial statements
                                       F-3
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                      Consolidated Statements of Operations
     For the period since inception ended September 30, 1995, and the years
                       ended September 30, 1996 and 1997
<TABLE>
<S>                                                         <C>                   <C>                  <C>
                                                                 1995                  1996                   1997
                                                            --------------        -------------         ---------------
                       REVENUE
Sales - environmental remediation services              $                0                    0                 108,944
Sales - crude oil                                                        0                    0                       0
                                                            --------------        -------------        ----------------
  Total sales                                                            0                    0                 108,944
                                                            --------------        -------------        ----------------
                     COST OF SALES
Cost of sales - environmental remediation services                       0                    0                  53,991
Cost of sales - crude oil                                                0                    0                       0
                                                            --------------        -------------        ----------------
  Total cost of  sales                                                   0                    0                  53,991
                                                            --------------        -------------        ----------------
   Gross profit/(loss)                                                   0                    0                  54,953
                  OPERATING EXPENSES
Automotive expenses                                                      0                7,257                  55,864
Bank charges                                                             0                  184                     421
Compensation - officers                                                  0              147,326               1,185,000
Compensation - directors                                                 0                    0               3,492,981
Consultant fees                                                          0              337,956               8,883,356
Depletion                                                                0                    0                       0
Depreciation                                                             0              173,713                 198,713
Donations                                                                0                    0                  10,500
Dues, fees, licenses and taxes                                           0                    0                   9,552
Insurance                                                                0                    0                 204,099
Geological data and reports (note 1i)                                    0                    0               2,008,848
Oil lease transfer fees                                                  0                    0                  55,000
Office expenses                                                          0                1,072                  97,226
Oil well rework expenses                                                 0                    0                  53,355
Professional fees                                                    3,404               19,500                 244,230
Research and development                                                 0                    0                  17,000
Rent                                                                     0                8,550                  45,950
Telephone                                                                0                    0                  48,528
Travel and entertainment                                                 0               19,380                 235,856
Miscellaneous                                                            0                    0                  13,783
                                                            --------------        -------------        ----------------
  Total operating expenses                                           3,404              714,938              16,860,262
                                                            --------------        -------------        ----------------
Income(loss) from operations                                       (3,404)            (714,938)            (16,805,309)
Interest expense                                                         0                    0                (40,787)
Interest income                                                          0                    0                     601
                                                            --------------        -------------        ----------------
Income(loss) before tax & extraordinary item                       (3,404)            (714,938)            (16,845,495)
Extraordinary item - forgiveness of debt                                 0               60,477                   6,730
                                                            --------------        -------------        ----------------
Income(loss) before taxes                                          (3,404)            (654,461)            (16,838,765)
Income tax expense/(benefit)                                             0                    0                       0
                                                            --------------        -------------        ----------------
Net income(loss)                                        $          (3,404)            (654,461)            (16,838,765)
                                                            ==============        =============        ================
Weighted average number of shares outstanding                      398,643            2,469,511              10,500,293
                                                            ==============        =============        ================
Net loss per share                                      $           (0.01)               (0.27)                  (1.60)
                                                            ==============        =============        ================
</TABLE>
    The accompanying notes are an integral part of the financial statements.
                                       F-4
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                 Consolidated Statements of Stockholders' Equity
                        September 30, 1995, 1996 and 1997
<TABLE>
<S>                   <C>            <C>         <C>       <C>           <C>          <C>          <C>             <C>
                        Number         Common      Pf'd        APIC       Stk Subs       Defr'd      Accumulated       TTL S/H
                       of Shares       Stock      Stock                  Receivable       Comp         Deficit          Equity
                     -------------   ----------  -------  ------------- ------------  -----------  --------------- ----------------
BEGIN BALANCE,
September 5, 1995                0 $          0        0              0            0            0                0                0

9/23 - cash                884,407           88        0              0            0            0                0               88
9/25 - services            755,043           76        0        499,924            0    (500,000)                0                0
  Net loss                       -            0        0              0            0            0          (3,404)          (3,404)
                     -------------   ----------  -------  ------------- ------------  -----------  --------------- ----------------

BALANCE,
September 30, 1995       1,639,450          164        0        499,924            0    (500,000)          (3,404)          (3,316)

10/1 - equipment           744,000           74        0      2,605,626            0            0                0        2,605,700
10/10 - cash                20,000            2        0         49,998            0            0                0           50,000
8/9 - cash                  20,500            2        0         42,890            0            0                0           42,892
8/19 - reverse merger      356,317           36        0      (243,366)            0            0                0        (243,330)
8/19 - S-8 services         73,277            7        0         73,270            0            0                0           73,277
8/30 - services             10,000            1        0         69,999            0            0                0           70,000
9/15 - services             55,000            6        0        384,994            0            0                0          385,000
9/15 - cash                320,830           32        0         31,963            0            0                0           31,995
9/30 - def comp amort            -            0        0              0            0       72,500                0           72,500
  Net loss                       -            0        0              0            0            0        (654,461)        (654,461)
                     -------------   ----------  -------  ------------- ------------  -----------  --------------- ----------------

BALANCE,
September 30,  1996      3,239,374          324        0      3,515,298            0    (427,500)        (657,865)        2,430,257

2/10 - S-8 services      1,600,000          160        0      1,099,840            0            0                0        1,100,000
3/4 - oil wells/leases     300,000           30        0      4,831,293            0            0                0        4,831,323
3/5 - oil wells/leases     200,000           20        0      9,504,303            0            0                0        9,504,323
3/13 - S-8 services        300,000           30        0        374,970            0            0                0          375,000
4/5 - Chevron contract   3,000,000          300        0              0            0            0                0              300
4/5 - services           1,342,981          134        0      1,342,847            0            0                0        1,342,981
4/5 - contrib to corp    (100,000)         (10)        0       (99,990)            0            0                0        (100,000)
4/9 - BAPCO acquisition  4,000,000          400        0        499,600            0            0                0          500,000
5/14 - S-8 services      1,500,000          150        0        562,350            0            0                0          562,500
6/19 - services            150,000           15        0         28,110            0            0                0           28,125
7/8 - cash                 800,000           80        0        399,920            0            0                0          400,000
7/25 - S-8 services      2,335,000          233        0      6,464,798            0            0                0        6,465,031
7/30 - services          1,500,000          150        0      2,249,850            0            0                0        2,250,000
7/30 - cash                147,000           15        0        146,985            0            0                0          147,000
8/8 - cash                  74,000            8        0        147,992            0            0                0          148,000
9/4 - services             400,000           40        0        307,960            0            0                0          308,000
9/10 - cash stk subs recv  727,273           73        0        799,927    (800,000)            0                0                0
9/15 - cash & stk subs rec 473,898           47        0        482,533    (113,300)            0                0          369,280
9/30 - deferred comp amort       -            0        0              0            0      177,500                0          177,500
  Net loss                       -            0        0              0            0            0     (16,838,765)     (16,838,765)
                     -------------   ----------  -------  ------------- ------------  -----------  --------------- ----------------
BALANCE,
September 30,  1997     21,989,526 $      2,199        0     32,658,586    (913,300)    (250,000)     (17,496,630)       14,000,855
                     =============   ==========  =======  ============= ============  ===========  =============== ================

Common Stock issued under a repurchase agreement
7/97 - DRSTP info        1,000,000          100        0  1,999,900                0            0                0        2,000,000
                     =============   ==========  =======  ============= ============  ===========  =============== ================
</TABLE>
    The accompanying notes are an integral part of the financial statements.
                                       F-5
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                      Consolidated Statements of Cash Flows
     For the period since inception ended September 30, 1995, and the years
                       ended September 30, 1996 and 1997
<TABLE>
<S>                                                                        <C>                 <C>                  <C>
                                                                                1995                 1996                  1997
                                                                           --------------      ---------------      ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss)                                                     $            (3,404)            (654,461)          (16,838,765)
Adjustments to reconcile net loss to net cash used for operating activities:
    Amortization of deferred compensation                                               0               72,500               177,500
    Non-cash gain on forgiveness of debt                                                0             (60,477)               (6,730)
    Stock issued for services rendered                                                  0              385,000            12,292,829
    Stock issued for DRSTP geological data                                              0                    0             2,000,000
    Depreciation                                                                        0              173,713               198,713
Changes in operating assets and liabilities:
   (Increase) decrease in prepaid expenses                                              0                    0             (215,708)
   Increase (decrease) in accrued interest expense                                      0                    0                37,228
   Increase (decrease) in accrued expenses                                          3,316                    0               111,054
   Increase (decrease) in accrued salaries                                              0                    0               960,000
                                                                           --------------      ---------------      ----------------
Net cash (used) provided by operating activities                                     (88)             (83,725)           (1,283,879)

CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits                                                                                0              (5,000)             (131,560)
                                                                           --------------      ---------------      ----------------
Net cash (used) provided by investing activities                                        0              (5,000)             (131,560)

CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock sold for cash                                                             88               81,995             1,102,988
Payments on stockholder advances                                                        0             (16,000)             (295,287)
Funds advanced by third-parties                                                         0                    0               175,000
Funds advanced by stockholders                                                          0               22,730               760,481
                                                                           --------------      ---------------      ----------------
Net cash (used)  provided by financing activities                                      88               88,725             1,743,182

Net increase (decrease) in cash                                                         0                    0               327,743

CASH, beginning of period                                                               0                    0                     0
                                                                           --------------      ---------------      ----------------
CASH, end of period                                                  $                  0                    0               327,743
                                                                           ==============      ===============      ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash                                                $                  0                    0                 3,559
                                                                           ==============      ===============      ================
Non cash financing activities:
   Stock issued to acquire environmental remediation equipment       $                  0            2,605,698                     0
                                                                           ==============      ===============      ================
   Stock issued to acquire crude oil reserves and wells              $                  0                    0            14,335,646
                                                                           ==============      ===============      ================
   Stock issued to acquire Chevron master P&A service agmt           $                  0                    0                   300
                                                                           ==============      ===============      ================
   Stock issued to acquire BAPCO                                     $                  0                    0               500,000
                                                                           ==============      ===============      ================
</TABLE>
    The accompanying notes are an integral part of the financial statements.
                                       F-6
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements
                        September 30, 1995, 1996 and 1997

(1) Summary of Significant Accounting Policies
     The Company.  Environmental  Remediation Holding  Corporation,  (ERHC), was
         incorporated on May 12, 1986 in Colorado as Valley View Ventures, Inc.,
         (VVV). Its name was changed to Regional Air Group Corporation,  (RAGC),
         on September 20, 1988, and then to  Environmental  Remediation  Holding
         Corporation on August 29, 1996. VVV was created in 1986 as a blind pool
         to seek a merger opportunity with a viable operating  company.  In 1988
         the company  acquired,  via a reverse  merger,  Mid-Continent  Airlines
         which was a regional "feeder" airline operating as Braniff Express.  On
         September 28, 1989, Braniff Airlines filed Chapter 11 Bankruptcy.  This
         event proved to be catastrophic  to the then operating  business of the
         Company.  RAGC liquidated its assets and liabilities shortly thereafter
         and  remained  dormant  until its  reverse  merger  with  Environmental
         Remediation  Funding  Corporation on August 19, 1996.  ERHC operates in
         the  environmental  remediation  industry  and the oil and  natural gas
         production  industry from its corporate  headquarters  in Jericho,  New
         York, its operating offices in Lafayette, Louisiana.

         The consolidated  financial statements have been prepared in conformity
         with  generally  accepted  accounting  principles.   In  preparing  the
         financial  statements,  management  is required to make  estimates  and
         assumptions  that affect the reported amounts of assets and liabilities
         as of the dates of the  statements of financial  condition and revenues
         and  expenses  for the years then ended.  Actual  results  could differ
         significantly  from those estimates.  The following  summarize the more
         significant  accounting  and  reporting  policies and  practices of the
         Company:

   a)    Basis of  presentation- The  Company  acquired  100% of the  issued and
         outstanding  common stock of Environmental  Remediation  Funding Corp.,
         (ERFC),  a Delaware  corporation,  effective on August 19,  1996,  in a
         reverse  triangular   merger,   which  has  been  accounted  for  as  a
         reorganization  of ERFC. At the same time the Company  changed its name
         from RAGC. Prior to the merger ERFC had acquired certain  environmental
         remediation  equipment in exchange for common stock. ERFC then employed
         the seller of this  equipment as an outside  consultant in exchange for
         common  stock.  Subsequently,   ERFC  was  unable  to  enter  into  the
         environmental  remediation  contracts  it had  hoped to and  asked  the
         consultant to become the Chairman, President and CEO of ERFC.

         At the time of the acquisition of ERFC by RAGC, ERFC owned 100% of Site
         Services,  Inc., (SSI).  ERFC had acquired SSI from Bass  Environmental
         Services Worldwide, Inc., (BESW), a company controlled by the Chairman,
         President and CEO of ERFC. SSI had always been an inactive company, but
         for certain  enviornmental  remediation  licences which it continues to
         hold.

         On  April  9,  1997,  the  Company  acquired  100%  of the  issued  and
         outstanding common stock of Bass American  Petroleum Company,  (BAPCO),
         which was  accounted  for as a  purchase.  BAPCO  had been an  inactive
         company for several years previously,  however BAPCO owned a variety of
         oil well production enhancing  equipment,  which is proprietary to, but
         not  patented  by  BAPCO.  The  transaction  was in  essence  an  asset
         acquisition. At the time of the acquisition BAPCO was 100% owned by the
         Chairman,  President and CEO of ERHC. The Company has begun using BAPCO
         as the  operator  of the  various  oil and  natural  gas  leases it has
         acquired.

         The consolidated  financial  statements include the accounts of SSI and
         BAPCO,  its  wholly  owned  subsidiaries.   Intercompany  accounts  and
         transactions have been eliminated in consolidation.

   b)    Equipment- Environmental remediation equipment was purchased by ERFC in
         exchange  for  common  stock.  The fair  market value of the ERFC stock
         exchanged was  undeterminable, therefore the Company chose to value the
         equipment  received using an estimate of historical  cost,  based on an
         independent  evaluation of replacement  cost at  acquisition  date, the
         Consumer Price Index to original  acquisition  date,  less  accumulated
         depreciation  to  the  date  ERFC  acquired  the  equipment.  This  was
         calculated  because the historical cost records had been  inadvertently
         destroyed. This adjusted calculated historical cost was $2,605,700. The
         Company has chosen to depreciate the equipment  using the straight line
         method  over its  estimated  remaining  useful  life of fifteen  years.
         Expenditures  for  maintenance and repairs are charged to operations as
         incurred.  Depreciation  expense for the period since  inception  ended
         September  30, 1995 was $0 and for the years ended  September  30, 1996
         and 1997 was $173,713 and $173,713.

         In the BAPCO  acquisition the Company acquired  ownership of all rights
         to BAPCO's  proprietary  oil well reworking  tool,  "the BAPCO Tool" as
         well as other oil and natural gas well reworking equipment. The control
         of this  proprietary  tool has enhanced the  Company's  position to the
         extent  that it would not have been able to enter into the  contract to
         control the Utah oil fields and the  reworking  of the  Indonesian  oil
         fields.  The control of this tool also enabled the  acquisition  of the
         200 Texas oil wells to be  economically  feasible to a greater  extent.
                                      F-7
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies, continued
    b)   Equipment,  continued-  The  Company  valued the equipment  received at
         historical  cost amounting to $500,000. The Company's common  stock was
         highly  volatile  in price and  extremely  thinly  traded which led the
         Company to determine that the equipment was the easier  to value  under
         APB 16. The  Company is  depreciating  these tools and technology  over
         ten years.  Depreciation  expense for  the period since inception ended
         September  30, 1995 was $0 and for the years ended  September  30, 1996
         and 1997 was $0 and $25,000.
     
     c)  Notes payable- The Company issued two notes payable to stockholders who
         are also  officers  and  directors  in exchange  for cash  amounting to
         $233,398 and $526,883. These notes carry no stated maturity date and an
         8.5% rate of interest.  The Company has repaid  $236,787 and $58,500 on
         these  notes,   including  interest  on  one.  The  remaining  note  is
         convertible  into restricted  stock at 50% of the average bid price for
         the month in which the loan was made.  The  conversion is at the option
         of the  noteholder.  Accrued  interest  on these  notes  is $0,  $0 and
         $21,273 for the period since inception ended September 30, 1995 and for
         the years ended September 30, 1996 and 1997.

         In  January  1997,  the  Company  issued  a note  payable  to a bank in
         exchange for $175,000 cash.  This note carried a maturity date of March
         15, 1997 and a 9.6875% interest rate. The Company is in default on this
         note. The default  interest rate is 13.6875%.  The Company and the bank
         had originally  expected to roll this note over into a long-term credit
         facility. The Company chose not to accept the long-term facility due to
         the terms  offered.  The Company has reached an agreement with the bank
         regarding  repayment terms amounting to $175,000 plus accrued interest.
         Accrued  interest  on this note is $0, $0 and  $15,955  for the  period
         since  inception  ended  September  30,  1995 and for the  years  ended
         September 30, 1996 and 1997.

     d)  Deferred  compensation-  ERFC issued 755,043 shares of its common stock
         into escrow in  exchange  for  services to be rendered by a  consultant
         under a four year contract.  These services were valued at $125,000 per
         year,  therefore the Company is amortizing  this deferred  compensation
         expense at a rate of $31,250 per quarter.  This consultant later became
         ERFC's Chairman, President and CEO.

         On August 30,  1996,  the Company  issued  10,000  shares of its common
         stock, valued at $70,000, to an attorney for services to be rendered at
         below market rates for a period of 4 months.  Accordingly,  the Company
         amortized this expense over the term of the agreement.

     e)  Net loss per share- Net loss per share is computed by dividing  the net
         loss by the number of shares outstanding during the period.

     f)  Crude oil  reserves- At September 30, 1996,  the Company had no oil and
         gas  reserves.  In March 1997,  the Company  acquired an undivided  7/8
         interest  in a 100 well  lease  located  in the  Gunsite  Sand Lease in
         Ector,  Texas,  in exchange for 300,000 shares of the Company's  common
         stock.  The Company  received an  independent  evaluation of this field
         which  reflected  1,000,000  barrels of proven oil  reserves.  In March
         1997,  the Company  acquired an  undivided  7/8  interest in a 100 well
         lease  located in the Woodbine  Sand Lease Block in  Henderson  County,
         Texas,  in exchange for 200,000  shares of the Company's  common stock.
         The Company  received  an  independent  evaluation  of this field which
         reflected  1,500,000  barrels of proven  oil  reserves.  These  reserve
         reports,  as amended in March 1998,  reflect  values of $4,831,323  for
         Gunsite and  $9,504,323 for Woodbine.  A separate  reserve report is in
         process of being  prepared,  which the  Company  will use to adjust the
         valuation if the subsequent report is materially different. The Company
         chose to value  these  acquisitions  on the  basis of the  asset  value
         received  rather than the value of the common  stock given up as at the
         time of the  acquisition the stock price was highly volatile and thinly
         traded.

         Both  acquisitions  also included all existing  equipment on site.  The
         Company has not  recorded  the fair market  value of the  equipment  in
         place,  as all of such equipment has minimal scrap value,  which is the
         only valuation  method available due to the  non-operational  status of
         the wells at  acquisition  and for several years prior to  acquisition.
         The Company spent $53,000 for the year ended September 30, 1997 on well
         equipment  repairs  and well  rework,  all on the  Gunsite  lease.  The
         Company expects to capitalize and depreciate repairs which are believed
         to extend the useful life of such existing  equipment  beyond one year,
         as well as the cost of replacement equipment.

         The  Company  expects  to  utilize  the  sucessful  efforts  method  of
         accounting for its oil and gas producing activities once it has reached
         the producing stage. The Company expects to regularly assess proved oil
         and gas  reserves  for possible  impairment  on an  aggregate  basis in
         accordance with SFAS 121.
                                      F-8
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies, continued
     g)  Depletion-  Depletion (including  provisions for future abandonment and
         restoration  costs)  of all  capitalized  costs of  proved  oil and gas
         producing   properties   are   expected  to  be   expensed   using  the
         unit-of-production  method by individual fields as the proven developed
         reserves are produced.

     h)  Chevron  master  P&A  service  agreement -  In   September   1996  Bass
         Environmental  Services Worldwide,  Inc., (BESW), entered into a Master
         Service Agreement with Chevron to plug and abandon oil wells located in
         the Gulf of Mexico  off the coast of  Louisiana.  In April  1997,  BESW
         assigned this contract to the Company in exchange for 3,000,000  shares
         of the Company's common stock. Chevron has reissued the contract in the
         Company's name. The Company valued this acquisition on the basis of the
         par value of the Company's  common stock given up. The Company  expects
         to begin commercializing the agreement in fiscal 1998.

     i)  DRSTP geological data- In July 1997, the Company  acquired  substantial
         geologic  data and  other  information  from an  independent  source in
         exchange for one million  shares of the Company's  common  stock.  This
         data was valued at $2,000,000  based the agreement with the seller that
         Company would repurchase these  shares for  $2,000,000 at a rate of 25%
         per quarter should the seller so  choose.  The  Company  expensed  this
         acquisition cost immediately.

(2)      Income taxes-  The  Company  has  a  consolidated  net  operating  loss
         carry-forward amounting to $17,496,630,  expiring as follows: $3,404 in
         2010,  $654,461  in 2011 and  $16,838,765  in 2012.  The  Company has a
         $6,998,652  deferred tax asset  resulting from the loss  carry-forward,
         for which it has  established  a 100%  valuation  allowance.  Until the
         Company's  current plans begin to produce  earnings it is unclear as to
         the ability of the Company to utilize these carry-forwards.

(3)      Stockholders' equity- The Company has authorized  950,000,000 shares of
         $0.0001 par value  common  stock and  10,000,000  shares of $0.0001 par
         value preferred  stock. On September 30, 1995, the predecessor  entity,
         ERFC,  had  1,639,450  shares  issued and  outstanding,  which had been
         issued  during the month since  inception as 884,407  shares for $88 in
         cash and 755,043 shares for a four year consulting  agreement valued at
         $500,000 with a then independent consultant who subsequently became the
         Company's Chairman, President and CEO.

         In  October  1995,   ERFC  issued   744,000   shares  in  exchange  for
         environmental  remediation  equipment valued as discussed in note 1b at
         $2,605,700.  This  equipment was acquired from the  consultant  who had
         received  the  755,043  shares and  subsequently  became the  Company's
         Chairman, President and CEO. In October 1995, ERFC issued 20,000 shares
         for $50,000 in cash.

         In August 1996,  ERFC issued  20,500  shares in exchange for $42,892 in
         cash. On August 19,1996,  the sucessor  Company issued 2,433,950 shares
         of common  stock to acquire 100% of the issued and  outstanding  common
         stock of ERFC. At the time of the acquisition ERHC, then known as RAGC,
         had 356,317 shares issued and  outstanding as a result of a 1 for 2,095
         share  reverse  stock  split.  On August 19, 1996,  the Company  issued
         73,277  shares of common stock to a consultant in exchange for services
         valued at $1.00 per share  related to the merger.  In August 1996,  the
         Company issued 10,000 shares of its common stock, valued at $70,000, to
         an attorney  for  services to be rendered at below  market  rates for a
         period of 4 months. In September 1996, the Company issued 55,000 shares
         of  its  common  stock  under  three  consulting  contracts  previously
         negotiated,  valued at $385,000.  In September 1996, the Company issued
         320,830 shares of its common stock in exchange for $31,995 in cash.

         In February 1997, the Company issued  1,600,000  shares of common stock
         via an S-8  registration  in exchange for consulting  and  professional
         services  valued at $1,100,000.  In March 1997, the Company  acquired a
         100 oil well lease  with one  million  barrels  of proven oil  reserves
         valued at  $4,831,323  in exchange for 300,000  shares of the Company's
         common stock. In March 1997, the Company  acquired a 100 oil well lease
         with one and one-half  million barrels of proven oil reserves valued at
         $9,504,323  in exchange  for  200,000  shares of the  Company's  common
         stock. In March 1997, the Company issued 300,000 shares of common stock
         via an S-8  registration  valued at  $375,000  in  exchange  for public
         relations services,  of which approximately  150,000 had been earned at
         fiscal year end. The balance will either be earned or returned to ERHC.

         In April 1997, the Company issued  3,000,000  shares of common stock in
         exchange  for  the   assignment  of  the  Chevron  P&A  master  service
         agreement,  valued at $300. In April 1997, the Company issued 1,342,981
         shares of common stock to three directors in lieu of cash  compensation
         for services  rendered to the Company  valued at  $1,342,981.  In April
         1997, a director contributed 100,000 shares of common stock back to the
         Company with a value of  $100,000.  In April 1997,  the Company  issued
         4,000,000 shares of common stock in exchange for 100% of the issued and
         outstanding common stock of Bass American  Petroleum Company,  (BAPCO),
         valued at historical cost of $500,000.
                                       F-9
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(3)      Stockholders' equity,  continued-  In  May  1997,  the  Company  issued
         1,500,000  shares of common stock via an S-8 in exchange for consulting
         and professional services valued at $562,500. In June 1997, the Company
         issued  150,000 shares of common stock to two  independent  consultants
         for  services  valued at $28,125.  One of these  consultants  became an
         employee of the Company in September 1997.

         In July 1997,  the Company  issued  800,000 shares under a Section 4(2)
         exemption from registration to a previously unrelated party in exchange
         for $400,000 in cash. In July 1997,  the Company  acquired  substantial
         geologic  data and  other  information  from an  independent  source in
         exchange for 1,000,000 shares of the Company's common stock.  This data
         was valued at  $2,000,000  based the  agreement  with the  seller  that
         Company would  repurchase  these shares for $2,000,000 at a rate of 25%
         per  quarter  should the seller so choose.  In July 1997,  the  Company
         issued   2,335,000   shares  of  common  stock  to  three   independent
         consultants for services valued at $6,465,031,  principally relating to
         the Company's  acquisition  of the MIII  agreement.  In July 1997,  the
         Company issued  1,500,000  shares of common stock to three directors in
         lieu of cash  compensation for services  rendered to the Company valued
         at  $2,250,000.  In July 1997,  the Company  issued  147,000  shares of
         common  stock  under a  Regulation  D Rule  506  private  placement  in
         exchange for $147,000 in cash. In August1997, the Company issued 74,000
         shares of common stock under a Regulation D Rule 506 private  placement
         in exchange for $148,000 in cash. In September 1997, the Company issued
         400,000  shares  of  common  stock  to an  independent  consultant  for
         services  valued at $308,000.  In September  1997,  the Company  issued
         370,898  shares of common  stock under a  Regulation D Rule 506 private
         placement  in exchange for $407,988 in cash.  In  September  1997,  the
         Company  received  stock  subscription  agreements for $913,300 in cash
         under a  Regulation D  Rule 506 private  placement representing 830,273
         shares of common stock.  The Company is contingently liable to issue up
         to three million shares of restricted stock in total to three  officers
         and directors of the Company for their efforts in  closing the Sao Tome
         & Principe contract. These shares will be issued upon the joint venture
         oil production level of 20,000 barrels a day being attained.The Company
         is contingently liable to  issue up to two million shares of restricted
         stock to two officers and directors of the Company  for  their  efforts
         in  closing  the  M III  contract  in  Utah  upon the joint venture oil
         production  level  of  4,000  barrels  a  day being  attained. This two
         million shares includes the 500,000  shares the  Company is to issue to
         M III.  The Company is also contingently  liable to issue an additional
         two  million  shares  upon  the joint venture attaining production of a
         total of 6,000 barrels a day.

(4)      Accrued salaries- At September 30, 1995,  1996 and 1997 the Company has
         accrued  salaries  of $0,  $0 and  $960,000,  respectively,  for  three
         officers.  These officers can, at their option,  convert these salaries
         into common stock of the Company at the rate of one-half of the average
         bid price of the  Company's  common  stock for the  months in which the
         salary was earned.

(5)      Commitments and  contingencies-  The  Company  is  committed  to  lease
         payments for 9 vehicles under  operating  leases  totaling  $52,292 and
         $20,043 for the years ended September 30, 1998 and 1999,  respectively.
         The Company  paid $0, $0 and $52,500 in vehicle  lease  expense for the
         period since inception ended September 30, 1995 and for the years ended
         September 30, 1996 and 1997, respectively. The Company currently leases
         its office space and  operating  facilities  on a month to month basis.
         The Company paid $0, $8,550 and $45,950 in facility rent for the period
         since  inception  ended  September  30,  1995 and for the  years  ended
         September 30, 1996 and 1997.

(6)      Segment information-  The Company has three  distinct lines of business
         through its two wholly owned subsidiaries,  Site Services, Inc., (SSI),
         and Bass  American  Petroleum  Company,  (BAPCO),  and a joint  venture
         agreement.  SSI operates in the environmental  remediation industry and
         BAPCO  will  operate  in the  oil and gas  production  industry.  SSI's
         principal   identifiable  assets  consist  of  $2,258,274,   (net),  of
         environmental  equipment,  a barge  deposit of $131,000 and the Chevron
         P&A master service  agreement valued at $300. All of the Company's 1997
         revenues  of  $109,000  and  cost of sales of  $54,000  relate  to SSI.
         BAPCO's  principal  identifiable  assets  consist of crude oil reserves
         valued at  $14,335,646  and  equipment  valued at $475,000  (net).  The
         Company also expects to operate in the supply industry  through a joint
         venture  agreement  to supply fuel and other goods to ships  transiting
         the Panama Canal.  No pricipal  identifiable  assets yet exist for this
         line of business.

(7) Subsequent events
     a)  Stockholder's Equity- The 830,273 shares of common stock were issued by
         the Company upon  receiving  the $913,300 in cash in October 1997 which
         had been  subscribed for at September 30, 1997. In October and November
         1997, the Company issued 175,599  additional  shares of common stock in
         exchange  for  $183,359  in  cash  under  the  same  private  placement
         memorandum offering in August and September 1997.
                                      F-10
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(7) Subsequent events, continued
     b)  Convertible notes- In November and December  1997,  the Company  issued
         5.5% convertible senior subordinated secured notes due 2002 in exchange
         for approximately  $4,300,000 in cash. These notes are convertible into
         shares  of the  Company's  common  stock  at a  conversion  price to be
         determined by so stated formula,  but at a price no less than $1.25 per
         share.  If all of the notes are converted at the lowest possible price,
         the  Company  would be  required  to issue  3,440,000  shares of common
         stock.  These notes also  carried  warrants for an  additional  258,000
         shares of common stock with an exercise price of $3.17 per warrant,  or
         total  proceeds  to the  Company  of  $817,860  in the event all of the
         warrants are exercised. The notes are secured by the Company's non-MIII
         oil reserves in Utah.

     c)  Sao Tome concession  payment-  When the Company  entered into the joint
         venture agreement in May 1997 with the Democratic  Republic of Sao Tome
         and  Principe,  (DRSTP),  the Company was  required to pay a $5,000,000
         concession fee to the DRSTP  goverment.  In September 1997, the Company
         received a Memorandum of Understanding  from the DRSTP government which
         allows the  Company to pay this  concession  fee within five days after
         the DRSTP files the  relevant  official  maritime  claims maps with the
         United Nations and the Gulf of Guinea Commission. In December 1997, the
         Company paid  $2,000,000 of this  concession  fee to the DRSTP form the
         proceeds of the convertible note offering.

     d)  Utah oil wells and reserves-On September 29, 1997, the Company  entered
         into an agreement to acquire 22 oil, gas and mineral  leases located in
         Uintah  and  Duchesne  Counties,  Utah from  three  joint  owners.  The
         purchase agreement was closed on October 8, 1997, at which time the the
         Company received the lease assignment. The terms of the acquisition are
         for the  Company  pay  $250,000 in cash,  issue  250,000  shares of the
         Company's  common stock at each of the following  four dates:  closing;
         December 30, 1997;  March 30, 1998 and June 30, 1998.  The Company also
         was required to  guarantee  that the bid price on the date the Rule 144
         restrictions  lapse will be no less than $2.00 per share or the Company
         is required to either issue additional  shares or to pay the difference
         in cash, at the Company's option.  The Company also granted the sellers
         a 4% gross production  receipts  royalty to a maximum of $677,000.  The
         Company is  currently  evaluating  the  existing  reserve  reports  and
         underlying  data on  these  leases  as well as has  contracted  another
         independent  appraiser to complete new reserve reports for its use. The
         total  valuation  of  this  transaction is $2,250,000 and is applied as
         $375,800 of oil and gas reserves and $1,874,200 of equipment.
 
     e)  Olmos Nueces River Prospect oil and natural gas lease- In October 1997,
         the  Company  entered  into an  agreement  to  acquire a 3/8  undivided
         interest  in a natural  gas well that had been  plugged  and  abandoned
         approximately 10 years ago. This agreement  requires the Company to pay
         the seller $150,000 and 50,000 shares of the Company's common stock, as
         well as to pay the Company's proportinate share of the costs to reenter
         this well.  The  Company is also  required  to carry the  seller's  1/8
         proportionate  share of the reentry  costs until the well is producing.
         The seller also owns an undivided 50% interest in the oil and gas lease
         on the  49,019  acres  of land  contiguous  to the  initial  well.  The
         agreement  allows the  Company to acquire a 3/8  undivided  interest in
         this lease by paying to the seller  approximately  $343,000  each April
         for four years.  The Company  received the initial lease  assignment on
         December 1, 1997.  The Company is  currently  evaluating  the  existing
         reserve  reports  and  underlying  data on these  leases as well as has
         contracted  another  independent  appraiser  to  complete  new  reserve
         reports for its use.

    f)   Firm commitment letter of intent-In December 1997, the Company received
         a firm  commitment  letter of intent form a registered  brokerage house
         which  contemplates a public offering of  approximately  $50,000,000 of
         the  Company's  debt  securities.  This  offering,  if it proceeds,  is
         contemplated for early 1998.

    g)   Test oil  production-  In  late  November  1997,  test  oil  production
         amounting to approximately  444 barrels was picked up from the tanks at
         the Gunsite Sand lease.  At that time the Company had  approximately  9
         wells back on line and pumping.  In late  November  and early  December
         1997, test oil production  amounting to approximately 1,292 barrels was
         picked  up from the  tanks at the 22  leases  in  Uintah  and  Duchesne
         Counties, Utah.

    h)   Stock repurchase- In December  1997,  the Company  repurchased  250,000
         shares of its common stock for $500,000 in cash. This was the first 25%
         quarterly repurchase agreed to by the Company relating to the 1,000,000
         shares issued to acauire the DRSTP geological data.

































                                      F-11
<PAGE>




                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                            SUPPLEMENTARY INFORMATION

                                      ----

                                   (UNAUDITED)




















































                                      F-12
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

         CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES

                        September 30, 1995, 1996 and 1997

                                      -----

                                   (Unaudited)
<TABLE>
<S>                                                               <C>                    <C>                  <C>
                                                                         1995                  1996                 1997
Developed oil and gas properties                             $                     0                    0            14,335,646
Undeveloped oil and gas properties--                                               0                    0                     0
                                                                  ------------------     ----------------     -----------------
                                                                                   0                    0            14,335,646

Accumulated depreciation, depletion and valuation
allowance                                                                          0                    0                     0
                                                                  ------------------     ----------------     -----------------
Net capitalized cost                                         $                     0                    0            14,335,646
</TABLE>

               COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION,
                     EXPLORATION AND DEVELOPMENT ACTIVITIES

                   Period since inception ended September 30,
                       1995 and years ended September 30,
                                  1996 and 1997

                                   (Unaudited)

<TABLE>
<S>                                                               <C>                    <C>                  <C>
                                                                         1995                  1996                 1997
                                                                  ------------------     ----------------     -----------------
Acquisition of properties:
           Developed                                         $            0                     0                14,335,646

           Undeveloped                                                    0                     0                     0

Exploration costs, excluding valuation allowance                          0                     0                     0

Development costs                                            $            0                     0                     0
</TABLE>


              See accompanying notes to supplementary information.

                                      F-13
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                    STANDARDIZED MEASURE OF DISCOUNTED FUTURE
              NET CASH FLOW RELATING TO PROVED OIL AND GAS RESERVES

                   Period since inception ended September 30,
                       1995 and years ended September 30,
                                  1996 and 1997
<TABLE>
<S>                                                               <C>                    <C>                  <C>
                                                                         1995                  1996                 1997
                                                                  ------------------     ----------------     -----------------
Future cash inflows                                          $                     0                    0            54,799,039

Future production and development costs                                            0                    0           (24,574,717)

Future income tax expenses                                                         0                    0                     0
                                                                  ------------------     ----------------     -----------------

       Future net cash inflows                                                     0                    0            30,224,322

10% annual discount for estimated timing of cash flow                              0                    0           (15,888,676)

Standardized measure of discounted future net cash flow      $                     0                    0            14,335,646
</TABLE>





























              See accompanying notes to supplementary information.

                                      F-14
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                    STANDARDIZED MEASURE OF DISCOUNTED FUTURE
                   NET CASH FLOW AND CHANGES THEREIN RELATING
                         TO PROVED OIL AND GAS RESERVES

                   Period since inception ended September 30,
                       1995 and years ended September 30,
                                  1996 and 1997

                                      ----

                                   (Unaudited)

The following are the principal sources of change in the standardized measure of
discounted future net cash flows during 1997, 1996 and 1995:
<TABLE>
<S>                                                               <C>                    <C>                  <C>

                                                                         1995                  1996                 1997
                                                                  ------------------     ----------------     -----------------
Sales of oil and gas produced, net of production costs       $    0                      0                    0

Net changes in prices and production costs                        0                      0                    0

Extensions, discoveries and improved recovery,                                                                0
          Less recovery costs                                     0                      0

Revisions of previous quantity estimates                          0                      0                    0

Reserves purchases, net of development costs                      0                      0                    14,335,646

Reserves sold                                                     0                      0                    0

Accretion of discount                                             0                      0                    0

Net change in income taxes                                        0                      0                    0

Other                                                             0                      0                    0
                                                                  ------------------     ----------------     -----------------
                  Net change                                      0                      0                    14,335,646

Standardized measure of discounted future net cash flow:
                   Beginning of year                              0                      0                    0
                                                                  ------------------     ----------------     -----------------
                                                                  
                   End of year                               $    0                      0                    14,335,646
                                                                  ==================     ================     =================
</TABLE>













              See accompanying notes to supplementary information.

                                      F-15
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                          RESERVE QUANTITY INFORMATION

                   Period since inception ended September 30,
                       1995 and years ended September 30,
                                  1996 and 1997

                                      ----

                                   (Unaudited)
<TABLE>
<S>                                                <C>             <C>          <C>           <C>         <C>         <C>
                                                            1995                        1996                        1997
                                                   -----------------------      --------------------      ------------------------
                                                    Gas             Oil          Gas           Oil         Gas              Oil
                                                   (MCF)           (bbls.)      (MCF)         (bbls.)     (MCF)            (bbls.)
Proved developed and undeveloped reserves:
            Beginning of year                         0               0            0             0           0                0

             Extensions, discoveries and              0               0            0             0           0                0
                    improved recovery

            Revisions of previous                     0               0            0             0           0                0
               estimates (1)

             Sales                                    0               0            0             0           0                0

             Purchases                                0               0            0             0           0        2,500,000

             Production                               0               0            0             0           0                0

             End of year                              0               0            0             0           0        2,500,000

Proved developed reserves                             0               0            0             0           0        2,500,000
</TABLE>




























              See accompanying notes to supplementary information.

                                      F-16
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

           RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING ACTIVITIES

                   Period since inception ended September 30,
                       1995 and years ended September 30,
                                  1996 and 1997

                                      ----

                                   (Unaudited)

<TABLE>
<S>                                                               <C>                    <C>                  <C>
                                                                         1995                  1996                 1997
                                                                  -------------------    ----------------     -----------------
Revenue:
        Oil and gas sales                                    $             0                    0                     0

Costs and expenses:                                                        0                    0                     0
         Lease operating expenses                                          0                    0                     0

         Exploration costs                                                 0                    0                     0

         Depreciation and depletion                                        0                    0                     0

         Income tax (benefit) expense                                      0                    0                     0
                                                                  -------------------    ----------------     -----------------
Results of operation from producing activities
            (excluding corporate overhead and interest costs)$             0                    0                     0
</TABLE>





























              See accompanying notes to supplementary information.

                                      F-17
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                       NOTES TO SUPPLEMENTARY INFORMATION

                                      ----

                                   (Unaudited)

1.       PRESENTATION OF RESERVE DISCLOSURE INFORMATION

         Reserve  disclosure  information  is  presented  in accordance with the
         provisions of Statement of Financial Accounting Standards No. 69 ("SFAS
         69"), Disclosures About Oil and Gas Producing Activities

2.       DETERMINATION OF PROVED RESERVES

         The estimates of the Company's  proved  reserves were  determined by an
         independent  petroleum  engineer in accordance  with the  provisions of
         SFAS 69. The estimates of proved reserves are inherently  imprecise and
         are  continually  subject  to  revision  based on  production  history,
         results of additional  exploration  and  development and other factors.
         Estimated  future net revenues were computed by applying current prices
         of oil and gas received by the Company to estimated  future  production
         of reserves,  less estimated future  development and production  costs,
         based on current costs.

3.       RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING ACTIVITIES

         The results of operations  from oil and gas producing  activities  were
         prepared in  accordance  with the  provisions  of SFAS 69.  General and
         administrative  expenses,  interest costs and other unrelated costs are
         not  deducted  in  computing  results  of  operations  from oil and gas
         activities.

4.       STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS AND CHANGES
         THEREIN RELATING TO PROVED OIL AND GAS RESERVES

         The standardized  measure of discounted  future net cash flows relating
         to proved oil and gas  reserves  and the  changes  of the  standardized
         measure of discounted  future net cash flows relating to proved oil and
         gas reserves were prepared in  accordance  with the  provisions of SFAS
         69.

         Future  production and  development  costs are computed  estimating the
         expenditures to be incurred in developing and producing the oil and gas
         reserves at year-end, based on year-end costs and assuming continuation
         of existing economic conditions.

         Future income tax expenses are calculated by applying the year-end U.S.
         tax rate to future pre-tax cash inflows  relating to proved oil and gas
         reserves, less the tax basis of properties involved.  Future income tax
         expenses  give  effect to  permanent  differences  and tax  credits and
         allowances relating to the proved oil and gas reserves.

         Future  net  cash  flows  are  discounted  at a rate  of  10%  annually
         (pursuant to SFAS 69) to derive the standardized  measure of discounted
         future net cash flows. This calculation does not necessarily  represent
         an estimate of fair  market  value or present  value of such cash flows
         since future prices and costs can vary  substantially from year-end and
         the use of a 10% discount figure is arbitrary.























                                      F-18
<PAGE>
ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
           FINANCIAL DISCLOSURE.

                                      NONE.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

                        Directors and Executive Officers

The names and age of the directors and  executive  officers of the Company,  and
their positions with the Company, are as follows:

Name                       Age                      Position

Sam L. Bass, Jr............63         Chairman of the Board, President and Chief
                                                Executive Officer

James R. Callender, Sr.....57        Chief Operating Officer, Vice President and
                                                     Director

Noreen G. Wilson...........45        Chief Financial Officer, Vice President and
                                                     Director

James A. Griffin...........43             Secretary, Treasurer and Director

Robert McKnight............62                   President of BAPCO

William Beaton.............75                         Director

The principal  occupations for the past five years (and, in some instances,  for
prior years) of each of the directors and executive  officers of the Company are
as follows:

     Sam L. Bass,  Jr. has been the Chairman of the Board,  President  and Chief
Executive  Officer of the  Company of the since  September  1996.  Mr. Bass also
serves as the Chief Executive Officer of Bass Environmental  Waste, Inc., of the
which he founded in 1987, U.S. Energy,  Inc., which he founded in 1984, and Bass
Stabilizers,  Ltd.,  which  he of the  co-founded  in  1978,  each of which is a
privately-held  company to which he devotes  minimal time.  From of the December
1993 to September  1995, he served as President and Chief  Executive  Officer of
Bass  Environmental  of the World  Wide  Services,  Inc.  From  January  1992 to
September  1995,  he served as President and Chief  Executive  Officer of the of
Bass  Environmental Inc. Mr. Bass is a pioneer in the field of downhole drilling
and stabilization, and is the the inventor of seven drilling aids, many of which
are being  used  around  the e the  world.  Mr.  Bass  founded  a  fire-fighting
organization  called  Al-Wadhi,  through  which he joined  others in  efforts to
putthe  out oil well  fires in  Kuwait,  immediately  after the Gulf War,  for a
period of  approximately  18 months in 1991 and 1992.  Mr. Bass  received a B.A.
degree from McNeese State  University in 1949 and an M.A. degree in Mechanical n
1991 Engineering from Georgia Tech in 1952.

     James R.  Callender,  Sr. has served as Chief  Operating  Officer  and Vice
President of the Company since August 1997 and a Director since  September 1996.
He has also been the  President  and owner of CalSons Co. Inc.,  an ostrich farm
and cattle ranch located in Louisiana,  since November  1990.  From July 1997 to
August 1997,  Mr.  Callender  served as a Consultant to the Company.  From March
1997 to April 1997, he served as a Consultant to Forcenergy Inc., an independent
oil and gas company.  From September 1996 to March 1997, Mr. Callender served as
a Management  Consultant to Arctic  Recoil,  Inc., a maker of high pressure well
control units. He acted as an Investment Consultant to Coburn Inc., an oil field
construction and heavy equipment operator, from February 1996 to September 1996.
From January 1993 to December  1995, Mr.  Callender  served as Chief Engineer to
the Chief  Executive  Officer and Senior  Consultant  at Unocal  Corp.,  a fully
integrated energy resources company whose 991 worldwide operations comprise many
aspects of energy production. Until December 1992, he served as Drilling Manager
of Worldwide  oprations at Unocal Corp. Mr. Callender  received a B.S. degree in
Geology and Engineering from Louisiana State University in 1964.

     Noreen G. Wilson has served as Chief Financial Officer of the Company since
June 1997.  She has been a Director of the Company  since  December  1996.  From
January  1995 to the  present  time,  Mrs.  Wilson  has served as  President  of
Supertrail  Manufacturing  Company, Inc., a real estate development firm located
in Aberdeen,  Mississippi.  Supertrail  Manufacturing  Company,  Inc.  filed for
Chapter 11  reorganization  under the U.S.  Bankruptcy  Code in January 1995. At
that point in time, Mrs. Wilson became  President,  in order to guide and manage
the company  through its  reorganization,  and she devotes  minimal time in this
position.  From  February  1993 to  December  1996,  Mrs.  Wilson  served  as an
International  Consultant for the financing of American builders and contractors
overseas,  primarily working through the Export/Import  Bank and the World Bank.
During the same time period, Mrs. Wilson served as Vice President of Traditional
Enterprises, a financial consulting firm located in Roswell, Georgia. Ms. Wilson
is the first cousin of James A. Griffin.
                                       42
<PAGE>
     James  A.Griffin  has been the  Secretary,  Treasurer and a Director of the
Company since  September  1996. From April 1992 to April 1996, Mr. Griffin was a
founding  and  managing  partner  in the law firm of Griffin &  Pellicane,  Esq.
located in Westbury, New York. In April 1996, he formed the law firm of James A.
Griffin, Esq., but he is currently minimally involved in the practice of law. He
received his J.D. from Touro College, Jacob D. Fuchsberg Law Center, in 1987. He
received his B.A. degree from Dowling College in 1976 and his B.S. degree at the
State  University of New York at Stony Brook,  School of Allied Health Sciences,
in 1979. He is admitted to practice law in the State of New York and is a member
of the  American Bar  Association,  the New York State Bar  Association  and the
Nassau  County Bar  Association.  Mr.  Griffin is the first  cousin of Noreen G.
Wilson.

     Robert  McKnight  has  been  the  President  of BAPCO  since  August  1997.
Previously, Mr. McKnight acted as a Consultant to the Company from November 1996
until August 1997.  From August 1991 until July 1996,  Mr.  McKnight  acted as a
Consulting  Engineer to Patriot  Resources,  an oil and gas  company  located in
Dallas,  Texas.  Mr.  McKnight has 35 years of  experience  in  supervising  and
managing  drilling and  production  operations,  including  reservoir  and field
evaluations, reserve and cash flow determinations for property acquisitions, and
equity  determinations.  Mr. McKnight received his B.S. in Petroleum Engineering
from Texas A&M University in 1957.

     William Beaton has been a Director of the Company since  September 1996. He
currently serves as the Chairman of The Institute of Petroleum (West of Scotland
Branch) and has been in that position for more than the past five years.  He was
the General Manager of Clydsedale Bank of Glasgow, Scotland until his retirement
in  1982.  the  Since  his  retirement  from  the  Bank,  he  has  worked  as  a
self-employed consultant to public and smaller independent the companies. He has
been  involved in the  international  oil and gas  industry for almost 30 years,
with more than 50 the years of experience in management and finance.

     All directors hold office until the next annual meeting of shareholders and
until their  successors are duly elected and  qualified,  unless their office is
vacated in accordance  with the  Certificate  of  Incorporation  of the Company.
elected Officers are elected to serve, subject to the discretion of the Board of
Directors, until their successors are ted appointed. Except for the relationship
between Noreen G. Wilson and James A. Griffin, who are cousins,  there arere ted
no family relationships among the directors and officers of the Company.

                                 Advisory Board

     The Company has  established an Advisory  Board  comprised of three members
with experience in the ares of oil and gas production.  The Advisory Board meets
periodically  with the Company's  Board of Directors  and  management to discuss
matters relating to the Company's  business  activities  including  establishing
commercial  business  alliances  and  working  projects  with  corporations  and
governmental  agancies on an international  basis. Members of the Advisory Board
are reimbursed by the Company for out-of-pocket  expenses incurred in serving on
the Advisory Board.

     Some of the members of the Advisory  Board may serve as  consultants to the
Company under consulting agreements for which they will receive compensation. To
the Company's knowledge, none of its Advisory Board members or other consultants
has any conflict of interest between their  obligations to the Company and their
obligations to others.

     The members of the Company's Advisory Board and their primary  professional
or academic affiliations are listed below.

     Senator  Vance  Hartke has been a member of the  Company's  Advisory  Board
since  September 1996. Mr. Hartke was the United States Senator for Indiana from
1959 to 1977.  While a Senator,  he served on both the Finance are Committee and
the Commerce Committee,  two of the most powerful and prestigious  committees of
the U.S. Senate. Prior to his senatorial term, he served as Mayor of the City of
Evansville,  Indiana from 1956 to 1958, when he are resigned to take his seat in
the U.S. Senate. Mr. Hartke's political career also includes service as a Deputy
Prosecuting  Attorney,  seven  times as a delegate  to the  Democratic  National
Convention,  as Democratic County Chairman in ing Vanderburgh  County,  Indiana,
and a Chairman  of the U.S.  Senatorial  Campaign  Committee.  He  continues  to
practice law at the law firm of Hartke & Hartke in Falls  Church,  Virginia.  He
currently sits on the Board of Directors of the  International  Human Assistance
Programs,  the New York Hall of Science and Technology,  the New York Commission
for  the  Development  of  Flushing  Meadows,  Federated  Finance  Corp.,  First
Federated  Savings  Bank,  and  McCrane  & Co.  He  received  his A.B.  from the
University of Evansville in 1941, and his J.D. from Indiana University School of
Law in 1948 where he was Editor-in-Chief of the Indiana Law Journal.
                                       43
<PAGE>
     Marvin  Gibbons  has been a member of the  Company's  Advisory  Board since
September  1996.  In  1990,  Mr.  Gibbons  founded  a  private  company  seeking
investment capital for various  development  projects,  including several Native
American Indian  Developments.  He opened a private  domestic and  international
import/export  company, as well. During the past seven years, Mr. Gibbons became
a partner and Acting Secretary of CAL-NOR,  Cal-Marine al Industries,  ESOP, and
Zenith Insurance  Limited.  He is currently  involved in a number of Development
Projects both in the United States and internationally.
 
     Ken Water has been a member of the Company's Advisory Board since September
1996.

     All directors hold office until the next annual meeting of shareholders and
until their  successors are dully elected and qualified,  unless their office is
vacated in accordance with the Articles of the Company.  Officers are elected to
serve,  subject  to the  discretion  of the  Board  of  Directors,  until  their
successors are appointed.

                      Committees of the Board of Directors

     The  Company  expects to  establish  an Audit  Committee  and  Compensation
Committee  in  early  1998,  each of which  will be  comprised  of at least  two
independent  Directors.  The Audit  Committee  will,  among other  things,  make
recommendations to the Board of Directors regarding the independent  auditors to
be nominated for  ratification by the  shareholders,  review the independence of
those  auditors  and review  audit  results.  The  Compensation  Committee  will
recommend to the Board  compensation  plans and arrangements with respect to the
Company's  executive  officers and key personnel.  It is  contemplated  that the
Audit and  Compensation  Committees  will initially  include  William Beaton and
another  independent  Director  who the Company is  currently  in the process of
identifying.  The Board of Directors does not currently have and does not intend
to establish a Nominating Committee as such functions are to be performed by the
entire Board of Directors.

                            Compensation of Directors

     Non-employee   directors   of  the  Company   currently   receive  no  cash
compensation  for serving on the Board of Directors other than  reimbursement of
reasonable expenses incurred in attending meetings.  The Company does not intend
to separately compensate employees for serving as directors.

     In September 1996, the Company issued to each of James R. Callender, Noreen
G.  Wilson,  James A.  Griffin and William  Beaton,  directors  of the  Company,
500,000 Common Shares in connection with their serving on the Company's Board of
Directors.

                         ITEM 11.EXECUTIVE COMPENSATION

     The  following  table sets forth,  in summary form,  the cash  compensation
earned  during the period from  October 31,  1996 to  September  30, 1997 by its
Chief  Executive  Officer  of the  Company  and by the  two  other  most  highly
compensated  executive officers whose compensation  exceeded $100,000 during the
year ended September 30, 1997:

                           SUMMARY COMPENSATION TABLE

                     Annual Compensation(c,d,e)        Long-Term Compensation(f)
(a)              (b)       (c)      (d)       (e)            (f)
NAME AND                                                  RESTRICTED
PRINCIPAL        FISCAL                   OTHER ANNUAL      STOCK 
POSITION          YEAR    SALARY   BONUS  COMPENSATION      AWARDS
                   (1)     (2)                               (4)
Sam L. Bass, Jr.  1997   $480,000    0      $125,000       500,000
CEO, President                                 (3)         shares

James R.          1997   $100,000    0          0          500,000
Callender, Chief           (5)                             shares
Operating Officer,
Director

James A. Griffin  1997   $120,000    0          0          500,000
Secretary,                                                 shares
Treasurer, shares
Director shares

Noreen G. Wilson  1997   $360,000    0          0          500,000
Executive Vice                                             shares
President, Chief 
Financial Officer

(1) James R. Callender joined the Company as its Chief Operating Officer in July
1997. Noreen G.Wilson joined the shares Company as Executive  Vice-President and
Chief Financial Officer in January 1997.

(2) Salaries for Sam L. Bass,  Jr.,  James A. Griffin,  and Noreen G. Wilson are
accrued and not paid in cash.  Each shares  individual  has an option to convert
all or part of any  accrued  salary to Common  Stock of the  Company  at a price
shares reasonably established by the Board of Directors at the time of exercise.
                                       44
<PAGE>
(3) Represents  amortization of Common Stock of ERFC  distributed in 1995 to Sam
L. Bass, Jr.

(4) Restricted stock awards to Messrs. Griffin and Callender and Ms. Wilson were
awarded in fiscal year 1997 and shares were vested as of the date of grant.

(5) This amount was paid in cash and represents salary for a 2.5 month period.

(6)The  aggregate  value of  benefits  to be  reported  under the "Other  Annual
Compensation"  column did not exceed the shares  lesser of $50,000 or 10% of the
total annual salary and bonus reported for the named executive officer.


                         Proposed Employment Agreements

     The Company  contemplates  entering into three-year  employment  agreements
with each of Sam L. Bass, Jr., James shares A. Callender,  Sr., Noreen G. Wilson
and James A.  Griffin to serve in their  respective  positions.  The  Company is
still  shares in the process of  determining  the terms and  conditions  of each
employment agreement.

                           Proposed Stock Option Plan

     The Company does not  currently  have a stock option plan or other  similar
employee  benefit  plan for shares  executives  and/or  other  employees  of the
Company, and no options have been granted or are currently outstanding.

     The Board of Directors of the Company plans to approve and adopt a proposed
1998  Stock  Option  Plan  (the  shares  "Plan"),  pursuant  to which  officers,
directors,  key  employees,  and  consultants of the Company will be eligible to
shares  receive  incentive  stock  options and  non-qualified  stock  options to
purchase  Common  Shares.  The Plan would also  shares  provide for the grant of
stock appreciation rights,  restricted stock, performance shares and performance
units at the discretion of Company's Board of Directors.

     With respect to incentive  stock  options,  the Plan would provide that the
exercise  price of each such option be at least equal to 100% of the fair market
value of the  Common  Shares  on the date that such  option is  granted  (and be
shares 110% of fair market  value in the case of  shareholders  who, at the time
the  option  is  granted,  own more  than 10% of the  total  outstanding  Common
Shares),  and would  require that all such options have an  expiration  date not
later than the date which is one day before the tenth anniversary of the date of
the grant of such option (or the fifth  anniversary  of the date of grant in the
case  of  10%  or res  greater  shareholders).  However,  with  certain  limited
exceptions,  in the event that the option  holder  would cease to be  associated
with the Company, or would engage in or be involved with any business similar to
that of the Company,  such option holder's  incentive  options would immediately
terminate.  Pursuant to the Plan, the aggregate fair market value, determined as
of the date(s) of grant,  for which incentive  options will first be exercisable
by an option holder during any one calendar year will not exceed $ 100,000.
 
                   Limitation of Liability and Indemnification

     The  Company's  Certificate  of  Incorporation  limits the liability to the
Company of individual  directors for certain breaches of their fiduciary duty to
the  Company.  The effect of this  provision is to  eliminate  the  liability of
directors for monetary damages arising out of their failure,  through negligence
or grossly negligent conduct, to satisfy their duty of care, which requires them
to exercise  informed  business  judgment.  The liability of directors under the
federal  securities laws is not affected.  A director may be liable for monetary
damages only if a claimant can show a breach of an individual director's duty of
loyalty to the Company, a failure to act in good faith,  intentional misconduct,
a knowing  violation  of the law,  an  improper  personal  benefit or an illegal
dividend or stock purchase.

     The Company's Certificate of Incorporation also provides that each director
or officer of the Company  serving as director or officer  shall be  indemnified
and held  harmless  by the  Company to the  fullest  extent  authorized  by law,
against all expense,  liability and loss (including  attorneys fees,  judgments,
fines,  Employee  Retirement  Income Security Act, excise taxes or penalties and
amounts  paid or to be paid in  settlement)  reasonably  incurred or suffered by
such person in connection therewith.
                                       45
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                      Beneficial Ownership by Shareholders

     The following table sets forth certain information as of December 29, 1997,
with respect to the beneficial  ownership of the Company's  Common Stock by each
shareholder  known by the Company to be the beneficial  owner of more than 5% of
its  outstanding  shares,  by each  director of the  Company,  by the  executive
officers named in the table below and by the directors and executive officers of
the Company as a group.  Except as otherwise  noted,  the persons  named in this
table,  based upon  information  provided by such persons,  have sole voting and
investment power with le respect to all Common Stock beneficially owned by them.

                                            Common Shares Beneficially Owned
Name and Address                            (1) Number        (2) Percentage

Sam L. Bass, Jr............................. 8,704,568        39.11%
James R. Callender, Sr...................... 500,000          2.1
Noreen G. Wilson............................ 500,000          2.1
James A. Griffin............................ 500,000          2.1
Robert McKnight............................. 75,000           *
William Beaton.............................. 500,000          2.1
                                                          
All officers and directors as a group....... 10,779,568       45.95%
 (six persons)

* Represents less than 1% of outstanding Common Shares or voting power.

(1) The address of each  beneficial  owner is c/o  Environmental  Remediation le
Holding Corporation, 420 Jericho Turnpike, Suite 321, Jericho, New York 11753.

(2)  Shares  beneficially  owned  and  percentage  of  ownership  are  based  on
23,458,125  Common  Stock  outstanding  as  of  December  29,  1997.  Beneficial
ownership is  determined  in  accordance  with the rules of the  Securities  and
Exchange  Commission and generally  includes  voting or  dispositive  power with
respect to such shares.

(3) Includes shares of Common Stock  beneficially owned by Mr. Bass individually
and through entities under his control.

               Selling Shareholders Pursuant to Mandated Form S-1

                                     General

     From  October to  December  1997,  the  Company  raised  gross  proceeds of
$4,300,000  in a private  placement  of the  Company's 5 Notes and Warrants to a
limited number of "accredited"  institutional  investors.  The maximum number of
shares of Common Stock which may be issued by the Company upon the conversion of
the Notes (at a base  conversion  rate of $1.25 per  share,  subject  to certain
limited  conditions)  and the exercise of the Warrants (at an exercise  price of
$2.83 per share) is up to  3,440,000  shares and 283,800  shares,  respectively.
This Form 10-K does not cover the  maximum of up to  3,723,800  total  shares of
Commons Stock  issuable upon the conversion of the Notes and the exercise of the
Warrants for which  registration or an exemption from registration under the Act
will be required.  In connection  with the sale of the Notes and  Warrants,  the
Company  entered  into  a  Registration   Rights   Agreement  with  the  certain
shareholders,  pursuant to which the Company agreed to register the Shares under
the Act for  resale by,  and for the  benefit  of,  such  shareholders.  In this
regard,  the Company has commenced the preparation of a registration on Form S-1
relative to these  shares (the "Form S-1").  Pursuant to such Form S-1,  certain
selling shareholders as described herein ("Selling Shareholders") intend to sell
the  Common  Stock  acquired  thereby  from  time to time  in the  future  ('the
"Shares") upon  conversion of the Notes and the exercise of the Warrants.  Based
on the  number  of  outstanding  shares  of Common  Stock of the  Company  as of
December 29, 1997, the Shares represent approximately 15.8% of the outstanding
                                       46
<PAGE>
Common Stock of the Company. As of December 29, 1997, none of the Notes had been
converted and none of the Warrants had been exercised.

     All of the Shares  held or to be held by the  Selling  Shareholders  may be
offered  pursuant to such Form S-1,  except that,  under the terms of the Notes,
the holders thereof may convert the original  principal amount of the Notes only
to the extent of  one-third  of such  amount on and after each of  December  30,
1997,  January 29, 1998 and February 28, 1998. The conversion  rate of the Notes
is equal to the lowest of (i) $2.83,  representing  100% of the average  closing
bid price  per share of the  Common  Stock as  quoted on the  primary  market or
exchange on which it trades (the "Average Share Price") for the five consecutive
trading days  immediately  preceding  October 15, 1997,  the date of the initial
issuance of the Notes (the  "Issuance  Date"),  (ii) 100% of the  Average  Share
Price for the five consecutive  trading days immediately  preceding  October 22,
1997 or the first  anniversary  of the Issuance Date or (iii) 80% of the Average
Share Price for the five  consecutive  trading  days  preceding  the  applicable
conversion  date on which all or part of the Notes are converted.  However,  the
conversion  price may not be less than $1.25 per share (the "Base Price") unless
80% of the  Average  Share  Price is less than the Base Price for a period of 90
consecutive  calendar  days,  in which  case the Base  Price  will not longer be
applicable.  Because the conversion rate of the Notes is based on future average
trading  prices of the Common Stock,  the number of shares which may actually be
sold could differ  significantly.  The Notes mature,  unless prepaid at any time
after  October 28,  1998 on October  15,  2002 and are secured by the  Company's
proven crude oil reserves on its  properties  in Utah.  The Notes do not contain
any covenants that would prohibit,  limit or restrict,  among other matters, the
Company's ongoing business  operations,  acquisitions of oil and gas properties,
payment of dividends or incurrence of additional indebtedness.  The Warrants may
be exercised at any time through October 15, 2002.

                                 Stock Ownership

     The  following  table  sets  forth  the  names of and the  number of Shares
beneficially  owned by each Selling  Shareholder  as of December  29, 1997.  All
Shares are  beneficially  owned and the sole voting and investment power is held
by the persons named.


Name of Selling        Underlying Notes   Underlying Warrants       Total Shares
Shareholder 

Banque Edouard            320,000              24,000                  344,000
Constant SA
11 Cours de Rive
Case Postale 3754
1221 - Geneva
Switzerland

Elara Ltd.                600,000              45,000                  645,000
P.O. Box 438
Tropic Isle Building
Wickhams Cay
Road Town, Tortola
British Virgin Islands
c/o Talisman Capital
1601 LaGrande Drive
Suite 100
Little Rock, AR 72211

Keyway Investments Ltd.   720,000             54,000                   774,000
19 Mount Havelock
Douglas, Isle of Man
1M1 2QG
British Islands
c/o Midland Walwyn
Capital, Inc.
BCE Place
181 Bay Street
Suite 500
Toronto, Ontario
M5J 2V8
Canada
                                       47
<PAGE>
JMG Capital Partners      320,000             24,000                   344,000
L.P.
c/o JMG Capital
Management Inc.
1999 Avenue of the Stars
Suite 1950
Los Angeles, CA 90067

Triton Capital            320,000             24,000                   344,000
Investments, Ltd.
c/o JMG Capital
Management Inc.
1999 Avenue of the Stars
Suite 1950
Los Angeles, CA  90067

Porter Partners L.P.      320,000             24,000                   344,000
c/o Porter Capital
Management Co.
100 Shoreline Highway
Suite 211B
Mill Valley, CA 94941

EDJ Limited                80,000              6,000                    86,000
c/o Porter Capital
Management Co.
100 Shoreline Highway
Suite 211B
Mill Valley, CA  94941

Cranshire Capital L.P.    240,000             18,000                   258,000
3000 Dundee Road
Suite 105
Northbrook, IL  60062

Legion Fund Ltd.          120,000              9,000                   129,000
c/o Porter Capital
Management Co.
100 Shoreline Highway
Suite 211B
Mill Valley, CA  94941

Banque Franck, SA         400,000             30,000                   430,000
1 Rue Toepffer
1206 - Geneva
Switzerland

Avalon Research Group,          0             25,800                    25,800
Inc.
1900 Glades Road
Suite 201
Boca Raton, FL  33431

Total                   3,440,000            283,800                 3,723,800

The Company has agreed to  indemnify  the Selling  Shareholders  and the Selling
Shareholders  have  agreed  to  indemnify  the  Company  against  certain  civil
liabilities, including liabilities under the Act.

None of the Selling Shareholders has had any position,  office or other material
relationship  with the  Company or any of its  affiliated  within the past three
years.

See Part II,  Item.  "Market  for the  Registrant's  Common  Stock  and  Related
Security Holders Matters" - (b) "Recent Sales of Unregistered Securities."
                                       48
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The Company's  predecessor,  Environmental  Remediation Funding Corporation
"ERFC"),  was incorporated  under the laws of the State of Delaware in September
1995. In August 1996, the  stockholders of ERFC exchanged all of their shares of
ERFC for 2,433,950 authorized and unissued shares of common stock,  representing
87.2% of such  then  outstanding  shares,  of  Regional  Air  Group  Corporation
("RAIR"), a Colorado  corporation.  RAIR was a publicly-owned  corporation which
had ceased  operations and as a result had only nominal assets and  liabilities.
ERFC was then merged  into RAIR.  Following  the  acquisition  of  control,  the
stockholders of RAIR approved the change in the Company's name to  Environmental
Remediation Holding Corporation.

     In April 1997, the Company acquired all of the outstanding capital stock of
BAPCO, a privately-held company controlled by Sam L. Bass, Jr., who has been the
Company's  Chairman of the Board,  President  and Chief  Executive  any Officer.
Through this acquisition, the Company acquired, among other assets, ownership of
all  rights to the BAPCO  Tool and  assignment  of the  Chevron  master  service
agreement.  The Company issued  4,000,000  Common Shares to Mr. Bass in exchange
for the  outstanding  capital stock of BAPCO.  In addition,  the Company  issued
3,000,000 Common Shares to BEW, a company  controlled by Mr. Bass, in connection
with the  assignment  of the Chevron  master  service  agreement.  See " Item 1.
Description of Business. - Environmental Remediation Services."

     From time to time,  Noreen G. Wilson and James A. Griffin,  both  executive
officers and directors of the Company, have advanced funds to the Company in the
total amount of approximately  $760,500,  pursuant to 8.5% the demand promissory
notes of which  $295,300 was repaid  during the fiscal year ended  September 30,
1997,  and  $465,200  the  remains  outstanding.  The  balance of such notes are
convertible  into Common Stock at a  conversion  rate per share the equal to the
fair market value of a share of Common Stock at the time of the advance.

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

                             Index to Exhibits Page

10.1 Chevron Master Service Order and Letter Agreement dated 10/1/96
[previously supplied]

10.2 Centram Marine Services, S.A. Joint Venture Agreement dated 12/6/96
[previously supplied]

10.3 Memorandum of Agreement Between M III Corporation and ERHC dated 6/28/97
[previously supplied]

10.4 Sao Tome Memorandum of Understanding dated 9/30/97 [previously supplied]

21 List of Subsidiaries [previously supplied]

27 Financial Data Schedule [previously supplied]

List  of  Exhibits and Reports on Form 8-K and 8K/A incorporated by reference in
 this report:
                           Form 8K filed July 7, 1997
                           Form 8K filed July 7, 1997
                           Form 8K filed July 23, 1997
                           Form 8K filed July 25, 1997
                          Form 8K files August 14, 1997
                                       49
<PAGE>
                                   SIGNATURES

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

Dated: April 6, 1998

                                   Environmental Remediation Holding Corporation
 
By:/s/Sam L. Bass, Jr.
Sam L. Bass, Jr., CEO and Chairman of the Board

By:/s/Noreen Wilson
Noreen Wilson, Vice President


Pursuantto the  requirements  of the  Securities and Exchange Act of 1934,  this
report has been signed by the following  persons on behalf of the  Registrant in
the capacities and on the dates indicated.

 SIGNATURE                           TITLE                       DATE

/s/James A. Griffin                Secretary                April 6, 1998
   James A. Griffin, Esq.         and Director

/s/Sam L. Bass, Jr.
   Sam L. Bass, Jr.             CEO and Director            April 6, 1998

/s/James Callender
   James Callender                 Director                 April 6, 1998

/s/William Beaton
   William Beaton                  Director                 April 6, 1998

/s/Noreen Wilson                Vice President
   Noreen Wilson                 and Director               April 6, 1998



                                       50
<PAGE>