U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                 Amendment No. 1
                                       To
                                    Form 10-K

ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT
OF 1934
For the fiscal year ended September 30, 1998

                           Commission file No. 0-17325


                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                  --------------------------------------------
                 (Name of small business issuer in its charter)

COLORADO                                                       88-0218499
-------------------------------                                ---------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

        3-5 Audrey Avenue
    Oyster Bay, New York                                        11771
---------------------------------------                       ----------
(Address of principal executive offices)                       (Zip Code)

Issuer's telephone number (516) 922-4170

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

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

                          Common Stock, $.0001 par value
                       -----------------------------------
                                (Title of class)

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

Issuer's revenues for its most recent Fiscal year: $99,278.

The aggregate market value of the 15,840,832 voting stock held by non-affiliates
of the Registrant as of September 30, 1998 was $4,435,433  (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, 1998 was 25,999,900.

                       Documents Incorporated by Reference

                                See Exhibit List
<PAGE>
                                     PART I

ITEM 1.           DESCRIPTION OF THE BUSINESS

         The Company is an independent oil and gas company whose predecessor was
formed  in 1995.  In 1997,  the  Company  focused  on  acquiring  and  servicing
marginally-producing   oil  and  natural  gas  properties  which  contained  the
potential  for  increased  value  through   workovers  and  secondary   recovery
operations utilizing the Company's  proprietary  horizontal drilling tool. Lower
oil prices and  increasing  equipment  costs in 1998 have  reduced the  economic
feasibility  of these  activities  at this time.  The  Company  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 refocused
its activities and has begun to acquire  interests in non-producing  oil and gas
properties,   particularly  high  potential  international  prospects  in  known
oil-producing  areas,  which  could  benefit  from  the  Company's   experienced
executive team in managing the exploration of possible reserves.

         In May 1997, the Company  entered into an exclusive  joint venture with
the Sao Tome, an archipelago island nation 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 onshore 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
exploration  and  is  conducting   geophysical,   seismic,   environmental   and
engineering  feasibility  studies.  In April 1998,  the  Government  of Sao Tome
granted  approval to the joint venture to proceed with the  preparation and sale
of leases of its oil  concession  rights,  which sales were expected to occur in
early  1999.  In July 1998,  The  Company  closed  and formed the joint  venture
national oil company  with the  Government  of Sao Tome.  This company is called
STPETRO.  The Company  owns 49% of STPETRO.  In July,  1998,  the  formation  of
STPETRO was promulgated  into law. In September 1998, the Government of Sao Tome
and STPETRO entered into a TAA Agreement with Mobil.  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,  known as
the "Nueces River Project",  in the Nueces River area of south Texas, one of the
largest  producing natural gas areas in the United States. In December 1997, the
Company re-entered the first of two existing shut-in wells on the property,  and
expected to  ultimately  recover up to 5 BCF per well using 5% of the  estimated
possible gas in place. Due to mechanical  failure  downhole,  this well has been
shut-in  again.  The daily  production  rates  from the  second  well  cannot be
determined until the completion of the reentry. The Company is currently meeting
with two  potential  farm-out  partners to work the project and  believes it has
negotiated an arrangement to drill additional wells on the northern and southern
portions of the leasehold.

         In addition,  the Company acquired in February and March 1997 leases in
oil fields located in Rusk County and Wichita County,  Texas.  These oil fields,
which together comprise  approximately  1,200 acres and 200 wells, have reserves
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 barrels of oil per day.  Through  December 1997, the Company had recompleted
18 oil wells and is currently  producing and selling oil from the Wichita County
field.  Of these wells,  13 had mechanical  failures.  The Company is evaluating
feasible  economic  options  including the potential sale of the Rusk County and
Wichita County properties.

         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 was estimated that the first  approximately 36 wells would
be  scheduled  for  recompletion  and  stimulation  in the fall of 1998 and, the
Company estimated that, after initial workover operations were completed,  these
wells could produce in excess of 3,900 barrels of oil per day.  These  estimates
were subject to internal  verification  by the Company.  An independent  reserve
report prepared by Richard Stephen Shuster, P.E. indicates , based on a study of
133 of such  wells,  which may or may not include any of the wells which are the
subject  of  the  MIII  joint   venture,   proven  and  producing   reserves  of
approximately  5.77 million  barrels of oil and 23.4 BCF of natural gas on these
sites. The leases on the MIII project were never  transferred to the Company and
it is currently evaluating its options with regard to this project.
<PAGE>
         In September 1997, the Company acquired net revenue  interests  ranging
from 76% to 84% in oil and gas properties  totaling  13,680 acres,  located near
the MIII fields,  currently  producing  approximately  70 barrels of oil per day
from six producing wells. As of December 31, 1997, these were the Company's only
commercially  producing  properties,  which  began  realizing  revenues  for the
Company in November 1997. A 1997 independent reserve report prepared by Ralph L.
Nelms and Gerry Graham of the gross recoverable reserves of these properties are
approximately  2.624  million  barrels of oil and 3.302 BCF of natural  gas. The
Company is currently evaluating the existing reserve reports, underlying data on
these leases and the economic  feasibility of increasing  production in light of
current oil prices or of the sale or other disposition of these properties.  The
Company is engaged in  arbitration  regarding  this project and believes  that a
settlement on all issues will be completed in January 1999.

     The  Company  provides  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  (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 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 is
capable of working in coastal  waters as shallow as 19 inches.  Due to the price
structure of the oil and gas business at this time, the Company does not believe
it is in its best  interest to  construct  this barge.  However,  a  substantial
increase  in oil prices  would  cause the  Company to  reevaluate  its  decision
regarding such construction.

         In  addition,  the  Company has  obtained  rights to  participate  in 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 at such time as adequate financing is secured, of which there can be no
assurance.

         To further penetrate the environmental  remediation  services market in
Louisiana. In February 1998, the Company sought to acquire a 70% equity interest
in Ven  Virotek,  Inc.,  a  Louisiana  corporation  ("Virotek"),  from  its sole
shareholder,  Recycling  Remedies,  Inc.  Virotek owns and operates a NORM solid
waste  disposal  site in  Houma,  Lousiana  and  holds  permits  from  Louisiana
environmental  authorities  to  dispose  of  salt  water,  brine  and  naturally
occurring waste products. In March 1998, Virotek obtained two contracts from the
U.S.  Department  of Energy to dispose of salt  water  brine from the  strategic
petroleum  reserves  located in Houma,  Louisiana.  Under the  contracts,  it is
contemplated  initially that a total of 475,000 barrels of brine will be shipped
to Virotek for  disposal,  and  Virotek  will  receive  $1.00 per barrel for its
services.  In August,  1998, this acquisiton was canceled because during the due
diligence process the Company  discovered (1) serious  unresolved  environmental
issues,  (2) greater  refurbishment  expenses than originally  estimated and (3)
larger liabilities than originally represented.

         The Company  commenced  negotiations  for remediation work in Mexico in
September 1998 and for remediation  work in Venezuela in December 1998.  Neither
negotiation has been reduced to contract at this time.

         In 1997,  the Company  believed  that it was 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
horizontal  drilling  system,  known as the 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.
Given adequate oil prices,  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.  In the long run, the Company  believes  that the
BAPCO Tool will have greater applicability in the international market.
<PAGE>
     Beginning in the early 1990's, the combination of secondary recovery of oil
reserves in conjunction  with  environmental  remediation of abandoned oil wells
have became  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  production,  large independent oil companies have
typically  outsourced some or all of the required "plug and abandonment" work to
third party  contractors.  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  existing  oil  recovery  by up to 30%,  prior to formal
abandonment.  The Company, which provides primary and secondary recovery,  "plug
and abandonment"  operations 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. The Company continues to believe
that at such  time  as oil  prices  rise to  suitable  levels,  such  activities
represent a potentially stable revenue source for them.

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) 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,  (ii) at such time as oil prices  are more  favorable,  continuing  to
pursue  environmental  remediation service contracts for oil and gas well rework
and "plug and  abandonment"  services in the United States and  internationally,
and (iii) exploiting the BAPCO Tool.

         Key elements of the Company's growth strategy include:

(1)      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.

(2)      Pursue  Additional  Environmental  Remediation  Contracts.  The Company
         continues  to pursue 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.

(3)      Exploit the BAPCO Tool. The Company has an  experienced  management and
         engineering  team that focuses on  acquisitions  of projects  where the
         BAPCO Tool can be utilized to enhance  primary and  secondary  recovery
         projects.  The  Company  has  had an 80%  success  ratio  for  improved
         production from wells on which the tool has been used.

Summary of Properties

         A summary of the Company's oil and gas properties is as follows:
<TABLE>
<S>                 <C>                         <C>              <C>                 <C>                  
                                                                                          Anticipated
                                                                                          Investment
                                                 Date                                       to Make        Anticipated
Property            Nature of Interest           Acquired        Cost                     Operational      Operational  Date
------------------- -------------------------------------------- ------------------- --------------------- -------------------------
Sao Tome            Joint Venture to drill       May 1997        $5,000,000          $2,200,000 (1)        Undetermined as of
                    and develop fields                           concession                                this time. STPETRO
                                                                 fee,                                      formed and Technical
                                                                 $4,000,000 of                             Agreement
                                                                 which has
                                                                 been paid (2)
------------------- -------------------------------------------- ------------------- --------------------- -------------------------
Nueces River        37.5% interest in a          Oct 1997        $200,000 and        $650,000 (3)          To be determined
Natural Gas         49,000 acre natural                          50,000 shares                             upon completion of
Prospect,           Texas gas lease                              of Common                                 negotiations with two
                                                                 Stock                                     potential farm-out
                                                                                                           partners
<PAGE>
------------------- -------------------------------------------- ------------------- --------------------- -------------------------
Rusk and            Leases in Oil fields         February        500,000             Currently             5 wells currently
Wichita                                          and March       shares              Operational           Operational
County Oil                                       1997            Common
Fields, Texas                                                    Stock
------------------- -------------------------------------------- ------------------- --------------------- -------------------------
Uintah and          Joint Venture with           July 1997       $55,000 and         Minimum               (5)
Ouray               MIII Corporation to                          contemplated        $1,000,000 to
Reservation         develop and operate                          issuance of         $1,500,000
(MIII Project)      335 wells                                    250,000 shares
Utah                                                             of Common
                                                                 Stock to MIII
------------------- -------------------------------------------- ------------------- --------------------- -------------------------
Uinta Project,      Net revenue interests        September       $250,000 and        Currently             6 wells currently
Utah                ranging from 76% to          1997            1,000,000           Operational (6)       operational
                    84% (and 100%                                shares
                    working interest on all                      Common
                    but 2 wells) in oil and                      Stock
                    gas properties of                            (7)
                    approximately 13,680
                    acres, with 22 wells
------------------- -------------------------------------------- ------------------- --------------------- -------------------------
</TABLE>
     (1) The Company has spent  (i)$2,500,000  for data that had been  purchased
through  cash  and  stock as of  March  1998,  and  (ii)  $250,000  in  expenses
preparatory to drilling.  The Company  anticipates  spending $1,500,000 over the
next 12 months for additional  seismic  studies needed to determine the location
and  depth of the  targeted  oil  deposits  and  $700,000  for  operating  costs
associated  with STPETRO in Sao Tome including  salaries and  improvements.  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.   By  Agreement  dated  August  18,  1998,   Procura  assigned  and
transferred all of its rights and obligations in the venture to the Company.  In
consideration  of such  assignment,  the Company issued  2,000,000 shares of its
restricted  stock to Procura.  As of December  31, 1998 said shares had not been
delivered to Procura because Procura has made certain claims to the Company that
it or its  principals  are  entitled  to  additional  shares.  The  Company  has
authorized further  negotiations to settle any disputes with Procura.  Under the
terms  of  the  approved  offer,  Procura  would  receive  4,000,000  shares  of
restricted Common Stock, $12,000 per month for 6 months and warrants to purchase
2,000,000  shares of Common  Stock on a graduated  basis  beginning at $1.00 and
increasing to $3.00  exercisable in increments of 250,000 based upon  production
levels.  Based upon prior meetings with the  principals of Procura,  the Company
believes such offer will be accepted.  See "--Managing  Exploratory Activities -
Sao Tome."

     (2) As of  December  31,  1998,  the Company  had paid  $4,000,000  of this
concession  fee and an  additional  $750,000  for  certain  costs  and  expenses
associated with the project.  The Company believes that this additional $750,000
will be  credited  to the  balance  of the  concession  fee.  See  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Capital Expenditures and Business Plan

     (3) The Company has already  spent  approximately  $350,000  reworking  the
first of two existing shut-in wells on the property.  Due to mechanical  failure
downhold,  this well has been  shut in  again.  The  Company  plans on  spending
approximately  $650,000 to $1,250,000 to bring the second well on line. Provided
financing is secured, the Company would also like to drill 15 to 20 new wells at
this  site in 1999 and is  currently  negotiating  with two  potential  farm-out
partners for wells in the northern and southern  portions of the leasehold.  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. See
"-Workover and Recovery Activities."

     (4) The Company expects to have to spend  $1,200,000 to bring production up
to a commercial  level.  The Company is  evaluating  feasible  economic  options
including the potential  sale of these  properties.  See "-Workover and Recovery
Activities."

     (5) The leases on the MIII  project were never  transferred  to the Company
and it is currently evaluating its options with regard to this project.

     (6) 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 12
additional  wells on line.  It plans to plug and  abandon 2 wells and do further
study on the remaining 2 wells. The Company anticipated utilizing funds acquired
through the Investment  Agreement with Kingsbridge.  Provided other financing of
$5,000,000  to  $10,000,000  is  secured,  the Company is  considering  the most
feasible options to implement a recompilation and drilling program.  The Company
has  entered  into a  settlement  agreement  with regard to  outstanding  issues
between  the  parties.  See  "-Workover  and  Recovery  Activities"  and  "Legal
Proceedings."
<PAGE>
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.

         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")  and the management of such oil company by the
Company during that period. 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  approximately  64,550 square miles in the Gulf of Guinea. On behalf of Sao
Tome,  the Company  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 failed to
make any remaining  concession fee payment at the time Sao Tome determines,  and
the United Nations  accepts,  the EEZ boundaries or fails to timely commence the
orderly  development  of the  national  oil and gas joint  venture  company.  By
Agreement  dated August 18, 1998,  Procura  assigned and  transferred all of its
rights and obligations in the venture to the Company.  In  consideration of such
assignment,  the Company  issued  2,000,000  shares of its  restricted  stock to
Procura.  As of December 31, 1998 said shares had not been  delivered to Procura
because Procura has made certain claims to the Company that it or its principals
are  entitled  to  additional   shares.   The  Company  has  authorized  further
negotiations  to  settle  any  disputes  with  Procura.  Under  the terms of the
approved  offer,  Procura would receive  4,000,000  shares of restricted  Common
Stock,  $12,000 per month for 6 months and warrants to purchase 2,000,000 shares
of Common Stock on a graduated  basis beginning at $1.00 and increasing to $3.00
exercisable in increments of 250,000 based upon  production  levels.  Based upon
prior meetings with the principals of Procura,  the Company  believes such offer
will be accepted.

         In November  1997,  the Company made an initial  $2,000,000  payment in
respect of the initial  concession fee from the net proceeds of its 1997 private
placement,  in June 1998,  paid  $1,000,000 of this  concession fee from the net
proceeds of the Third June 1998 Private Placement, in August, paid $1,000,000 of
this concession fee from the net proceeds of the July/August 1998 Financing.  In
addition,  the Company paid  $250,000  out of the net proceeds of the  September
1998  Financing  and  $500,000  out of the  net  proceeds  of the  October  1998
Financing,  each of which payment were for certain expenses  associated with Sao
Tome.  The  Company  believes  that these  additional  expense  payment  will be
credited to the concession fee.
See "The Company - The Private Placement."

         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.  The Company has
already  provided to Sao Tome  initial  feasibility  studies  including  seismic
interaction, sedimentology,  geochemistry and petrographics and diagnostics. The
Company  expects  to expend at least  $2,300,000  in the  initial  phase of this
project.  Following further studies,  the Company  anticipates  coordinating the
drilling of a "test" well in early 1999. The costs  associated with drilling and
testing  such a well  cannot  be  determined  until the  seismic  data have been
processed  and  evaluated.  In April 1998,  the  Government  of Sao Tome granted
approval to the joint venture to proceed with the preparation and sale of leases
of its oil concession rights,  which sales were expected to occur in early 1999.
In June  1998,  the  Company  and Sao Tome  signed a letter of intent to award a
contract to  Schlumberger  to perform a marine seismic survey in anticipation of
the  license  round to be held in Sao Tome and to act as  technical  advisor and
coordinator of such license  round.  In July 1998, the Company closed and formed
the joint venture  national oil company with the Government of Sao Tome. The oil
company is called the  STPETRO.  STPETRO is owned 51% by the  Government  of Sao
Tome and 49% by the  Company.  The  Company  previously  was  granted  a 25-year
management  arrangement with STPETRO in the 1997 Letter of Intent. In July 1998,
the Ministry of Cabinets and the Prime Minister  executed the STPETRO  formation
documents  and they were  promulgated  into law by the  President.  In September
1998, the  Government of Sao Tome and STPETRO  entered into a TAA Agreement with
Mobil.  Under such  agreement,  Mobil will  perform a technical  evaluation  and
<PAGE>
feasibility study of oil and gas exploration in certain designated acreage.  The
agreement is for an initial term of 18 months and  superceded the need for lease
sales  in  early  1999.  Mobil  retains  a right of  first  refusal  to  acquire
development  rights to all or a portion of the acreage  which it is  evaluating.
Mobil then executed an agreement with Schlumberger to perform the marine seismic
survey as previously  agreed under the letter of intent with the Company  signed
in June 1998. Under the Mobil/Schlumberger agreement,  Schlumberger will perform
seismic work on the option blocks designated in the TAA Agreement.  Such work is
to commence in January 1999.

     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  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
Exxon,  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.

AMCO Montenegro

         In April 1998 the Company  agreed to enter into a 50/50  joint  venture
with a privately  held Delaware  corporation,  AMCO  Montenegro,  Inc.,  and its
related ABC Group of companies  ("AMCO") to construct  and operate an "Off-Shore
Logistics  Center" for the oil industry in the Gulf of Guinea,  on the Island of
Sao Tome.  AMCO Montenegro is a construction  company based in Virginia.  Due to
political  conflict,  the parties were uanble to finalizing the  agreements.  In
April 1998,  Jugobanks AD Podgorica of Montenegro agreed to finance  $50,000,000
for the construction of the "Off-Shore Logistics Center" in Sao Tome. When funds
were blocked because of war in the region,  the Company terminated its tentative
agreement  with AMCO since AMCO could not  perform at the time  performance  was
required.  In April 1998, the Government of Sao Tome and the Company filed their
EEZ coordinates with the United Nations.  The Company  continues to maintain the
right to construct the Off-Shore  Logistics Center and is seeking an appropriate
joint  venture  partner  for the  project  There  can be no  assurance  that the
financing or an appropriate partner will be available for this project.
 .
Workover and Recovery Activities

         In  1997,  the  Company   concentrated   its  acquisition   efforts  on
marginally-producing  properties which  demonstrated 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  pursued a workover  and  recompletion  program on the
properties it intends to commence some workover and recompletion in the future.

     "Workovers"  refer to the  major  repairs  and  modifications  occasionally
required by  producing  oil and natural gas 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.  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  completion
operations.  The Company leases well servicing rigs for its projects and intends
to  continue  to do so in the  future  when  such  services  are  required.  The
completion process may require from a few days to several weeks.

         The  Company's  staff  has  focused  on  maximizing  the  value  of the
properties  within its reserve base.  The results of their efforts are reflected
in limited increased production and additions to reserves.
<PAGE>
         For the  fiscal  year ended  September  30,  1997,  the  Company  spent
approximately  $53,000 on workover and recompletion  operations,  involving nine
wells in Texas. The Company anticipated  spending in excess of $1.825 million on
workover and recompletion  operations during fiscal 1998.  Through September 30,
1998, the Company has spent approximately $460,000 on these operations.

         In connection with this focus, the Company  actively pursues  operating
cost  reductions on the  properties it acquired.  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  producing
natural gas areas in the United States. In December 1997, the Company re-entered
the  first of two  existing  shut-in  wells on the  property,  and  expected  to
ultimately  recover up to 5 BCF per well using 5% of the estimated  possible gas
in place. Due to mechanical failure, this well has been shut in again. The daily
production rates, as well as the anticipated  operational dates, from the second
well  cannot  be  determined  until the  completion  of the  reentry.  Following
revitalization,  the Company  estimates  that such well has 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
Project in October 1997 in consideration for $200,000 and the issuance of 50,000
shares of Common Stock.  In November  1998, the Company issued 491,646 shares of
its  restricted  stock to Autrey  Stephens & Co. in lieu of payment of  $338,007
which represented the Company's share of the costs to reenter the first well. In
addition,  the Company issued  249,536  shares of its restricted  stock to Hinge
Line Inc.  in lieu of  payment of  $171,556  which  Hinge Line Inc.  had paid on
behalf of the Company as the  Company's  share of the yearly option fee which is
due each April for retention of the option on the remaining  49,000 acres.  This
option  fee is due each  April  for a period  of 4 years at a total  payment  of
$343,000 per year. The Company is currently meeting with two potential  farm-out
partners to work the project and believes it has  negotiated an  arrangement  to
drill additional wells on the northern and southern portions of this leasehold.

         The Company plans on spending  approximately  $650,000 to $1,200,000 to
bring both wells on line.  Provided  financing  is  secured,  the  Company  also
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 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 1999.

         Rusk and Wichita County Oil Fields

         The Company  holds  directly  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 Joseph Shoaf, P.E. has reserves verified. Through December 1997, the
Company had recompleted 18 wells,  all of which were operational as of March 20,
1998. Of these wells,  13 had mechanical  failures.  The Company had located its
BAPCO  Tool on site but it has  since  been  removed.  The  Company  anticipated
spending  $1,200,000  in  order  to  bring  production  on  the  fields  up to a
commercial  level.  After  reworking  the fields  using the BAPCO Tool and other
techniques,  the Company believes that these wells could produce from 500 to 800
barrels of oil per day.  The Company is  evaluating  feasible  economic  options
including the potential sale of the Rusk County and Wichita County properties.

         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 $515,625.

         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  had  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 was estimated that the
first   approximately   36  wells  would  be  scheduled  for   recompletion  and
restimulation  by fall 1998,  provided  that the  Company  raised  the  required
funding. After initial workover operations were completed, the Company estimated
that these wells could produce in excess of 3,900 barrels of oil per day.  These
estimates were subject to internal  verification by the Company.  
<PAGE>
An  independent  reserve  report  prepared  by  Richard  Stephen  Shuster,  P.E.
indicates,  based on a study of 133 such wells, which may or may not include any
of the  wells  which are the  subject  of the MIII  joint  venture,  proven  and
producing  reserves of approximately 5.77 million barrels of oil and 23.4 BCF of
natural gas on these sites. The Company's  production estimates at this site are
based  predominately  on the  multiple  sandstone  reservoirs  of  the  Wasatch,
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 reached  5,000 MCF,  MIII had agreed to  construct a gas  gathering
plant on such site,  with the Company  retaining a 25% interest in the plant. As
of this date, it is highly unlikely that such plant will be constructed.

         The  Company  believed it had a 37.762%  working  interest in the wells
located  on the MIII  property,  and would be  entitled  to  receive a $2.50 per
barrel  operator fee on production  in the fields.  The Company also believed it
had the right to receive an  additional  5% working  interest in the wells after
start-up costs of approximately $1.5 million had been 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  contemplated  issuing 250,000 shares of
Common Stock to MIII in connection with entering into this venture.  Such shares
were never issued. In 1998, the Company planned to recomplete and restimulate 36
wells and to drill five to seven  development  and extension wells at this site,
provided  adequate  financing  was secured.  The leases on the MIII project were
never transferred to the Company and it is currently evaluating its options with
regard to this project.

         Uintah Project

         In September 1997, the Company acquired net revenue  interests  ranging
from 76% to 84% (and 100% working  interest) in oil and gas properties  totaling
13,680  acres,  located  near the MIII fields in the Uinta Basin with 22 oil and
natural gas wells,  currently producing  approximately 70 barrels of oil per day
from six producing wells. As of December 31, 1997, these were the Company's only
commercially producing properties, which began realizing revenue for the Company
in November 1997. A 1997  independent  reserve report prepared by Ralph L. Nelms
and Gerry Graham of Sandwood Consultants indicated that the total ultimate gross
recoverable reserves of these properties are 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 Wasatch  transition  zone and lower Green
River  Formations at depths ranging from 5,500 to 16,000 feet. The remaining net
revenue interests in these properties are held by the Ute Tribe.

     At  such  time  as  oil  prices  rise,   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 12 more wells on line. It plans to plug and
abandon 2 wells and do  further  study on the  remaining  2 wells.  The  Company
anticipated  utilizing  funds  acquired  under  the  Investment  Agreement  with
Kingsbridge.   Provided  other  additional  financing  of  about  $5,000,000  to
$10,000,000  is  secured,  the  Company  plans  extensive  work in  this  field,
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
existing  wells to test the viability of more shallow  formations  for potential
future  development.  The Company is currently  evaluating the existing  reserve
reports,  underlying  data on  these  leases  and the  economic  feasibility  of
increasing  production  in  light of  current  oil  prices  or the sale or other
disposition of these properties. The Company is engaged in arbitration regarding
this project and believes  that a settlement  on all issues will be completed in
January 1999.

         Lower oil prices and higher  equipment  costs have reduced the economic
feasibility of drilling, workover and recompletion activities such that they are
marginal at best.  Therefore,  the Company has directed its primary focus to its
high potential international prospects and to a lesser extent to its remediation
activities.

Reserves
         The  following  table  sets forth  estimates  of the proven oil and gas
reserves (gross) of the Company as of December 31, 1998:
<TABLE>
<S>                                <C>         <C>          <C>      <C>        <C>          <C>         <C>
                                                                                                         Oil Equivalent
                                                  Oil                             Gas                    --------------
                                   ------------------------------    ------------------------------       (millions of
                                         (millions of barrels)             (billion cubic feet)             barrels)
           Field (1)                Developed  Undeveloped  Total    Developed  Undeveloped  Total           Total
           -----                    ---------  -----------  -----    ---------  -----------  ------         ------
Nueces River Prospect, Texas.        -              -         -         -            -         -               -
Rusk County Field, Texas.....        -              -         -         -            -         -               -
Wichita County Field, Texas..        -              -         -         -            -         -               -
Uintah & Ouray Reservation,
   Utah.......................       -              -         -         -            -         -               -
Uinta Project, Utah..........        -              -         -         -            -         -               -
                                    ---           -----     -----      ----        -----     -----           -----
         Total.............          -              -         -         -            -         -               -
                                  ======          =====     =====     =====        =====      ====            ====
</TABLE>
<PAGE>
----------
     (1) The Company is currently in the process of evaluating  reserve  reports
on these  properties,  and  therefore,  internally  verified  estimates  for the
developed and undeveloped  proven oil and gas reserves are not available at this
time.

     Estimates of the  Company's  proved  reserves  have not been filed with, or
included  in  reports  to,  any  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 Prospectus represent only estimates.
Reserve   engineering  is  a  subjective   process  of  estimating   underground
accumulations of oil and natural 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 the  Company's  oil and gas  reserves  and
pricing,  see "Management's  Discussion and Analysis of Financial  Condition and
Results 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. Given adequate oil prices, 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.  In the long  run,  the
Company  believes  the  BAPCO  Tool  will  have  greater  applicability  in  the
international market.

         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.  At such time as production  wells become  economically  feasible,  the
Company plans to construct  additional  tools. The BAPCO Tool has been tested on
multiple  wells in a variety of  formations  during the past 3 years.  The BAPCO
Tool has  been  continuously  updated  and  modified  since  the tool was  first
designed and developed by Sam L. Bass, Jr., the Company's  Chairman of the Board
and by Herman Schellstede, an engineering consultants..

Environmental Remediation Services

         The Company provides environmental  remediation services to oil and gas
operators. These services include environmental engineering,  hazardous material
(including naturally occurring  radioactive  material) remediation and disposal,
and oil spill, 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  regulations.  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.

         The Company's  soil  decontamination  systems are capable of handling a
variety  of  different  contamination  problems  utilizing  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.
<PAGE>
         The Company  anticipates that its staff will be 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  will use 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. Provided funds are available, of which there can be no assurance, the
Company  expects to deliver  emergency  crews  trained in chemical and oil spill
containment  and  clean-up  throughout  many  parts  of the  world  should  such
contracts become available.

     In April 1997,  the Company  entered into a master  service  agreement with
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 substantial
deposit was made by the Company to secure the barge.  The Company  believes  the
original  barge  supplier  will not be able to  deliver  since  the owner of the
company died. The Company is attempting to recover the deposit and is seeking an
alternate  supplier.  It is estimated that the Company's barge could be ready to
operate 180 days following funding.  To date, the Company has not determined the
exact level of financing  that will be necessary for this  project,  but expects
$1.5 million is necessary to get the barge  operational.  The Chevron  agreement
was  originally  entered into by BAPCO and 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 Common Stock to BEW in connection with the assignment
of this  agreement.  Due to the price  structure  of the oil and gas business at
this time,  the  Company  does not  believe  that it is in its best  interest to
construct this barge.  However, a substantial increase in oil prices would cause
the Company to reevaluate its decision regarding such construction.

         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,  and  restoring  a site to its  pre-drilling  condition.  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 sealings which can lead to "blow outs,"  spilling oil and gas
into the  surrounding  waters and creating  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.
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.

         To assist in the Company's penetration of the environmental remediation
services  market in  Louisiana,  in  February  1998,  the  Company  executed  an
agreement to acquire a 70% equity interest in Virotek, a Louisiana  corporation,
from its 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. Under the Company's agreement to acquire its
interest in Virotek,  the Company paid an initial installment payment of $15,000
in cash and signed a promissory  note in the amount of $300,000.  The  Company's
payment of the promissory note is pending its receipt from the seller of audited
financial  statements  for  Virotek.  The  Company  came to  believe  that  such
financial  statements  would not be provided and that this  transaction  was not
likely to be completed.  In August 1998, this  acquisition was canceled  because
during the due diligence process the Company  discovered (1) serious  unresolved
environmental  issues,  (2)  greater  refurbishment   expenses  than  originally
estimated and (3) larger liabilities than originally represented.

     In late September 1998, the Company  commenced  negotiations for a contract
with  PEMEX in Mexico to  process  150,000  tons of oil  contaminated  drill bit
cuttings.  The  process  would  involve  moving a high  temperature  burner to a
central site in southern Mexico near the Yucatan  Peninsula and incinerating the
oil  contamination  within the cuttings.  The contract will require PEMEX to pay
the  Company  a  processing  fee of  between  $160-$170  per  ton.  
<PAGE>
     The  cost to  incinerate  and  process  the  cuttings  is  estimated  to be
approximately  $103 per ton including  the cost to incinerate  and transport the
cuttings,  salaries  and  operating  expenses  and the 8%  commission  which the
Company  would be required to pay to the Mexican  agent.  The Company  estimates
that it would  require  $1.8  million to complete  this  project,  for which the
Company would require additional funding.

         In  late  November  1998,  the  Company  commenced  negotiations  for a
contract with a major  international  oil company in Venezuela to incinerate oil
based  drill  cuttings  from 6 wells to be drilled.  This is in the  preliminary
stages and economic feasibility has not been determined.

         The Company is evaluating the financial merit of each of these projects
and potential funding sources at this time.

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  rights to  participate  in 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 66-2/3%
of all net profits of the venture,  in exchange for the  provision 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 as such time as adequate  financing is
secured, of which there can be no assurance.  However, the Company believes that
all initial  funds  available  to it will be focused  initially  on its Sao Tome
activities unless such funds are available solely for this project.

         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 one  million  gallons by the end of the first year of  operation.
Based on a markup 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 in October 1997, the Company recorded sales
of crude oil from the Uinta properties and, in November 1997,  recorded sales of
"test" oil from the Wichita Falls field in north Texas. As of December 31, 1998,
the Company continues to sell oil from both of these properties.  All such sales
were made on the spot market. In the future,  the Company intends to continue to
sell its crude oil and natural gas, and associated oil and gas products,  on the
spot market.

Raw Materials

         The Company  believes  that its source of supply for any  materials  or
equipment  used in its  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  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.
<PAGE>
Environmental Regulation and Claims

     The Company's  workover and environmental  remediation  services  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 contracts with third parties 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 cleanup 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. Cleanup 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." Revision were made in July 1998. 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
many wells and/or oilfield  uneconomical  to operate.  The Company is evaluating
the impact, if any, of the revisions to its business activities.

Patents and Trademarks

         The Company owns or has exclusive rights to use 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 4 to 14 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 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,  after  consideration of other methods,  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  Rusk  County  formations,  as  they  are a
"fractured" type horizon,  and the oil is being drained from existing  fractures
in the  formation.  The  drilling  of  horizontal  drain  holes is  expected  to
encounter  many  new  fracture  systems  within  the  formation,   resulting  in
significant  oil production  increases  from each well because it  interconnects
various fracture systems,  thus enhancing the recovery potential.  
<PAGE>
     Based on data  supplied  by the  Schellstede  Company,  initial  production
increases  from 8 to 10 barrels  per day are common in similar  types of shallow
wells laterally drilled using the lateral drilling system.

Employees

         As of  September  30,  1998,  the Company had 16  full-time  employees,
including three petroleum engineers and one geologist.  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 Oyster Bay,
New York in approximately  1,100 square feet of leased office space. The Company
currently  pays $850 per month in rent under its lease,  which  extends  through
March 2000. 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.

         The Company's oil and gas properties and reserves are described in Part
I, Item 1. Description of the Business.

ITEM 3.           LEGAL PROCEEDINGS

     Piedra  Drilling  Company,  Inc.  ("PDC")  commenced an action  against the
Company in 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 to PDC because the  necessary
equipment and designs were not delivered and/or validly assigned to the Company.
PDC obtained a default  judgment in the amount of  approximately  $1.2  million,
which was vacated in November  1997.  Colorado  counsel for the Company filed an
answer,  counterclaims  and  discovery  demands in  November  1997.  The Company
believed it has a number of meritorious defenses and potential counterclaims and
vigorously  defended  this  action.  This case  went to trial in August  1998 in
Denver and judgment was found in favor of the Company. The award is in excess of
$17,000,  however,  there local  counsel  believes that such judgment may not be
recoverable  since PDC has few  assets.  The time for  appeal has lapsed and the
Company is evaluating whether to seek recovery on the judgment.

         Uinta Oil & Gas, Inc., ("Uinta") one of the three "joint" sellers under
the  agreement to acquire the Uinta leases and certain other assets took certain
actions that were in  contravention  of the agreement  when certain  anticipated
funding to the  Company  did not occur.  The  Company  gave Uinta  notice of its
demand for arbitration under the agreement. Uinta commenced an action agains the
Company, BAPCO, Sam L. Bass, Jr., Noreen Wilson, Jim Griffin, Robert E. McKnight
and Robert  Ballou (the  Company's  geologist) in Uintah  County,  Utah in April
1998.  The  complaint  alleges  fraud  in  the  inducement,  rescission  of  the
agreement, breach of contract and securities fraud and requests punitive damages
and  appointment  of a  receiver.  The  Company  then filed a formal  demand for
arbitration.  Uinta filed a request for a receiver to be appointed.  This motion
was denied; however, the court held the issue of arbitration in abeyance pending
an evidentiary  hearing on the allegations of Uinta's allegations of fraud since
Utah  law  contains  an  exception  to  mandatory  arbitration  when  there  are
allegations  of  fraud.  Prior to the  hearing  on  receivership,  the other two
"joint" sellers, Coconino, S.M.A., Inc. and Pine Valley Exploration,  Inc. filed
their formal demand for  arbitration.  The Company believes that it has numerous
meritorious  defenses to this action.  In the  interim,  the Company has made an
offer to settle this  matter.  The Company  believes  that a  settlement  on all
issues  will be  completed  in  January  1999.  Under the terms of the  executed
settlement,  for the 500,000  shares of restricted  stock which were issued at a
guarantee  price of $2 per share,  additional  restricted  shares will be issued
which  reflect the  difference  between $2 and the price on October 16, 1998 and
December 30, 1998 and the 500,000  shares of  restricted  stock which were to be
issued in early  1998 will be issued  and  treated as if issued at the time such
deliverance  was  initially  required.  In  addition,  the parties  will receive
additional shares equal to the difference between the value on a date certain in
January  1999 and $2 (the "Strike  Price") for the second block of 500,000.  The
Company will  reimburse  certain  filing fees,  attorneys  fees and will pay for
certain  office  equipment.  The  Company  will  receive  a  quitclaim  deed and
assignments to perfect the Company's  interest in the leases.  In addition,  (1)
Uinta will be issued  shares of the  Company's  Common Stock the amount of which
shall be  determined  by dividing  $250,000 by the Strike  Price,  half of which
shares  shall be  included  in this  registration  and  half of  which  shall be
restricted securities, (2) in exchange for assignment of a 4% overriding royalty
interest,  Uinta will  receive  restricted  shares the amount of which  shall be
determined  by dividing  $677,000 by the Strike  Price,  (3) a deficiency  value
equal to $41,200 for the Utah office  building will be liquidated by issuance of
shares  the  amount of which  shall be equal to  $41,200  divided  by the Strike
Price, which shares shall be included in this registration statement,  (4) Uinta
will  receive no more than $10,000 to cost its court costs and  attorneys  fees,
and (5) payment of  outstanding  production  service  invoices to third  parties
totally  $27,000  shall  be  paid  in  the  form  of  shares  included  in  this
registration  statement,  which shares shall be equal to $27,000  divided by the
Strike Price. See "Selling Shareholders".
<PAGE>
         On August 11, 1998, the Company and Kingsbridge agreed to enter into an
agreement to cancel the  Kingsbridge  Private  Equity Line of Credit dated March
23, 1998. Pursuant to the terms of the proposed  cancellation,  the Company will
pay a penalty in the amount of $100,000  and will issue  warrants to purchase up
to an additional  100,000 shares of the Company's Common Stock (the "Kingsbridge
Warrants").  The Company has decided to cancel the  Kingsbridge  Private  Equity
Line of Credit  because  terms of certain  of the third  quarter  1998  fundings
require the Company to cancel this agreement so as to limit the number of shares
of the  Company's  Common Stock  outstanding  upon  conversion  of the Company's
convertible notes in the future.  However,  as of December 31, 1998, the Company
had not  completed  the terms of the  anticipated  cancellation,  and  therefore
continues to be obligated to register the potential  Kingsbridge shares issuable
under the put option  exercise  notice and the  Kingsbridge  Warrant.  Under the
terms of the cancellation,  the Company will be responsible for the registration
of the additional warrants.  On December 10, 1998,  Kingsbridge made application
to the American  Arbitration  Association for arbitration of outstanding  issues
between the parties,  claiming  beaches of  contracts.  The Company has filed an
Answer in such  proceedings.  The Company  believes it has just and  meritorious
defenses to the claims and intends to vigorously defend these claims.

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

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.

         (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 commissions 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 31, 1997)..............         3-3/8   1-3/8
2nd Quarter (January 1 - March 31, 1998) .................        2-3/16     7/8
3rd Quarter (April 1 - June 30, 1998) ....................        1-3/4    41/64
4th  Quarter (July 1 - September 30, 1998)................        1-1/8    11/16

Fiscal Year 1999
1st Quarter (October 1, - December 31, 1998)...............        53/64     1/4

                  (2)      Holders.   The  number  of  record   holders  of  the
                           Company's  Common  Stock as of December  31, 1998 was
                           2075 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 Common 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 is subject to the  discretion  of the Board
                           of  Directors  and  will  depend  upon  a  number  of
                           factors,    including   future   earnings,    capital
                           requirements,  financial  condition and the existence
                           or  absence  of any  contractual  limitations  on the
                           payment of dividends.

         (B)      Recent Sales of Unregistered Securities.

                  (1)      The Company made the following  unregistered sales of
                           its securities from October 1, 1997 through  December
                           31, 1998:
<PAGE>
<TABLE>
<S>       <C>                 <C>                <C>                            <C>
DATE
OF         TITLE OF
SALE       SECURITIES         AMOUNT             CONSIDERATION                  PURCHASER
-------   ------------------  --------------     ---------------------          --------------------------

10/97     Common Stock        830,273            $913,000                       Purchasers in Rule 506
                              (1)                                               private placement (14 purchasers)

10/97     Common Stock        1,000,000          Oil reserves and               1. Uinta Oil & Gas, Inc
                              (2                 equipment                      2. Pine Valley
                                                 Valued at $2,000,000              Exploration,    Inc.
                                                                                3. Coconino, S.M.A.,
                                                                                   Inc.
                                                                                4. Joseph H. Lorenzo

10/97     Common Stock        112,599            $123,109                       Purchasers in Rule 506
                              (1)                                               private placement (6 purchasers)

10/97     5.5% Convertible    $4,300,000         $4,300,000                     Accredited institutional
          Senior              principal                                         investors
          Subordinated        amount;                                           (10 institutions)
          Notes               convertible
                              into up
                              to 3,440,000
                              shares of
                              Common Stock (1)

10/97     Warrants to         Exercisable        No additional                  Accredited institutional
          Purchase            into 283,800       consideration                  investors
          Common              shares of                                         (11 institutions)
          Stock (1)           Common Stock

10/97     Common Shares       100,000            For consulting                 Kenneth M. Waters
                                                 services valued at
                                                 $295,000

10/97     Common Shares       50,000             3/8 Undivided Interest         Hinge Line, Inc.
                                                 Gas reserves and
                                                 one natural gas well -
                                                 Valued at $148,750

10/97     Common Shares       45,000             Consulting Services            Steve Boltax
                                                 Valued at $17,100


10/97     Common Shares       50,000             Consulting Services            MyTec & Associates
                                                 rendered in connection
                                                 with Wichita and Rusk
                                                 Counties valued at
                                                 $148,500

10/97     Common Shares       50,000             Consulting Services            Sheila Williams Bass
                                                 Valued at $144,000

10/97     Common Shares       100,000            Professional Services          Senator Vance Hartke
                                                 Valued at $291,000

11/97     Common Shares       64,409             $67,750                        Purchasers in Rule 506
                                                 (1)                            private placement (8 purchasers)

12/97     Common Shares       10,000             Consulting Services            C.D. Johnston, Jr.
                                                 Valued at $26,400

2/98      Common Shares       24,000             Part of acquisition of         Craig Phillips
                                                 Utah office building           Robert Ballou
                                                 Valued at $70,000

2/98      Common Shares       282,000            $180,250                       Purchasers in Rule 506
                              (1)                                               Private placement
                                                                                (2  purchasers)

2/98      Common Shares       84,664             For services valued at         Purchasers in Rule 506
                                                 $21,999                        Private Placement
                                                                                (5 purchasers)

2/98      Common Shares       23,200             Consulting Services            Jerome Rappaport
                                                 Valued at $28,496              Andrew Racz

3/98     Warrant to          Exercisable        In connection with              Kingsbridge Capital
          Purchase            into 100,000       entering into Investors        Limited
          Common Stock        shares of          Agreement
                              Common
                              Stock (1)
<PAGE>
3/98      Common Stock        300,000            $236,250                       Purchasers in Rule 506
                              (1)                                               Private Placement
                                                                                (1 Purchaser)

4/98      12.0%               $300,000;          $300,000                       Accredited investors
          Convertible         convertible                                       (9 institutions)
          Notes               into up to
                              200,000 shares of
                              Common Stock
                              (1)

 4/98     Warrants to         Exercisable        No additional                  Accredited investors
          purchase            into 210,000       consideration                  (9 institutions)
          Common Stock        shares (1)

 6/98     Warrants to         Exercisable        $200,000                       Accredited investors
          purchase            into 1,050,000                                    (3 institutions)
          Common Stock        shares (1)

 6/98     12.0%               $425,000;          $425,000                       Accredited investors
          Subordinated        convertible                                       (5 institutions)
          Convertible         into up to
          Notes               425,000 shares
                              of Common
                              Stock (1)

 6/98     Warrants to         Exercisable        No additional                  Accredited investors
          purchase            into 531,250       consideration                  (5 institutions)
          Common Stock        shares (1)

 6/98     5.5%                $1,293,750         $1,250,000                     Accredited investor
          Convertible         convertible                                       (1 institution)
          Notes               into up to
                              1,798,124 shares
                              of Common
                              Stock  (1)

 6/98     Warrants to         Exercisable        No additional                  Accredited investor
          purchase            into 230,000       consideration                  (1 institution)
          Common Stock        shares (1)

6/98      Common Shares       234,200            $135,600                       Purchasers in Rule 506
                              (1)                                               Private placement
                                                                                (15 purchasers)

6/98      Common Shares       62,420             For services                   Jerome Rappaport
                                                 Valued at $31,884              Ilona Minovskiy
                                                                                Yvonne Montiel
                                                                                Assonta LoGiudice
                                                                                Maria Cardenas
                                                                                HWK Consultants, Inc.

7/98      8.0%                $2,485,000         $2,485,000                     Accredited Investors
          Convertible         convertible                                       (10 Institutions)
          Notes               into up to
                              3,303,840 Shares
                              of Common
                              Stock (1)(3)

7/98      Warrants            Exercisable        No additional                  Accredited Investors
          to purchase         into 223,650       consideration                  (10 Institutions)
          Common Stock        shares (1)

8/98      Common Stock        47,0000            $23,500                        Purchasers in Rule 506
                              (1)                                               Private Placement
                                                                                (9 Purchasers)

8/98      Common Stock        50,000             Consulting Services            Andrew Racz
                                                 Valued at $25,000

8/98      Common Stock        4,700              Consulting Services            Jerome Rappaport
                                                 Valued at $2,350

8/98      Common Stock        50,000             Penalty due on                 Don Hillin
                                                 Payment made
                                                 By Hinge Line, Inc.
                                                 In April to continue
                                                 Option on 49,000
                                                 Acres, valued at
                                                 $47,656

8/98      Common Stock        525,000            In connection with             1.   Robert McKnight -
                                                 Services on the Company's                 425,000
                                                 Board of Directors             2.   Kenneth Waters-
                                                 Valued at $446,250                       100,000
                                                 (4)
<PAGE>
9/98      Common Stock        249,536            Payment on                     Hinge Line Inc.
                                                 Nueces in lieu of
                                                 Balance due of
                                                 $171,556

9/98      Common Stock        491,646            Payment on                     Autry C. Stephens
                                                 Nueces in lieu of
                                                 Balance due of
                                                 $338,007

10/98     20.0%               $500,000           $500,000                       Accredited Investor
          Convertible         convertible                                         (1 Institution)
          Note                into up to
                              500,000 Shares
                              of Common Stock
                              (1)
                                                
10/98     Warrants            Exercisable        No additional                  Accredited Investor
          to purchase         into 1,500,000     consideration                  (1 Institution)
          Common Stock        shares (1)

10/98     12.0%               $800,000           $800,000                       Accredited Investors
          Convertible         convertible                                       (4 Institutions)
          Notes               into up to
                              640,000 Shares
                              of Common
                              Stock    (1)

10/98     Warrants            Exercisable        No additional                  Accredited Investors
          to purchase         into               consideration                  (4 Institutions)
          Common Stock        2,400,000
                              shares (1)

10/98     Common Stock        109,000            Consulting Services            R&S Environmental
                                                 Valued at $45,984              Inc.

10/98     Common Stock        8,000,000          In consideration               1.  Sam Bass -
                                                 Of services to the                 2,000,000
                                                 Company relative               2.  Jim Callender -
                                                 To the finalization                2,000,000
                                                 Of contracts with              3.  Noreen Wilson -
                                                 Sao Tome and Mobil                 2,000,000
                                                 Not Valued (5)                 4.  Jim Griffin -
                                                                                    2,000,000

11/98     Common Stock        100,000            Consulting Services            Richard Magar
                                                 Valued at $71,000

11/98     Common Stock        2,000,000          Payment in Settlement          Procura
                                                 Of claims relative
                                                 To original Sao Tome
                                                 Agreement valued at
                                                 Not Valued (6)
</TABLE>
     (1) The above transactions were private transactions not involving a public
offering and were exempt from the registration  provisions of the Securities Act
of 1933, as amended,  pursuant to Section 4(2)  thereof.  The sale of securities
was without  the use of an  underwriter,  and the  certificates  evidencing  the
shares bear the  restrictive  legend  permitting the transfer  thereof only upon
registration  of the shares or an exemption under the Securities Act of 1933, as
amended.

     (2) The Company was  obligated  to issue  1,000,000  of which  500,000 were
issued and the balance will be issued pursuant to the Uinta Settlement.

     (3) A total of $412,350 of such convertible notes were converted in October
1998 and 1,210,686 shares issued on such conversions.

     (4) Mr.  Waters has  returned  his  100,000  shares to the  Company  due to
personal  tax  considerations,  therefore no value has been  attributed  to such
shares.

     (5) The Board of Directors  rescinded  the issuance of 8,000,000  shares on
December 18, 1998, therefore no value has been attributed to such shares.

     (6) The  parties  had  agreed to settle  matters  relative  to the Sao Tome
contract,  and Procura is now disputing the  settlement.  The Company is holding
the  shares  until  resolution  of this  matter,  therefore  no  value  has been
attributed  to such shares.  The Company has  authorized  an offer of a proposed
settlement,  which based upon  discussions  with the principals of Procura,  the
Company believes will be accepted.
<PAGE>
ITEM 6.           SELECTED FINANCIAL DATA

         The  selected  financial  data of the  Company  presented  below  as of
September 30, 1998, have been derived from the Consolidated Financial Statements
of the Company,  which  Consolidated  Financial  Statements have been audited by
Durland & Company, CPAs, 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 Plans of Operations."

                                  Fiscal Years ended September 30,
Statement of
Operations Data              1996               1997 (1)                1998 (2)
Revenues:
Environmental
Remediation
Services                 $        0       $       108,944          $     65,404
Crude Oil sales                   0                     0                     0
Other Income                 60,477                 7,331                33,874

Operating expenses          789,225            17,029,327            11,681,706
Income before
taxes and
extraordinary items        (728,748)          (16,913,052)          (11,582,428)
Provision (benefit)
for income items                  0                     0                     0
Net income (loss) (3)      (728,748)          (16,913,052)          (11,582,428)
Net income (loss)
per share                     (0.30)                (1.61)                (0.46)
Weighed average
common stock
outstanding                2,469,511            10,500,293           24,970,815
Balance Sheet Data (at end of period)
Property and
equipment                  3,477,000             4,351,185            6,654,662
Total Assets               3,477,000             4,894,936           11,691,218
Total Liabilities              6,730             1,748,376           12,922,127
Stockholders equity          347,270             3,146,560           (2,730,909)
-------------

     (A) The Company acquired 100% of the issued and outstanding common stock of
ERHC,  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.

     (B) 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 "The Company."

     (C)  The  net  cash  operating  loss  of the  Company  was  $4,849,236  and
$1,283,900 for the fiscal years ended September 30, 1998 and 1997, respectively.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations."

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

     The following  Management's  Discussion and Analysis of Financial Condition
and Results 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  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 sale 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
this goal  through  its  growth  strategy  of:  (i)  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,  (ii) at such times as pil prices are more  favorable,  continuing  to
pursue  environmental  remediation service contracts for oil and gas well rework
and "plug and abandonment" services in the United States and internationally and
(iii) exploiting the BAPCO Tool.

         The Company has acquired all of its oil and gas properties  since 1997.
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   contributions  and  short-term   financing
arrangements.
<PAGE>
         The  following  discussion  should  be read  in  conjunction  with  the
Consolidated  Financial Statements and notes thereto appearing elsewhere in this
Prospectus.

Results of Operations

     Fiscal  Year  Ended  September  30,  1998  compared  to Fiscal  year  Ended
September 30, 1997

         During  fiscal  1998 the  Company  incurred a net loss of  $11,582,428,
compared to a net loss of $16,913,052  in fiscal 1997,  reflecting the Company's
increased level of business  operations.  In fiscal 1998 a total of $935,916 was
accrued, but not paid in cash, as compensation to three officers of the Company.
Depreciation and depletion  equaled $504,314 in fiscal 1998 compared to $273,000
in fiscal 1997.  Amortization of the beneficial  conversion  feature discount on
convertible debt was $1,364,063 for the period ended September 30, 1998 compared
to $0 for the period ended  September 30, 1997.  The net cash  operating loss of
the Company for fiscal 1998 was  $4,849,236  compared to  $1,283,879  for fiscal
1997.

     Officers'  compensation,  professional  fees,  travel,  consultant fees and
miscellaneous  expenses for the period ended  September 30, 1998 compared to the
period ended  September 30, 1997  increased  significantly  due to the Company's
business  operations  continuing  to increase.  Professional  fees in the period
ended September 30, 1998 included legal, audit,  petroleum engineering and other
engineering costs.

         The Company had revenues of $99,278 in fiscal 1998 compared to $116,275
in  fiscal  1997.   Included  in  fiscal  1998  were  preparatory   expenses  of
approximately  $200,000  related  to  the  cost  of  bringing  a  delegation  of
government  officials,  including the Prime  Minister of Sao Tome, to the United
States for meetings with various committees of the United Nations and the United
States government, determining the boundaries of the concession and facilitating
the passage of a law in Sao Tome regarding the boundaries of the country.

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
1999 in part through  additional debt or equity capital and in part through cash
flow from  operations.  A  description  of the Company's  most recent  financing
activities is included herein under the heading "The Company."

         The Company  presently intends to utilize any cash flow from operations
as follows:  (i) seismic  studies and fees for the Sao Tome joint venture;  (ii)
production of wells in the Uintah Basin,  (iii)  production in the oil fields in
Texas; and (vi) working capital and general corporate purposes.

Capital Expenditures and Business Plan

         In May 1997, the Company  entered into an exclusive  joint venture with
the  Democratic  Republic  of Sao Tome &  Principe  ("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.  In December 1997, the Company
paid  $2,000,000 of this concession fee to Sao Tome from the net proceeds of the
1997 Private  Placement,  in June 1998,  paid  $1,000,000 of this concession fee
from the net proceeds of the Third June 1998 Private Placement,  in August, paid
$1,000,000 of this concession fee from the net proceeds of the July/August  1998
Financing.  Subsequent  to September  30,  1998,  $250,000 was paid from the net
proceeds of the  September  1998  Financing  and  $500,000 was paid from the net
proceeds of the October  1998  Financing to pay other  expenses and  obligations
relative  to Sao  Tome  which  the  Company  believes  will be  credited  to the
concession fee.

     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  $2,200,000
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
concession  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.
<PAGE>
         In April 1998, the Government of Sao Tome granted approval to the joint
venture to proceed with the preparation and sale of leases of its oil concession
rights,  which sales were  expected to occur in early  1999.  In June 1998,  the
Company  and Sao  Tome  signed  a  letter  of  intent  to  award a  contract  to
Schlumberger  to perform a marine seismic survey in  anticipation of the license
round  to be  held  in  Sao  Tome,  and to act  as  the  technical  advisor  and
coordinator  of such  license  round.  Schlumberger  is a seismic  data  service
company located in Great Britain.  The exact number and size of the lease blocks
to be  offered  have not yet been  determined.  The  Company  intends to run the
survey and acquire the  seismic  data in late 1998 in order to proceed  with the
licensing  round  commencing in early 1999. In July 1998, the Company closed and
formed the joint venture  national oil company with the  Government of Sao Tome.
The oil company is called the STPETRO. STPETRO is owned 51% by the Government of
Sao Tome and 49% by the Company. In addition,  the Company was granted under the
original agreement with the government,  a long term management arrangement with
STPETRO.  In July 1998, the Ministry of Cabinets and the Prime Minister executed
the  STPETRO  formation  documents  and they  were  promulgated  into law by the
President.  In September  1998, the  Government of Sao Tome and STPETRO  entered
into a Technical  Assistance  Agreement with Mobil. Under such agreement,  Mobil
will  perform  a  technical  evaluation  and  feasibility  study  of oil and gas
exploration in certain designated acreage.  The agreement is for an initial term
of 18 months  and  superceded  the need for  lease  sales in early  1999.  Mobil
retains  a right of first  refusal  to  acquire  development  rights to all or a
portion of the acreage which it is evaluating.  Mobil then executed an agreement
with  Schlumberger  to perform the marine  seismic  survey as previously  agreed
under the  letter of intent  with the  Company  signed in June  1998.  Under the
Mobil/Schlumberger  agreement,  Schlumberger  will  perform  seismic work on the
option  blocks  designated  in the TAA  Agreement.  Such work is to  commence in
January  1999.  The  Company  continues  to  maintain a right to  construct  the
Off-Shore  Logistics Center and is seeking an appropriate  joint venture partner
for the project.

         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 1997, 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.  Due to
mechanical  failure  downhole,  this well has been shut in again.  In 1998,  the
Company   planned  on  spending   $650,000  to  $1,200,000  to  make  the  wells
operational,  utilizing funds to be acquired under the Investment Agreement with
Kingsbridge.  See  "The  Company  --- The  Kingsbridge  Equity  Line  of  Credit
Agreement." 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 funding, the
Company  expected  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  rates, of the second well cannot be determined  until the
completion of the reentry.  The Company is currently  meeting with two potential
farm-out   partners  to  work  the  project  and  believes  it  will   negotiate
arrangements to drill additional wells on the northern and southern  portions of
the leasehold.

         In February and March 1997, the Company  acquired 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  1997,  the Company had
recompleted  18 wells,  all of which were  operational  as of March 20, 1998. Of
these wells, 13 had mechanical failures.  The Company has located its BAPCO Tool
on  site.  The  Company  anticipates  spending  $1,200,000  in  order  to  bring
production  on the fields up to a commercial  level.  At the current  time,  the
Company is evaluating  feasible economic options including the potential sale of
the Rusk County and Wichita County properties.

         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. At this time, none of the wells are operational.  The Company
had designed a development  program,  under which it planned to  recomplete  and
restimulate 36 wells and to drill five to seven  development and extension wells
at this site.  This plan would  require  spending  a minimum  of  $1,000,000  to
$1,500,000 in order to make the project operational. Subject to the availability
of such funds, the Company  anticipated that the first wells would be on line by
fall 1998. The leases on the MIII project were never  transferred to the Company
and it is currently evaluating its options with regard to this project.
<PAGE>
     In September 1997, the Company acquired net revenue  interests ranging from
76% to 84% (and 100% working  interest in all but 2 of the wells) in oil and gas
properties  totaling  13,680  acres,  located  near the MIII fields in the Uinta
Basin with 22 oil and natural gas wells.  These  wells are  currently  producing
approximately  70 barrels of oil per day from six  producing  wells  which began
realizing  revenues  for the Company in November  1997.  The Company  planned on
spending approximately  $1,000,000 on additional equipment and up to $80,000 per
well on well  stimulation  in order to bring 12 more wells on line in 1999.  The
Company  plans to plug and abandon 2 more wells and to perform  further study on
the other 2 wells.  The Company  planned on funding this plan through the use of
funds acquired under the Kingsbridge  Investment  Agreement.  See "The Company -
The  Kingsbridge  Equity  Line of Credit  Agreement."  To date,  the Company has
received no funds under the Kingsbridge Investment Agreement,  no longer intends
to take down any funds under this agreement, has negotiated terms to cancel this
agreement  and  Kingsbridge  is seeking  arbitration  of the  agreement  and its
cancellation.  Provided  additional  financing of $5,000,000 to  $10,000,000  is
secured  from  another  source,  the  Company  would  schedule  to  implement  a
recompilation  and drilling  program on this  project.  The Company is currently
evaluating the existing reserve reports, the underlying data on these leases and
the economic  feasibility  of increasing  production in light of the current oil
prices or of the sale or other disposition of these  properties.  The Company is
engaged in arbitration  regarding this project and believes that a settlement on
all issues will be completed in January 1999.

         In April 1997, the Company entered into a master service agreement with
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 substantial
deposit was made by the Company to secure the barge.  The Company  believes  the
original  barge  supplier  will not be able to  deliver  since  the owner of the
company died. The Company is attempting to recover the deposit and is seeking an
alternate supplier. Additional funding is being sought to purchase and equip the
barge.  It is estimated  that the Company's  barge could be ready to operate 180
days following  funding.  Due to the price structure of the oil and gas business
at this time,  the Company does not believe  that it is in its best  interest to
construct this barge.  However, a substantial increase in oil prices would cause
the Company to reevaluate its decision regarding such construction. To date, the
Company has not yet  determined  the extent of financing  that will be necessary
for this project. The Chevron agreement was originally entered into by BAPCO and
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 Common  Stock to BEW in
connection with the assignment of this agreement.

         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.

     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 binding  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
dilution  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. Such decline occurred in fiscal 1998.
This was primarily due to excess oil supplies worldwide.
<PAGE>
         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 natural 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.  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  stage.  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 $29,224,228  which
expire in the years 2010 through 2013.  The Company has a  $11,595,000  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.

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  forward-looking
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 or developments will conform with the Company's  expectations and
predictions is subject to a number of risks and uncertainties,  general economic
market and 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
consequence  to or effects on the  Company or its  business or  operations.  The
Company assumes no obligations to update any such forward- looking statements.

         ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                           MARKET RISK

                  None

         ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<PAGE>



                          INDEX TO FINANCIAL STATEMENTS


                                                                            Page


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

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

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

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

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

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

Supplementary information ..................................................F-16

                                      F-1
<PAGE>





                         REPORT OF INDEPENDENT AUDITORS



TO:  The Board of Directors and Stockholders
         Environmental Remediation Holding Corporation



We have audited the  accompanying  consolidated  balance sheets of Environmental
Remediation Holding Corporation and subsidiary,  (the "Company") as of September
30,  1997  and 1998  and the  related  consolidated  statements  of  operations,
stockholders'  equity and cash  flows for each of the three  years in the period
ended September 30, 1998. These financial  statements are the  responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Environmental Remediation Holding Corporation and subsidiary as of September 30,
1997 and 1998 and the  consolidated  results of their  operations and their cash
flows for each of the three  years in the period  ended  September  30,  1998 in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial  statements,  the  Company  has  experienced  operating  losses  since
inception.   The  Company's  financial  position  and  operating  results  raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these  matters are also  described  in Note 3. The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


                                                   Durland & Company, CPAs, P.A.

Palm Beach, Florida
January 21, 1999
                                      F-2
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                           Consolidated Balance Sheets
                                                       1997            1998
                                             -----------------   ---------------
                       ASSETS
CURRENT ASSETS
  Cash                                        $       327,743    $       36,359
  Restricted cash                                           0            18,826
  Accounts receivable                                       0           193,736
  Prepaid expenses and other current assets           215,708           256,059
                                            -------------------- ---------------
    Total current assets                              543,451           504,980
                                            -------------------- ---------------
PROPERTY AND EQUIPMENT
   Oil and gas properties                            515,625          1,240,175
   Equipment                                       4,220,000          6,435,113
   Deposit on purchase of equipment                  136,560                  0
                                          --------------------   ---------------
     Total property and equipment 
before depreciation and depletion                  4,872,185          7,675,288
   Less: accumulated depreciation and depletion     (521,000)        (1,020,626)
                                            -------------------- ---------------
      Net  property and equipment                  5,393,185          6,654,662
                                            -------------------- ---------------
OTHER ASSETS
   Master service agreement                             300                 300
   Investment in STPetro, S.A.                            0              49,000
   Due from STPetro, S.A.                                 0             452,276
   DRSTP concession fee                                   0           4,000,000
   Deferred offering costs                                0              30,000
                                            -------------------- ---------------
    Total other assets                                  300           4,531,576
                                            -------------------- ---------------
Total Assets                                $     5,936,936       $  11,691,218
                                           ==================== ================

          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
   Stockholder loans payable                $       465,094       $     731,328
   Note payable - bank                              175,000                   0
   Current portion of long-term debt                      0             308,636
   Suspended revenue                                      0             141,409
   Accounts payable and accrued liabilities :
       Accounts payable                             111,054           1,365,764
       Accrued officer salaries                     960,000           1,673,985
       Accrued interest                              37,228           1,116,196
                                           -------------------- ----------------
    Total current liabilities                     1,748,376           5,337,318
                                           -------------------- ----------------
LONG TERM LIABILITIES
   Long term loans                                        0              41,631
   Convertible debt, net                                  0           7,543,178
                                           -------------------  ----------------
    Total long term liabilities                           0           7,584,809
                                           -------------------- ----------------
Total Liabilities                                 1,748,376          12,922,127
                                          --------------------  ----------------
Common stock issued under a repurchase 
agreement; issued and outstanding
1,000,000 and 750,000 shares                      2,000,000           1,500,000
                                         --------------------   ----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.0001  par value; 
authorized 10,000,000 shares; none
issued and outstanding                                   0                   0
Common stock, $0.0001 par value; 
authorized 950,000,000 shares; issued
and outstanding  21,989,526 and 25,999,900           2,199                2,600
Additional paid-in capital in excess of par     19,952,865           25,020,717
Additional paid-in capital - warrants                    0              207,502
Deficit                                        (17,645,204)         (29,224,228)
Stock subscriptions receivable                    (913,300)                   0
Beneficial conversion feature                            0            1,387,500
Deferred compensation, net                        (250,000)            (125,000)
                                         --------------------  -----------------
Total Stockholders' Equity (Deficit)             1,146,560           (2,730,909)
                                         --------------------  -----------------
Total Liabilities and Stockholders' 
Equity (Deficit)                         $       4,894,936     $     11,691,218
                                        ====================   =================
 
    The accompanying notes are an integral part of the financial statements
                                      F-3
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                      Consolidated Statements of Operations
<TABLE>
<S>                                                     <C>                     <C>                <C>
                                                                            Year ended September 30,
                                                           -----------------------------------------------------------
                                                                1996                 1997                  1998
                                                           ---------------       -------------       -----------------
REVENUE
Environmental remediation services                      $                0      $      108,944     $            65,404
Crude oil                                                                0                   0                       0
Other income                                                        60,477               7,331                  33,874
                                                           ---------------       -------------       -----------------
  Total revenue                                                     60,477             116,275                  99,278
                                                           ---------------       -------------       -----------------
COSTS AND EXPENSES
Compensation :
     Officers                                                      147,326           1,185,000               1,793,000
     Directors                                                           0           3,492,981                 446,250
Consulting fees                                                    337,956           8,883,356                 920,723
Geological data and reports                                              0           2,008,848                   8,000
General and administrative expense                                  55,943           1,145,355               5,533,916
Depreciation and depletion                                         248,000             273,000                 499,626
Interest expense                                                         0              40,787               2,480,191
                                                           ---------------       -------------       -----------------
  Total costs and expenses                                         789,225          17,029,327              11,681,706
                                                           ---------------       -------------       -----------------

Net loss                                                $        (728,748)      $ (16,913,052)     $      (11,582,428)
                                                           ===============       =============       =================

Weighted average number of shares outstanding                    2,469,511          10,500,293              24,970,815
                                                           ===============       =============       =================

Net loss per share - basic                              $          (0.30)       $       (1.61)     $            (0.46)
                                                           ===============       =============       =================
</TABLE>
     The accompanying notes are an integral part of the financial statements
                                      F-4
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
       Consolidated Statement of Changes in Stockholders' Equity (Deficit)
                  Years ended September 30, 1996, 1997 and 1998
<TABLE>
<C>                             <C>          <C>      <C>         <C>      <C>         <C>       <C>      <C>          <C>
                                Common Stock                                Beneficial                                  Total S/H
                                                                     APIC     Conv.    Stk.Subs.  Def'd     Accum.       Equity
                                                         APIC      Warrants  Feature   Rec'vable Comp.     Deficit      (Deficit)
                                -------------------- ------------ -------- ----------- --------- -------- ------------ -------------
                                Number
                                of Shares    Amount
                                ------------ ------- ------------ -------- ----------- --------- --------- ------------ ------------
BALANCE, September 30, 1995     1,639,450    $  164      499,924        0           0         0  (500,000)     (3,404)       (3,316)

Common stock issued for :
10/95 - equipment                 744,000        74    3,719,926        0           0         0         0            0    3,720,000
1st quarter - cash                 20,000         2       49,998        0           0         0         0            0       50,000
08/96 - reverse merger            356,317        36     (243,366)       0           0         0         0            0     (243,330)
08/96 - S-8 services               73,277         7       73,270        0           0         0         0            0       73,277
4th quarter - cash and services   406,330        41      529,846        0           0         0         0            0      529,887
09/96 - deferred comp. amort.           -         0            0        0           0         0    72,500            0       72,500
  Net loss                              -         0            0        0           0         0         0    (728,748)     (728,748)
                                ------------ ------- ------------ -------- ----------- --------- --------- -----------  ------------

BALANCE, September 30, 1996     3,239,374       324    4,629,598        0           0         0  (427,500)   (732,152)    3,470,270

Common stock issued for :
03/97 - oil wells/leases          500,000        50      515,575        0           0         0         0            0      515,625
2nd quarter - services          1,900,000       190    1,474,810        0           0         0         0            0    1,475,000
04/97 - Chevron contract        3,000,000       300            0        0           0         0         0            0          300
04/97 - contributed to corp      (100,000)      (10)     (99,990)       0           0         0         0            0     (100,000)
04/97 - BAPCO acquisition       4,000,000       400      499,600        0           0         0         0            0      500,000
3rd quarter - services          2,992,981       299    1,933,307        0           0         0         0            0    1,933,606
09/97 - cash stk subs rec'v     1,201,171       120    1,282,460        0           0  (913,300)        0            0      369,280
4th quarter - services          4,235,000       423    9,022,608        0           0         0         0            0    9,023,031
4th quarter - cash              1,021,000       103      694,897        0           0         0         0            0      695,000
09/97 - deferred comp. amort.           -         0            0        0           0         0   177,500            0      177,500
  Net loss                              -         0            0        0           0         0         0 (16,913,052)  (16,913,052)
                                ------------ ------- ------------ -------- ----------- --------- --------- -----------  ------------

BALANCE, September 30,  1997   21,989,526     2,199   19,952,865        0           0  (913,300) (250,000)(17,645,204)    1,146,560

Common stock issued for :
10/97 - stock subs rec'd                -         0            0        0           0   913,300         0            0      913,300
10/97 - Uinta acquisition       1,000,000       100    1,999,900        0           0         0         0            0    2,000,000
10/97 - Nueces acquisition         50,000         5      148,745        0           0         0         0            0      148,750
11/97 - bene conv feat create           -         0            0        0   1,075,000         0         0            0    1,075,000
1st quarter - services            355,000        36      921,964        0           0         0         0            0      922,000
1st quarter  - cash               177,008        18      167,676        0           0         0         0            0      167,694
01/98 - building equity            24,000         2       69,998        0           0         0         0            0       70,000
2nd quarter - services             23,200         2       28,494        0           0         0         0            0       28,496
2nd quarter - cash                666,664        67      438,432        0           0         0         0            0      438,499
06/98 - bene conv feat create           -         0            0        0     312,500         0         0            0      312,500
3rd quarter  - services           162,420        16      102,868        0           0         0         0            0      102,884
3rd quarter - cash                234,200        23      135,577  200,000           0         0         0            0      135,600
09/98 - accounts payable          491,646        49      337,958        0           0         0         0            0      338,007
09/98 - option fee and penalty    229,536        30      219,193        0           0         0         0            0      219,223
4th quarter - services            479,700        48      473,552        0           0         0         0            0      473,600
4th quarter - cash                 47,000         5       23,495    7,502           0         0         0            0       23,500
09/98 - deferred comp. amort            -         0            0        0           0         0   125,000            0      125,000

    Net loss                            -         0            0        0           0         0         0 (11,343,788)  (11,343,788)
                                ------------ ------- ------------ -------- ----------- --------- --------- ------------ ------------
BALANCE September 30, 1998     25,999,900    $2,600   25,020,717  207,502   1,387,500         0  (125,000)(28,988,992)   (2,495,673)
                               ===========   ======= ============ ======== =========== ========= ========= ============ ===========

Common stock issued under a  repurchase agreement:
BALANCE, September 30, 1996             0    $    0            0        0           0         0         0            0            0
7/97 - DRSTP info               1,000,000       100    1,999,900        0           0         0         0            0    2,000,000
                             ------------    ------- ------------ -------- ----------- --------- --------- ------------ ------------
BALANCE, September 30, 1997     1,000,000       100    1,999,900        0           0         0         0            0    2,000,000
12/97 - cash repurchase          (250,000)        0     (500,000)       0           0         0         0            0     (500,000)
                              ------------   ------- ------------ -------- ----------- --------- --------- ------------ ------------
BALANCE, September 30, 1998       750,000    $  100    1,499,900        0           0         0         0            0    1,500,000
                              ============   ======= ============ ======== =========== ========= ========= ============ ============
</TABLE>
    The accompanying notes are an integral part of the financial statements
                                      F-5
<PAGE>
                ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                      Consolidated Statements of Cash Flows
<TABLE>
<S>                                                                         <C>                <C>                 <C>
                                                                                            Years ended September 30,
                                                                             -------------------------------------------------------
                                                                                   1996               1997                1998
                                                                             ----------------   -----------------   ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                    $       (728,748)  $     (16,913,052)  $    (11,579,024)
Adjustments to reconcile net loss to net cash used by operating activities:
    Amortization of deferred compensation                                              72,500             177,500            125,000
    Amortization of bene. conv. feat. and conv. debt expenses                               0                   0          1,518,243
    Stock issued for services rendered                                                385,000          12,292,829          1,526,980
    Stock issued for DRSTP geological data                                                  0           2,000,000                  0
    Depreciation and depletion                                                        248,000             273,000            499,626
    Other                                                                            (60,477)             (6,730)                  0
Changes in operating assets and liabilities:
   (Increase) decrease in accounts receivable                                               0                   0          (193,736)
   (Increase) decrease in prepaid expenses and other current assets                         0           (215,708)           (40,351)
   (Increase) decrease in due from STPetro, S.A.                                            0                   0          (452,276)
   Increase (decrease) in suspended revenue                                                 0                   0            141,409
   Increase (decrease) in accounts payable                                                  0             111,054          1,811,940
   Increase (decrease) in accrued salaries                                                  0             960,000            713,985
   Increase (decrease) in accrued interest expense and penalties                            0              37,228          1,078,968
                                                                             ----------------   -----------------   ----------------
Net cash provided by (used by) operating activities                                  (83,725)         (1,283,879)        (4,849,236)
                                                                             ----------------   -----------------   ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
DRSTP concession fee payment                                                                0                   0        (4,000,000)
Investment in STPetro, S.A.                                                                 0                   0           (49,000)
Acquisition of property and equipment                                                 (5,000)           (131,560)          (526,306)
                                                                             ----------------   -----------------   ----------------
Net cash provided by (used by) investing activities                                   (5,000)           (131,560)        (4,575,306)
                                                                             ----------------   -----------------   ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of bank borrowing                                                                  0             175,000                  0
Payment of loans                                                                            0                   0          (182,780)
Net proceeds from sale of convertible debt                                                  0                   0          7,719,937
Proceeds from loans payable to  stockholders                                           22,730             760,481          1,059,194
Payments on stockholder loans payable                                                (16,000)           (295,287)          (792,960)
Common stock and warrants sold for cash                                                81,995           1,102,988            865,293
Payments of deferred offering costs                                                         0                   0           (30,000)
Repurchase of common stock                                                                  0                   0          (500,000)
Proceeds from stock subscription receivable                                                 0                   0            913,300
                                                                             ----------------   -----------------   ----------------
Net cash provided by (used by) financing activities                                    88,725           1,743,182          9,051,984
                                                                             ----------------   -----------------   ----------------
Net increase (decrease) in cash                                                             0             327,743          (272,558)
CASH, beginning of period                                                                   0                   0            327,743
                                                                             ----------------   -----------------   ----------------
CASH, end of period                                                        $               0   $         327,743   $         55,185
                                                                             ================   =================   ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest                                     $               0   $           3,559   $         30,819
                                                                             ================   =================   ================
Non cash financing and investing activities: Stock issued to acquire :
      Option fee and penalty settlement                                    $                                                219,223
      Environmental remediation equipment                                  $       3,720,000   $                0  $              0
                                                                             ================   =================   ================
      BAPCO equipment                                                      $               0   $          500,000  $              0
                                                                             ================   =================   ================
      Oil and gas properties and equipment                                 $               0   $          515,625  $      2,148,750
                                                                             ================   =================   ================
      Master service agreement                                             $               0   $              300  $              0
                                                                             ================   =================   ================
     Accounts payable settlement                                           $               0   $                0  $        338,007
                                                                             ================   =================   ================
      Equity in building                                                   $               0   $                0  $         70,000
                                                                             ================   =================   ================
Convertible debt and warrants issued for services                          $               0   $               0  $          51,252
                                                                             ================   =================   ================
Mortgage payable assumed                                                   $               0   $                0  $         28,782
                                                                             ================   =================   ================
Capital lease - telephone equipment                                        $               0   $                0  $          3,393
                                                                             ================   =================   ================
Bank loan - truck                                                          $               0   $                0  $         25,872
                                                                             ================   =================   ================
</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.

   Nature of operations.
         ERHC operates in the environmental remediation industry and the oil and
         natural gas  production  industry  from its corporate  headquarters  in
         Oyster  Bay,  New  York,  and  its  operating   offices  in  Lafayette,
         Louisiana.

   Use of estimates
         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.

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

   Cash equivalents
         The  Company  considers  all highly  liquid  debt  instruments  with an
         original maturity of three months or less to be cash equivalents.

   Concentration of risks
         The  Company  primarily  transacts  its  business  with  one  financial
         institution.  The amount of deposit in that one institution exceeds the
         $100,000 federally insured limit at September 30, 1997 and 1998.

   Accounts receivable
         No allowance for uncollectible  accounts has been provided.  Management
         has evaluated the accounts and believes they are all collectible.

   Deferred offerings costs
         Deferred  offering  costs  represent   capitalized   payments  made  in
         connection with the Company's proposed public offering. These costs are
         charged to  additional  paid-in-capital  as the cash  proceeds  for the
         offerings are received.  In the event the monies are not raised,  these
         costs will be charged to operations.

   Compensation for services rendered for stock
         The Company issued shares of common stock in lieu of services rendered.
         The costs of the services are valued according to the terms of relative
         agreements,  market  value on the date of  obligation,  or based on the
         requirements  of Form S-8, if applicable.  The cost of the services has
         been charged to operations.

    Net loss per share
         Net loss per common  share - basic is computed by dividing the net loss
         by the number of shares of common stock outstanding  during the period.
         Net loss per share - diluted is not presented  because the inclusion of
         common share equivalents would be anti-dilutive.

     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 on the
                                      F-7
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(2) Significant Acquisitions
          agreement  with the seller that the  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.  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,
         except  for  certain   environmental   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.

(3) Going Concern
         The  Company's  current   liabilities  exceed  its  current  assets  by
         $4,832,338.   The  Company  has   incurred   net  losses  of  $728,248,
         $16,913,052 and $11,582,428 in 1996, 1997 and 1998 respectively.  These
         conditions raise  substantial doubt as to the ability of the Company to
         continue as a going concern.  The Company is in ongoing negotiations to
         raise general operating funds and funds for specific projects. However,
         there is no assurance that such financing will be obtained. The Company
         is in  preliminary  discussions  with  several  parties  regarding  the
         potential  sale of some to all of its US  based  crude  oil  production
         fields. In prior years, the Company was able to raise funds in a timely
         manner,  there is no evidence  that they will  continue to do so in the
         future.

(4) Restricted Cash
         A total  balance of $18,826 in  restricted  cash,  which is invested in
         interest-bearing  certificates of deposit,  pledged as collateral for a
         performance bond covering the Utah properties.

(5) Property, Equipment, Depreciation and Depletion
         Property and equipment are valued at cost. Maintenance and repair costs
         are charged to expense as incurred. When items of property or equipment
         are sold or retired,  the related  costs are removed  from the accounts
         and any gains or losses are reflected as income.

         Depreciation  is computed  on the  straight-line  method for  financial
         reporting purposes,  based on the estimated useful lives of the assets.
         Autos and trucks are depreciated  over a three to five year life, field
         equipment  over a five to fifteen year life,  office  furniture  over a
         three to five year  life,  and the  building  over a thirty  year life.
         Depreciation  expense totaled , $0, $40,787, and $495,083 for the years
         ended September 30, 1996, 1997 and 1998, respectively.

         At September  30,  1996,  the Company had no oil and gas  reserves.  In
         March 1997,  the Company  acquired an undivided  7/8 net revenue with a
         100% working  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 valued this transaction at the closing price
         of stock given up,  $1.03125  per share,  or a total of  $309,375.  The
         Company  received  an  independent   evaluation  of  this  field  which
         reflected  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  valued this  transaction  at the
         closing price of the stock given up,  $1.03125 per share, or a total of
         $206,250.  The Company received an independent evaluation of this field
         which reflected reserves.
                                      F-8
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(5) Property, Equipment, Depreciation and Depletion (continued)
         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.  The Company spent approximately $460,000 for
         the year ended

          September 30, 1998 on well equipment  repairs and well rework,  all on
         the Gunsite lease.  The Company will 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.

          On  September  29,  1997,  the Company  entered  into an  agreement to
         acquire 22 wells on 7 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  Company
         received the lease assignment. The terms of the acquisition are for the
         Company  to pay  $250,000  in cash  and  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 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 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.

         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  $200,000  and issue  50,000  shares of the
         Company's  common stock, as well as to pay the Company's  proportionate
         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,
         estimated  between $250,000 and $500,000,  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 4 years.  The Company  received  the initial  lease  assignment  on
         December 1, 1997.  The Company is  currently  evaluating  the  existing
         reserve  reports and underlying data of these leases and has contracted
         another  independent  appraiser to complete new reserve reports for its
         use.

         Depletion (including  provisions for future abandonment and restoration
         costs)  of all  capitalized  costs  of  proved  oil and  gas  producing
         properties  is  expensed   using  the   unit-of-production   method  by
         individual  fields  as the  proven  developed  reserves  are  produced.
         Depletion  expense was $0, $0 and $4,354 for the years ended  September
         30, 1996, 1997 and 1998, respectively.

         At September 30, major  classes of property and equipment  consisted of
the following :
                                             1997                 1998
                                       -------------------- --------------------
Oil and gas properties                $            515,625 $          1,240,175
Land                                                     0                2,500
Building                                                 0               96,282
Field equipment                                  4,220,000            6,229,859
Office furniture and equipment                           0               67,800
Vehicles                                                 0               38,672
Deposit on purchase of equipment                   136,560                    0
                                       -------------------- --------------------
Total                                            4,872,185            7,675,288
Less: accumulated depreciation                    (521,000)          (1,020,626)
                                       -------------------- --------------------
Net property and equipment               $       4,351,185 $          6,654,662
                                       ==================== ====================
                                      F-9
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(6)  Master 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.  At the time of the
         acquisition, BESW was controlled by the CEO of ERHC. The Company valued
         this  acquisition on the basis of the par value of the Company's common
         stock  given up, or $300,  because no  historical  cost basis  could be
         individually  determined  and the contract has minimal  value until the
         Company has built or  purchased  the  equipment  to  commercialize  the
         contract.  The Company hopes to begin  commercializing the agreement in
         fiscal 1999.

(7) Notes payable
         The  Company  issued  two notes  payable to  stockholders  who are also
         officers and  directors in exchange for cash  amounting to  $1,842,405.
         These notes carry no stated maturity date and an 8.5% rate of interest.
         The Company has repaid  $1,104,247 on these notes,  including  interest
         and principal 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, $21,273 and $35,300 for the period since
         inception  ended  September 30, 1995 and for the years ended  September
         30, 1996, 1997 and 1998 respectively.

         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 default  interest rate was
         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
         repaid this loan in full plus accrued interest in December 1997.

         In  November  1997,  the  Company   issued  5.5%   convertible   senior
         subordinated secured notes due 2002 in exchange for $4,300,000 in cash.
         These notes are convertible  into shares of the Company's  common stock
         at a conversion 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  283,800  shares of common stock a
         with an exercise price of $3.17 per share, or total additional proceeds
         to the Company of $899,636 in cash in the event all of the warrants are
         exercised.  The  notes  are  secured  by the  Company's  non - MIII oil
         reserves in Utah. As the notes are  potentially  convertible at a price
         below  market,  the Company  recorded a beneficial  conversion  feature
         discount of  $1,075,000 in  accordance  with FASB EITF Topic D-60.  The
         discount is  amortized  over the period from  inception of the notes to
         the convertibility  dates, 60, 90 and 120 days in this case. The amount
         of amortization for the year ended September 30, 1998 was $1,075,000.

         In  April  1998,  the  Company  issued  12%  convertible   subordinated
         unsecured  notes due  January  1999 in exchange  for  $300,000 is cash.
         These notes are convertible  into shares of the Company's  common stock
         at a  conversion  price of $1.50 per share.  If all of these  notes are
         converted,  the Company  will be required  to issue  200,000  shares of
         common  stock.  These notes also  carried  warrants  for an  additional
         210,000  shares of common  stock  with an  exercise  price of $1.25 per
         share, or total additional  proceeds to the Company of $262,500 in cash
         in the event all of the warrants are exercised.

         In June 1998, the Company issued 12% convertible subordinated unsecured
         notes due December 1999 in exchange for $425,000 cash.  These notes are
         convertible  into shares of the Company's  common stock at a conversion
         price of $1.00 per  share.  If all of these  notes are  converted,  the
         Company will be required to issue 425,000 shares of common stock. These
         notes also carried warrants for an additional  531,250 shares of common
         stock  with an  exercise  price of $0.50  per  share  for the first two
         years, and $0.85 per share  thereafter or total additional  proceeds to
         the  Company of  $265,625  or  $451,563 in cash in the event all of the
         warrants are exercised.

         In  June  1998,  the  Company  issued  5.5%  convertible   subordinated
         unsecured  notes  due June 2000 in  exchange  for  $1,250,000  cash and
         $43,750 of broker fees.  These notes are convertible into shares of the
         Company's  common stock at a  conversion  price to be  determined  by a
         stated  formula.  If  all  of  these  notes  are  converted  using  the
         conversion price of the issuance date  ($0.69517),  the Company will be
         required to issue  1,798,124  shares of common stock.  These notes also
         carried warrants for an additional  230,000 shares of common stock with
         an exercise price of $0.8634 per share, or total additional
                                      F-10
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(7) Notes payable, (continued)
         proceeds  to the  Company of  $198,582  in cash in the event all of the
         warrants are exercised.  As the notes are potentially  convertible at a
         price  below  market,  the  Company  recorded a  beneficial  conversion
         feature  discount of $312,500 in accordance  with FASB EITF Topic D-60.
         The discount is amortized  over the period from  inception of the notes
         to the  convertibility  dates,  60, 90 and 120 days in this  case.  The
         amount  of  amortization  for the year  ended  September  30,  1998 was
         $289,063.

         In  July  1998,  the  Company  issued  8.0%  convertible   subordinated
         unsecured  notes due July 2000 in exchange for $1,200,000  cash.  These
         notes are  convertible  into shares of the Company's  common stock at a
         conversion price to be determined by so stated formula. If all of these
         notes are converted using the conversion  price as of the issuance date
         ($0.478723),  the Company will be required to issue 2,506,668 shares of
         common stock.  In  connection  with this  funding,  the Company  issued
         warrants for 108,000  shares of common stock with an exercise  price of
         $0.74375 per share, or total proceeds to the Company of $80,325 in cash
         if all of the warrants are exercised.  The Company  recorded an expense
         discount  to the notes  amounting  to $7,425  in  connection  with this
         issuance as the warrant  exercise  price was below the market  price of
         the common stock at issuance.

         In  July  1998,  the  Company  issued  8.0%  convertible   subordinated
         unsecured  notes due August 2000 in exchange for $275,000  cash.  These
         notes are  convertible  into shares of the Company's  common stock at a
         conversion price to be determined by so stated formula. If all of these
         notes are converted using the conversion  price as of the issuance date
         ($0.644878),  the Company  will be required to issue  426,437shares  of
         common stock.  In  connection  with this  funding,  the Company  issued
         warrants for 24,750  shares of common  stock with an exercise  price of
         $0.73125 per share, or total proceeds to the Company of $18,098 in cash
         if all of the warrants are exercised.  The Company  recorded an expense
         discount to the notes amounting to $77 in connection with this issuance
         as the warrant  exercise price was below the market price of the common
         stock at issuance.  In August 1998, the Company issued 8.0% convertible
         subordinated unsecured notes due August 2000 in exchange for $1,010,000
         cash.  These notes are convertible  into shares of the Company's common
         stock at a conversion  price to be determined by so stated formula.  If
         all of these  notes are  converted  using the  conversion  price of the
         issuance   date   ($0.979813),   the   Company   will  be  required  to
         issue1,030,809 shares of common stock. In connection with this funding,
         the Company  issued  warrants for 90,900 shares of common stock with an
         exercise  price of $0.9938 per share,  or total proceeds to the Company
         of $90,336 in cash if all of the  warrants are  exercised.  The Company
         did not record an expense  discount to the notes amounting to $7,425 in
         connection  with this issuance as the warrant  exercise price was below
         the market  price of the common  stock was below the  warrant  exercise
         price at issuance

(8) Accrued Salaries
         At  September  30, 1997 and 1998 the  Company  has accrued  salaries of
         $960,000  and  $1,673,985,  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.
         If the three officers  chose to convert all of the accrued  salaries to
         common stock,  the Company would be required to issue 3,644,031  shares
         of common stock

(9) Accrued Interest
         Accrued interest consisted of the following at September 30 :

                                              1997                  1998
                                      --------------------- --------------------
Accrued interest - other              $              37,228 $             56,774
Accrued interest - convertible debt                       0              288,547
Accrued penalties - convertible debt                      0              770,875
                                      --------------------- --------------------
Total                                 $              37,228 $          1,116,196
                                      ===================== ====================
                                      F-11
<PAGE>
       ENVIRONMENTAL REMEDIATION HOLDING CORPORATION Notes to Consolidated
                              Financial Statements

(10) Oil Production
         During the year ended September 30, 1998, the Company completed repairs
         on well  equipment on twenty  wells on the Gunsite  Sand Lease.  Two of
         these are employed as water injection wells.  Thirteen have had further
         mechanical failures. The remaining five are producing approximately six
         barrels  of crude oil per day.  At  September  30,  1998,  three of the
         twenty two Utah wells are producing  approximately twenty to twenty six
         barrels per day. Five more are  temporarily  off line for minor repairs
         and produce  approximately  sixty nine to eighty  five  barrels per day
         when  operating.  At the  current  market  price  for  crude oil at the
         wellhead,  (approximately  $8.00 per barrel), the Company does not find
         it economically  feasible to complete other than minor repairs in order
         to reestablish  well production.  Furthermore,  the Company is actively
         negotiating  with  several  potential  purchasers  for its  East  Texas
         leases.  The  Company is  utilizing  the  successful  effort  method of
         accounting  for  its  oil and gas  producing  activities.  The  Company
         regularly  assesses oil and gas reserves for possible  impairment on an
         aggregate basis in accordance with SFAS 121.

(11) Income Taxes
         The  Company  has  a  consolidated  net  operating  loss  carry-forward
         amounting to $29,224,228, expiring as follows: $3,404 in 2015, $728,748
         in 2016,  $16,913,052 in 2017 and  $11,582,428 in 2018. The Company has
         an   $11,689,691   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. The Tax Reform Act of 1986 provided for a limitation on
         the use of net operating loss carryforwards following certain ownership
         changes. Such a change in ownership under the IRS rules and regulations
         potentially could occur pursuant to the Company's S-1 amendment.

(12) 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  at  $3,720,000.   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
         related to the merger  valued at $1.00 per share.  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 in  exchange  for  300,000  shares of the  Company's
         common stock valued at $309,375.  In March 1997, the Company acquired a
         100 oil well lease in  exchange  for  200,000  shares of the  Company's
         common  stock  valued at $206,250.  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. 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
                                      F-12
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(12) Stockholders' Equity (continued)
          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 on the  agreement  with the seller that
         the 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   principally   related  to  the  Company's
         acquisition of the MIII agreement,  valued at $6,465,031. 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 August  1997,  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.

         On September 29, 1997, the Company entered into an agreement to acquire
         22 wells on 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 Company received the lease
         assignment.  The terms of the  acquisition  are for the  Company to pay
         $250,000 in cash and 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 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  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.

         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  $200,000  and issue  50,000  shares of the
         Company's  common stock, as well as to pay the Company's  proportionate
         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,
         estimated  between $250,000 and $500,000,  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 4 years.  The Company  received  the initial  lease  assignment  on
         December 1, 1997.  The Company is  currently  evaluating  the  existing
         reserve  reports  and  underlying  data of these  leases as well as has
         contracted  another  independent  appraiser  to  complete  new  reserve
         reports for its use.

          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
         acquire the DRSTP  geological data. In January 1998, the Company issued
         24,000  shares  valued at $70,000  and  assumed a  mortgage  payable of
         $28,782  to  acquire a small  office in Utah,  valued at $98,782 , from
         Unita Oil and Gas.  In the 1st  quarter,  the  Company  issued  177,008
         shares in exchange for $167,694 in cash and 355,000  shares in exchange
         for services valued at $922,000. In the 2nd quarter, the Company issued
         666,664  shares in exchange for  $438,499 in cash and 23,200  shares in
         exchange  for  services  valued at  $28,496.  In the 3rd  quarter,  the
         Company  issued  234,200  shares in exchange  for  $135,600 in cash and
         162,420 shares for services valued at $102,884. In the 4th quarter, the
         Company  issued  47,000  shares in  exchange  for  $23,500  in cash and
         479,700  shares  in  exchange  for  services  valued  at  $473,600.  In
         September  1998,  the  Company  issued  491,646  shares to its  working
         interest  partner on the Nueces  project in exchange for its payable of
         $338,007.  In September 1998, the Company issued 299,536 shares for its
         portion of the annual option  payment on the Nueces  project and a late
         payment penalty for a total value of $219,223.
                                      F-13
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(12) Stockholders' Equity (continued)
   Warrants
         In March  1998,  the Company  issued a warrant  for  100,000  shares of
         common  stock  with an  exercise  price of $1.20  per  share,  or total
         proceeds of $210,000 in cash for the Company if all of the warrants are
         exercised.  This warrant was issued in  conjunction  with entering into
         the  Kingsbridge  Investment  Agreement.  In  June  1998,  the  Company
         received $200,000 in cash in exchange for warrants for 1,050,000 shares
         of common  stock with an  exercise  price of $0.75 per share,  or total
         proceeds to the Company of $787,500 in cash if all of the  warrants are
         exercised.

   Contingent issuances
         The  Company  is  contingently  liable  to issue up to a total of three
         million  shares of restricted  stock 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 a total of 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
         MIII.  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.  The Company is  contingently  liable to
         issue 3,644,031  shares for officer's  accrued salaries as of September
         30, 1998.

    Rescinded and returned shares
         In September  1998,  the Board of Directors  authorized the issuance of
         100,000 shares to a director.  This director returned the shares to the
         Company due to personal  tax  considerations.  In September  1998,  the
         Board of Directors  authorized the issuance of 2,000,000 shares each to
         four officers and directors in connection with the DRSTP Agreement.  In
         December 1998,  the Board of Directors  rescinded the issuance as if it
         had never occurred.

    Procura Financial Consultants, cc (PFC)
         Under the May 1997 Agreement between the DRSTP and the Company,  PFC is
         a junior partner to the Agreement.  The Company and PFC are negotiating
         an agreement  whereby the Company would issue shares to PFC in exchange
         for PFC foregoing its rights under the May 1997 Agreement.  The Company
         has issued,  but not  delivered  2,000,000  shares in  anticipation  of
         settling this negotiation. However, at the date of this report no final
         agreement has been reached.

   Arbitration settlements
         The  Company  has  notified  Kingsbridge  that it intends to cancel the
         equity   line  of  credit   previously   negotiated.   The   negotiated
         cancellation agreement requires the Company to pay $100,000 in cash and
         issue  warrants for 100,000  shares of common  stock.  This  settlement
         agreement has not yet been funded and Kingsbridge filed for arbitration
         in December 1998.

         In April  1998,  Uinta Oil and Gas,  Inc.  (Uinta)  filed  suit in Utah
         relating to the Company's  October 1997  acquisition  of twenty two oil
         and gas wells in Utah.  The other two  joint  sellers  of these  wells,
         along with Uinta, filed a formal demand for arbitration as the purchase
         agreement requires. The Company has entered into negotiations to settle
         this matter and expects to issue additional  shares in this settlement.
         However,  at the  date of this  report,  no  final  agreement  has been
         reached.

(13) 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.
                                      F-14
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(14) Commitments and Contingencies
         The  Company is  committed  to lease  payments  for 10  vehicles  under
         operating  leases  totaling  $50,598,  $7,826  and $3,913 for the years
         ended  September 30, 1999,  2000 and 2001. The Company paid $0, $52,500
         and $76,642 in vehicle lease expense for the years ended  September 30,
         1996, 1997 and 1998,  respectively.  The Company  currently  leases its
         office  space and  operating  facilities  on a two year lease and three
         year lease respectively.  The Company is committed to lease payments on
         the two facilities  totalling  $67,108 and $60,808 for the years ending
         September  30, 1999 and 2000.  The  Company  paid  $8,550,  $45,950 and
         $68,908 in leased facility rent for the years ended September 30, 1996,
         1997 and 1998 respectively.

(15) 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 $3,224,000, net, of environmental equipment, and the Chevron
         P&A master service  agreement valued at $300, net.  Revenues of $65,000
         relate to SSI. BAPCO's principal  identifiable  assets consist of crude
         oil reserves valued at $1,240,175,  equipment  valued at $2,508,000 and
         land and  building  valued at  $98,782.  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
         principal identifiable assets yet exist for this line of business.

(16) Sao Tome Concession
       Concession fee 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 from the proceeds of the  convertible
         note  offering.  On July 2, 1998 the  Company  paid  $1,000,000  of the
         Concession  fee to the  government  of the DRSTP.  On July 31, 1998 the
         Company paid an  additional  $1,000,000  of the  concession  fee to the
         government of the DRSTP.

       Investment in STPetro, S.A.
         In July 1998, the Government of the Democratic Republic of Sao Tome and
         Principe established  STPetro,  S.A. as the national petroleum company.
         The charter  established the initial ownership of STPetro,  S.A. as 51%
         by the  government  and 49% by ERHC in exchange for $51,000 and $49,000
         respectively.  The Company immediately forwarded $20,000 of its $49,000
         in cash, and believes that $29,000 of expenses it has paid on behalf of
         STPetro, S.A.
         prior to its formation will be credited to it for the balance owed.

      Due from STPetro,S.A.
         The Company has expended  approximately  $452,000 on behalf of STPetro,
         S.A.,  principally prior to the formation of STPetro,  S.A. The Company
         believes that these expenses are recoverable  from STPetro,  S.A. under
         its May 1997 agreement with the DRSTP.

(17) Suspended Revenue
         The Company's oil and gas production revenue, amounting to $147,782 for
         the year ended  September  30,  1998 has been placed in suspense as the
         Company has not yet  received  valid  complete  division  orders on its
         leases and wells

(18) Subsequent Events
    a) Stockholder's equity
         In October 1998, the Company received conversion notices on $419,848 of
         the  convertible  debt issued in July and August,  1998.  This debt was
         converted into 800,172 shares of common stock.

    b) Convertible notes
     In October 1998, the Company issued 20% convertible  subordinated unsecured
     notes due October 2000 in exchange for
                                      F-15
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(18) Subsequent Events (continued)
     b)  Convertible   notes   (continued)   $500,000  cash.   These  notes  are
         convertible  into shares of the Company's  common stock at a conversion
         price to be determined by so stated formula.  If all of these notes are
         converted  using the conversion  price as of the issuance date ($1.00),
         the Company will be required to issue  500,000  shares of common stock.
         These notes also carried warrants for an additional 1,500,000 shares of
         common  stock  with an  exercise  price of $0.40  per  share,  or total
         additional proceeds to the Company of $600,000 in cash in the event all
         of the warrants are exercised.

         In  October  1998,  the  Company  issued 12%  convertible  subordinated
         unsecured  notes due December  31, 1999 in exchange for $800,000  cash.
         These notes are convertible  into shares of the Company's  common stock
         at a conversion price to be determined by so stated formula.  If all of
         these notes are converted  using the  conversion  price of the issuance
         date ($1.25),  the Company will be required to issue 640,000  shares of
         common  stock.  These notes also  carried "A" and "B"  warrants  for an
         additional 1,200,000 and 1,200,000 shares of common stock with exercise
         prices of $0.50 and $3.00 per share,  or total  additional  proceeds to
         the Company of  $4,200,000 in cash in the event all of the warrants are
         exercised.
                                      F-16
<PAGE>

                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                            SUPPLEMENTARY INFORMATION

                                      ----

                                   (UNAUDITED)
                                      F-17
<PAGE>                                  

                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

         CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES

                        September 30, 1996, 1997 and 1998

                                      -----

                                   (Unaudited)
<TABLE>
<S>                                                         <C>                      <C>                <C>
                                                                      1996                 1997               1998
Developed oil and gas properties                            $                   0    $        515,625    $       891,425
Undeveloped oil and gas properties--                                            0                   0            348,750
                                                                -----------------    ----------------   ----------------
                                                                                0             515,625          1,240,175

Accumulated depreciation, depletion and valuation
allowance                                                                       0                   0              4,354
                                                                -----------------    ----------------   ----------------
Net capitalized cost                                        $                   0    $        515,625    $     1,235,821
                                                                =================    ================   ================
</TABLE>

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

                  Years ended September 30, 1996, 1997 and 1998

                                   (Unaudited)

<TABLE>
<S>                                                         <C>                 <C>                 <C>
                                                                      1996                 1997               1998
                                                                -----------------    ----------------   ----------------
Acquisition of properties:
           Developed                                        $           0        $       515,625     $      375,800
           Undeveloped                                                  0                   0               348,750
Exploration costs, excluding valuation allowance                        0                   0                  0
Development costs                                           $           0        $          0        $         0
</TABLE>
               See accompanying notes to supplementary information
                                      F-18
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

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

                  Years ended September 30, 1996, 1997 and 1998
<TABLE>
<S>                                                         <C>                      <C>                 <C>
                                                                      1996                 1997               1998
                                                                -----------------    ----------------   ----------------
Future cash inflows                                         $                   0   $               0   $              0
Future production and development costs                                         0                   0                  0
Future income tax expenses                                                      0                   0                  0
                                                                -----------------    ----------------   ----------------
       Future net cash inflows                                                  0                   0                  0
10% annual discount for estimated timing of cash flow                           0                   0                  0
                                                                -----------------    ----------------   ----------------
Standardized measure of discounted future net cash flow     $                   0   $               0   $              0
                                                                =================    ================   ================
</TABLE>
               See accompanying notes to supplementary information
                                      F-19
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

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

                  Years ended September 30, 1996, 1997 and 1998

                                      ----

                                   (Unaudited)

The following are the principal sources of change in the standardized measure of
discounted future net cash flows during 1996, 1997 and 1998:
<TABLE>
<S>                                                         <C>                      <C>                 <C>
                                                                      1996                 1997               1998
                                                                -----------------    ----------------   ----------------
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             515,625            724,550
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             515,625            724,550
Standardized measure of discounted future net cash
flow:
                   Beginning of year                                            0                   0            515,625
                                                                -----------------    ----------------   ----------------
                   End of year                              $                   0   $         515,625   $      1,240,175
                                                                =================    ================   ================
</TABLE>
               See accompanying notes to supplementary information
                                      F-20
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                          RESERVE QUANTITY INFORMATION

                  Years ended September 30, 1996, 1997 and 1998

                                      ----

                                   (Unaudited)

<TABLE>
<S>                                               <C>         <C>          <C>        <C>           <C>     <C>
                                                      1996                    1997                   1998
                                                      ----                    ----                   ----
                                                     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    16,735
             Purchases                                 0           0           0           0           0         0
             Production                                0           0           0           0           0         0
             End of year                               0           0           0           0           0         0
                                             ----------- ----------- ----------- ----------- ----------- ---------
Proved developed reserves                              0           0           0           0           0         0
                                             =========== =========== =========== =========== =========== =========
</TABLE>
               See accompanying notes to supplementary information
                                      F-21
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

           RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING ACTIVITIES

                  Years ended September 30, 1996, 1997 and 1998

                                      ----

                                   (Unaudited)
<TABLE>
<S>                                                         <C>                    <C>              <C>            
                                                                       1996                 1997               1998
                                                                ------------------    ----------------   -----------------
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-22
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                       NOTES TO SUPPLEMENTARY INFORMATION

                                      ----

                                   (Unaudited)


(2)      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

(3)      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.

(4)      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.

(5)      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-23
<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  as of the date of this  Amendment,  are as
follows:
         The  names  and age of the  directors  and  executive  officers  of the
Company,  and their positions with the Company as of the date of this Amendment,
are as follows:

Name                               Age   Position
- ----                                   ----------

Sam L. Bass, Jr.................... 63   Chairman of the Board and Vice
                                         President
James R. Callender, Sr............  57   President, Chief Executive Officer
                                         and Director
Noreen G. Wilson..................  45   Vice President, Chief Financial
                                         Officer and Director (1)
James A. Griffin..................  43   Secretary, Treasurer and Director
Robert McKnight...................  62   President of BAPCO and Director
                                         (1)
William Beaton....................  75   Director
Alfred L. Cotten..................  46   Director
Kenneth M. Waters.................. 73   Director

-------------------
(1)      Noreen G. Wilson's  resignation as the Vice President,  Chief Financial
         Officer and as a Director was  accepted on November  23,  1998.  Robert
         McKnight was appointed as the Acting Chief Financial  Officer effective
         the same date.

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 since  September  1996,
Vice President  since September 1998 and served as President and Chief Executive
Officer of the Company from September 1996 until  September  1998. Mr. Bass also
serves as the Chief Executive Officer of Bass  Environmental  Waste, Inc., which
he founded  in 1987,  U.S.  Energy,  Inc.,  which he  founded in 1984,  and Bass
Stabilizers,   Ltd.,   which  he  co-founded  in  1978,   each  of  which  is  a
privately-held  company to which he devotes  minimal time. From December 1993 to
September  1995,  he served as  President  and Chief  Executive  Officer of Bass
Environmental World Wide Services,  Inc. From January 1992 to September 1995, he
served as President and Chief Executive Officer of Bass  Environmental  Inc. Mr.
Bass is a pioneer in the field of downhole  drilling and  stabilization,  and is
the  inventor of seven  drilling  aids,  many of which are being used around the
world. Mr. Bass founded a fire-fighting  organization  called Al-Wadhi,  through
which  he  joined  others  in  efforts  to put 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 Engineering from Georgia Tech in 1952. Mr. Bass
is the father of Alfred L. Cotten.

         James R.  Callender,  Sr. has served as the President  since  September
1998 and has  served as the Chief  Executive  Officer  since  August  1997 and a
Director since September 1996. He previously served as the Vice President of the
Company  from August 1997 until  assuming the officer of the  President.  He has
also been the  President  and owner of Cal-Sons  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 worldwide  operations  comprise many
aspects of energy production. Until December 1992, he served as Drilling Manager
of Worldwide  Operations at Unocal Corp. Mr. Callender received a B.S. degree in
Geology and Engineering from Louisiana State University in 1964.
<PAGE>
         Noreen G. Wilson served as Chief Financial  Officer of the Company from
June 1997 until November 23, 1998. Prior to her resignation,  she was a Director
of the Company from 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  Imperial
International Design, a consulting company. She provided consulting services for
the financing of American builders and contractors  overseas,  primarily working
through OPIC, 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.

     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 Acting Chief Financial  Officer since November
23, 1998 and a Director  since July,  1998.  He has served as 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 Clydesdale Bank of Glasgow,  Scotland until
his retirement in 1982.  Since his retirement  from the Bank, he has worked as a
self-employed  consultant to public and smaller  independent  companies.  He has
been  involved in the  international  oil and gas  industry for almost 30 years,
with more than 50 years of experience in management and finance.

     Alfred L. Cotten has been a Director of the Company  since  December  1998.
Mr. Cotten is currently  working for Noble  Drilling.  From 1993 until 1995, Mr.
Cotten  was  a  Sub-Sea  Engineer  with  Wilrig,  U.S.A.,  Inc.,  in  Lafayette,
Louisiana. From 1992 until 1993, Mr. Cotten worked for Bass Environmental,  Inc.
assisting  with the initial  funding  for  operations  and  pulling  samples for
subsequent  remedial clean-up  projects.  From 1990 until 1992, Mr. Cotten was a
sales and service  representative for P.S.D.  Controls, in Lafayette.  From 1986
until 1990,  Mr.  Cotten  obtained an OIM License and performed  barge  engineer
duties for Penrod Drilling Corporation in Dallas,  Texas. From 1984 to 1986, Mr.
Cotten was a Sub-sea  engineer for Sonat Offshore of Dallas,  Texas,  working in
Malaysia.  From 1977 to 1984,  Mr.  Cotten  was a Sub-sea  engineer  for  Penrod
Drilling.  Mr. Cotten pursued a Petroleum Engineering Degree from the University
of Southern  Louisiana in 1977 and 1978,  having  previously  attended  Lousiana
State University in 1971 and 1972. Mr. Cotten is the son of Sam L. Bass.

         Kenneth M. Waters has been a Director of the Company since July,  1998.
He  previously  served on the  Advisory  Board  from  September  1996  until his
appointment to the Board. From 1992 until the present,  Mr. Waters has served as
the Vice President of Bulk Tank Inc. From 1984 to 1992, Mr. Waters was a rancher
and independent geological  consultant.  From 1980 until 1984, Mr. Waters worked
for  Texoma  Production  Co.,  Houston,  Texas,  first as a Vice  President  for
Exploration  and Production and then in 1981 until 1984 as President.  From 1958
until 1980, Mr. Waters was a Vice President and Manager for Consolidated Natural
Gas Co., in New Orleans, Louisiana. From 1954 to 1958, Mr. Waters worked for the
California Co. which is now known as Chevron, in New Orleans, Louisiana, working
for the first 4 years in Geological and Geophysical Training, 2 years as an Area
Exploration Geologist and then 2 years as Assistant Chief Development Geologist.
After serving in the U.S. Air Force in the Second World War, Mr. Waters earned a
MA degree from Indiana University in 1950 with a major in geology and a minor in
physics.
<PAGE>
         All directors hold office until the next annual meeting of shareholders
and until  successors  are duly  elected and  qualified,  unless their office is
vacated in accordance  with the  Certificate  of  Incorporation  of the Company.
Officers  are  elected  to  serve,  subject  to the  discretion  of the Board of
Directors,  until their  successors are appointed.  Except for the  relationship
between Sam L. Bass and Al Cotton,  who are father and son, and Noreen G. Wilson
and James A. Griffin,  who are cousins,  there are 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 areas 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 government agencies 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  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 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 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  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.

         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  Industries,  ESOP,  and
Zenith Insurance  Limited.  He is currently  involved in a number of Development
Projects both in the United States and internationally.

Committees of the Board of Directors

         The Company  expects to establish an Audit  Committee and  Compensation
Committee  in  early  1999,  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  stockholders,  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 June 1997, the Company issued 150,000 shares of the Company's Common
Stock to two  independent  consultants  (75,000  each)  for  services  valued at
$28,125.  One of the  consultants,  Robert  McKnight,  subsequently  joined  the
Company  as an  employee  of BAPCO in August  1997 and now  serves as the Acting
Chief Financial Officer of the Company.

     In July 1997, the Company issued to each of James R.  Callender,  Noreen G.
Wilson and William  Beaton,  directors of the Company,  500,000 shares of Common
Stock in connection with their serving on the Company's Board of Directors.
<PAGE>
         In October 1997,  the Company  issued 100,000 shares of Common Stock to
Kenneth M. Waters in repayment of loans made by him to BAPCO.  In November 1997,
the Company  issued  12,500  shares of Common Stock to Al Cotten for  consulting
services performed by him for the Company.

     In  September  1998,  the  Company,  under a mistaken  interpretation  of a
contingent  obligation  of the Company to issue  shares in  connection  with the
efforts to close the Sao Tome  contract,  authorized the issuance and in October
1998 issued  2,000,000  shares to each of Sam L. Bass,  Jr., James R. Callender,
Sr., Noreen Wilson and James A. Griffin. When it was discovered that such shares
were issued in error,  by vote of the Board of Directors,  on December 18, 1998,
such issuance was rescinded. Mr. Bass, Mr. Callender and Mr. Griffin have agreed
to tender their shares  immediately to the transfer agent for cancellation.  The
transfer  agent has been  notified to place a stop upon the shares of Ms. Wilson
in the event her shares are not tendered in a timely fashion.  On the same date,
the Company issued  425,000 shares to Robert  McKnight and 100,000 to Kenneth M.
Waters in connection  with their serving on the Board of Directors.  Such shares
are not subject to the  rescission.  Mr.  Waters has tendered his shares back to
the Company for cancellation because of personal tax considerations.

ITEM 11.          COMPENSATION OF EXECUTIVE OFFICERS

         The following table sets forth, in summary form, the cash  compensation
earned during the period from October 1, 1997 to September 30, 1998 by its Chief
Executive Officer and the three other most highly compensated executive officers
whose compensation exceeded $100,000 during such period.

                                            Summary Compensation Table
<TABLE>
<S>                           <C>            <C>            <C>            <C>                         <C>    
                           Annual Compensation (c, d, e)                Long Term Compensation (f)
             (a)                    (b)            (c)            (d)                   (e)                      (f)
          NAME AND                 FISCAL        SALARY          BONUS             OTHER ANNUAL               RESTRICTED
          PRINCIPAL                 YEAR           (2)            ($)              COMPENSATION                 STOCK
          POSITION                  (1)                                                                         AWARDS
=============================  ============= =============== =============  =========================== ======================
Sam L. Bass, Jr.                   1998             $480,000             0                     $125,000                      0
Vice President                                                                                      (4)
-----------------------------  ------------- --------------- -------------  --------------------------- ----------------------
James R. Callender                 1998             $480,000             0                            0                      0
President and Chief
Executive Officer
-----------------------------  ------------- --------------- -------------  --------------------------- ----------------------
James A. Griffin,                  1998             $120,000             0                            0                      0
Secretary, Treasurer
-----------------------------  ------------- --------------- -------------  --------------------------- ----------------------
Noreen G. Wilson,                  1998             $480,000             0                            0                      0
Executive Vice
President and Chief
Financial Officer
-----------------------------  ------------- --------------- -------------  --------------------------- ----------------------
</TABLE>
     (1) Sam L. Bass served as President and Chief  Executive  Officer and James
R. Callender served as Vice President in 1997 until September 12, 1998.

     (2) Salaries for Sam L. Bass,  Jr., James A. Griffin,  and Noreen G. Wilson
were accrued and not paid in cash.  Each individual has an option to convert all
or part of any accrued  salary to Common Stock of the Company at the rate of 1/2
of the average  price of the Common Stock for the months in which the salary was
earned.

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

     (4) Represents  amortization of Common Stock of  Environmental  Remediation
Funding Corporation distributed in 1995 to Sam L. Bass, Jr.

Proposed Employment Agreements

         The Company contemplates entering into three-year employment agreements
with each of Sam L. Bass, Jr., James A. Callender,  Sr., and James A. Griffin to
serve in their  respective  positions.  The  Company is still 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  executives  and/or  other  employees of the
Company,  and no options  have been  granted or are  currently  outstanding.  In
October  1998,  the Company  adopted a Consultant  stock option plan under which
250,000 shares have been issued and registered  with the Securities and Exchange
Commission on Form S-8.
<PAGE>
         The Board of  Directors  of the  Company  plans to approve  and adopt a
proposed  1998 Stock  Option  Plan (the  "Plan"),  pursuant  to which  officers,
directors and key employees of the Company will be eligible to receive incentive
stock  options and  non-qualified  stock  options to  purchase  shares of Common
Stock. The Plan would also 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
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 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  stock  options are first  exercisable  by an option holder
during any one calendar year will not exceed $ 100,000.

Limitation of Directors' Liability; 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  negligent
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.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the  "Act") may be  permitted  to  directors,  officers  or persons
controlling the registrant pursuant to the foregoing provisions,  the registrant
has been informed that in the opinion of the Securities and Exchange  Commission
such  indemnification  is against  public  policy as expressed in the Act and is
therefore unenforceable.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

Beneficial Ownership by Shareholders

         The following table sets forth certain  information as of September 30,
1998, with respect to the beneficial ownership of the Company's Common Shares 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 respect to all Common Shares  beneficially  owned by them.
None of the current  directors and officers of the Company are  participating in
this offering.

                    Common Shares Beneficially Owned
                  ------------------------------------------
Name (1)                                 Number(2)      Percentage
--------------------                     ---------      ----------
Sam L. Bass, Jr........................   7,971,568 (3)     30.66%
James R. Callender, Sr.................     500,000          1.92%
Noreen G. Wilson.......................     500,000          1.92%
James A. Griffin.......................     500,000          1.92%
Robert McKnight........................      75,000           *
William Beaton.........................     500,000          1.92%
Alfred L. Cotten.......................      12,500 (4)       *
Kenneth M. Waters .....................     100,000           *

All officers and directors as a group
(Eight (8) persons)....................  10,179,068          38.34%

 * Represents less than 1% of outstanding Common Shares or voting power.
<PAGE>
     (1) The address of each beneficial owner is c/o  Environmental  Remediation
Holding Corporation, 3-5 Audrey Avenue, Oyster Bay, New York 11771.

     (2) Shares  beneficially  owned and  percentage  of ownership  are based on
25,999,900  Common  Shares  outstanding  as of September  30,  1998.  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 and 50,000 shares owned by
Sheila Williams Bass, his wife.

     (4) Alfred L. Cotten  received  his 12,500  shares from his father,  Sam L.
Bass, Jr.

Selling Shareholders Pursuant to Mandated Form S-1

         As of the date  hereof,  the  Company has  39,613,436  shares of Common
Stock outstanding of which 1,210,686 relate to its registration  statement filed
on Form S-1, as amended (the "Form S-1").

The 1997 Investor Private Placement

         In November and December  1997,  the Company  raised gross  proceeds of
$4,300,000  in  two  closings  of a  private  placement  of the  Company's  5.5%
convertible  senior  subordinated  secured  notes due  October  2002 (the  "1997
Notes") and warrants to purchase Common Stock (the "1997 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 1997
Notes (at a base conversion rate of $1.25 per share,  subject to certain limited
conditions) and the exercise of the 1997 Warrants (at an exercise price of $3.17
per share) is up to 3,440,000 shares and 283,800 shares, respectively.  The Form
S-1 covers the maximum of up to 3,723,800  total shares of Common Stock issuable
upon the conversion of the 1997 Notes and the exercise of the 1997 Warrants. The
1997  Investors  intend to sell the Common Stock  acquired  thereby from time to
time in the future  upon  conversion  of the 1997 Notes and the  exercise of the
1997 Warrants.  Based on the number of outstanding shares of Common Stock of the
Company  as of the date  hereof,  the number of shares  issuable  under the 1997
Notes and the 1997 Warrants  represent  approximately  9.69% of the  outstanding
Common Stock of the Company.  As of the date hereof,  none of the 1997 Notes had
been converted and none of the 1997 Warrants had been exercised.

     All of the Shares held or to be held by the 1997 Investors could be offered
under the Form S-1 except that,  under the terms of the 1997 Notes,  the holders
thereof  could convert the original  principal  amount of the 1997 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 1997 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 31, 1997 (the agreed upon date between the
parties) (ii) 100% of the Average Share Price for the five  consecutive  trading
days immediately  preceding the first  anniversary,  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 1997 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 no longer be
applicable.  For purposes of registering  the maximum number of shares of Common
Stock under the Form S-1, the  conversion  rate is assumed to be the Base Price.
Because the conversion rate of the 1997 Notes is based in part on future average
trading  prices of the Common Stock,  the number of shares which may actually be
sold pursuant to the Form S-1 could differ  significantly.  For example,  in the
event a notice of  election  to  convert  all the 1997  Notes  were to have been
received on April 8, 1998, the lowest applicable conversion rate would have been
$.96 per share (80% of the Average Share Price for the five consecutive  trading
days  preceding such date),  resulting in a total of 3,723,800  shares of Common
Stock  issuable upon  conversion  (including  283,800 shares into which the 1997
Warrants are  exercisable),  subject to the elimination of the 90-day Base Price
provision  described  above.  The 1997 Notes mature,  unless prepaid at any time
after  October 15,  1998,  on October 15, 2002 and are secured by the  Company's
proven  crude oil  reserves  on its  properties  in Utah.  The 1997 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
1997 Warrants may be exercised at any time through October 15, 2002.

     In connection  with the sale of the 1997 Notes and the 1997  Warrants,  the
Company  entered into a Registration  Rights  Agreement with the 1997 Investors,
pursuant to which the Company agreed to register the Shares under the Securities
Act for resale by, and for the benefit of,  such  shareholders.  The Company has
failed to register the shares into which the 1997 Notes are  convertible and the
1997 Warrants are exercisable during the 120-day period following the completion
of this  transaction.  As a result,  the  Company is  required  to make  certain
payments to the 1997 Investors.  The Company is currently in  negotiations  with
these Investors to determine the amounts to be paid.
<PAGE>
         The public  offering of the Shares by the 1997 Investors will terminate
on the  earlier of  October  15,  2000 or the date on which all  Shares  offered
hereby have been sold by the 1997 Investors.

The Kingsbridge Line of Credit Agreement

     In  March  1998,  the  Company  entered  into  the  Kingsbridge  Investment
Agreement,  pursuant  to  which  the  Company  has the  right to  receive  up to
$10,000,000 in equity financing from the sale of its Common Stock in tranches to
Kingsbridge.  At the same  time,  the  Company  issued a  three-year  warrant to
purchase 100,000 shares of Common Stock (the "Kingsbridge Warrant"). Through the
Company's exercise of put options,  Kingsbridge is required to purchase, and the
Company  is  required  to  sell,  subject  to  certain  closing  conditions  and
limitations  on the timing of  purchases  and amount of Common  Stock to be sold
with respect to exercises of  individual  put options,  at least  $3,000,000  in
shares of Common  Stock at a purchase  price  equal to 79% of the average of the
lowest prices of the Common Stock on the trading day on which notice of exercise
of the put option is given and on the one trading day prior, and the two trading
days following,  such put option exercise  notice.  The minimum market price for
sales of shares is $1.00 per share.  For  purposes  of  registering  the maximum
number of shares of Common Stock under the Form S-1, the market price is assumed
to be $1.00. At a market price of $1.00,  the maximum number of shares of Common
Stock  which may be issued by the Company  upon the  exercise of the put options
and the number of shares which may be  purchased on exercise of the  Kingsbridge
Warrant are  12,658,228  shares and 100,000  shares  respectively.  The Form S-1
covers the maximum of up to 12, 758,228 total shares issued upon notice of a put
option  exercise and exercise of the Kingsbridge  Warrant.  Because the purchase
price of the Common Stock is based in part on future  average  trading prices of
the Common  Stock,  the number of shares which may actually be sold  pursuant to
the Form S-1 could differ  significantly.  For example, in the event a notice of
election to exercise  individual put options were to have been received on March
26, 1998, the lowest  applicable  purchase price would have been $0.98 per share
(79% of the lowest prices of the Common Stock for the applicable days before and
after the put option exercise notice), resulting in a total of 10,204,082 shares
of Common Stock offered under the Form S-1.  Notwithstanding the foregoing,  the
maximum number of shares  issuable to Kingsbridge  shall not exceed 19.9% of the
outstanding shares of Common Stock at the time of such exercise(s).

         In connection with entering into the Kingsbridge  Investment Agreement,
the Company issued the  Kingsbridge  Warrant,  a three-year  warrant to purchase
100,000  shares of Common Stock at an exercise  price of $1.20 per share (94% of
the market price  calculated  as of March 23,  1998),  exercisable  beginning on
September 24, 1998. As a condition  precedent to the purchase and sale of shares
pursuant to the Kingsbridge  Investment Agreement,  among others, the Company is
required  to  register  with the  Commission  under the terms of a  Registration
Rights Agreement all of the shares of Common Stock subject to the put option, as
well as those into which the Kingsbridge  Warrant is exercisable,  for resale by
Kingsbridge.  The Kingsbridge  Investment Agreement has a term of two years, but
may be terminated by  Kingsbridge  earlier in the event the Common Stock subject
to the put options is not, or fails to be, registered for resale after specified
time  periods  lapse.  Based on the number of  outstanding  shares of the Common
Stock of the  Company as of the date  hereof,  if all of the shares  were issued
pursuant to the put option  exercise notice and the  Kingsbridge  Warrant,  they
would  represent  approximately  33.22% of the  outstanding  Common Stock of the
Company. As of the date hereof, no put option exercise notices had been given to
Kingsbridge and none of the Kingsbridge Warrant had been exercised.

         In connection  with the  Kingsbridge  arrangement,  the Company entered
into a Registration  Rights  Agreement,  pursuant to which the Company agreed to
register the Shares under the  Securities Act for resale by, and for the benefit
of, such shareholders.  The Company has failed to register the shares into which
the put  option  exercise  would  be  applied  and the  Kingsbridge  Warrant  is
exercisable   during  the  90-day  period   following  the  completion  of  this
transaction.  As a result, the Company is required to make a lump sum payment in
the amount of $10,000. The Company is currently in negotiations with Kingsbridge
regarding such payment.

         On August 11, 1998, the Company and Kingsbridge agreed to enter into an
agreement to cancel the  Kingsbridge  Private  Equity Line of Credit dated March
23, 1998. Pursuant to the terms of the proposed  cancellation,  the Company will
pay a penalty in the amount of $100,000  and will issue  warrants to purchase up
to an additional  100,000 shares of the Company's Common Stock (the "Kingsbridge
Warrants").  The Company has decided to cancel the  Kingsbridge  Private  Equity
Line of Credit  because  terms of certain  of the third  quarter  1998  fundings
require the Company to cancel this agreement so as to limit the number of shares
of the  Company's  Common Stock  outstanding  upon  conversion  of the Company's
convertible notes in the future.  However,  as of December 31, 1998, the Company
had not  completed  the terms of the  anticipated  cancellation,  and  therefore
continues to be obligated to register the potential  Kingsbridge shares issuable
under the put option  exercise  notice and the  Kingsbridge  Warrant.  Under the
terms of the cancellation,  the Company will be responsible for the registration
of the additional warrants.  On December 10, 1998,  Kingsbridge made application
to the American  Arbitration  Association for arbitration of outstanding  issues
between the parties. The Company has filed an Answer in such proceedings.
<PAGE>
The April 1998 Financing

     In April  1998,  the  Company  raised  gross  proceeds  of  $300,000 in two
closings of a private  placement of the Company's 12% convertible  notes,  which
are due on the earlier of January  1999 or at such time as the Company  receives
the first draw-down under the Kingsbridge  Investment Agreement (the "April 1998
Notes"),  and  warrants  to  purchase  shares of Common  Stock (the  "April 1998
Warrants")  to nine  "accredited"  investors.  The  maximum  number of shares of
Common Stock which may be issued by the Company upon the conversion of the April
1998 Notes (at a base price of $1.50 per share), subject to certain adjustments,
and the exercise of the April 1998  Warrants (at an exercise  price of $1.25 per
share) to 200,000 shares and 210,000 shares,  respectively.  The Firm S-1 covers
the 410,000  shares of Common Stock  issuable  upon the  conversion of the April
1998 Notes and the exercise of the April 1998  Warrants.  Based on the number of
outstanding  shares of Common  Stock of the Company as of the date  hereof,  the
shares  issuable  under the April 1998 Notes and April 1998  Warrants  represent
approximately  1.07% of the outstanding  Common Stock of the Company.  As of the
date hereof, none of the April Notes had been converted and none of the Warrants
had been exercised

         All of the  shares to be held upon  conversion  by the  holders  of the
April  1998  Notes may be  offered  in that,  under the terms of the April  1998
Notes,  such holders may convert 100% of the principal  amount of the April 1998
Notes at any time after the issuance date. The conversion rate of the April 1998
Notes is equal to $1.50  per  share  and this  price  was used for  purposes  of
registering  the maximum number of shares of Common Stock upon conversion of the
April 1998 Notes under the Form S-1.  The April 1998 Notes are  subordinated  to
any  senior  debt  incurred  by the  Company.  All of the shares to be held upon
exercise by the holders of the April 1998 Warrants may be offered in that, under
the terms of the April 1998  Warrants,  the holders  thereof may exercise at any
time up until April 2001. The exercise price of the April 1998 Warrants is equal
to $1.25 per  share and this  price was used for  purposes  of  registering  the
maximum  number of shares of Common Stock under the Form S-1 for exercise of the
April 1998 Warrants. In connection with the sale of the April 1998 Notes and the
April 1998  Warrants,  the Company  committed  to register the April 1998 shares
under  the  Securities  Act  for  resale  by,  and  for  the  benefit  of,  such
shareholders.

The First June 1998 Financing

         In June 1998,  the  Company  raised  gross  proceeds  of  $200,000 in a
private placement of warrants to purchase shares of Common Stock (the "June 1998
Warrants") to two "accredited" investors. The maximum number of shares of Common
Stock which may be issued upon the  exercise  of the June 1998  Warrants  (at an
exercise  price of $.75) is up to  1,050,000  shares.  The Form S-1  covers  the
1,050,000  shares of Common  Stock  issuable  upon the exercise of the June 1998
Warrants.  Based on the  number of  outstanding  shares  of Common  Stock of the
Company  as  of  the  date  hereof,   the  First  June  1998  shares   represent
approximately  2.73% of the outstanding  Common Stock of the Company.  As of the
date hereof, none of the June 1998 Warrants had been exercised.

         All of the  shares to be held by the  Investors  upon  exercise  of the
First June 1998  Warrants may be offered  under the Form S-1 in that,  under the
terms of the First June 1998 Warrants,  the holders  thereof may exercise at any
time up until 5 PM Eastern  Standard  Time on the first  business  day after the
fourteen month period following the date of the declaration of the effectiveness
of the  Company's  registration  statement in which the First June 1998 Warrants
are  registered.  The exercise price of the First June 1998 Warrants is equal to
$.75 per share and this price was used for purposes of  registering  the maximum
number of shares of Common  Stock  under the Form S-1 for  exercise of the First
June 1998 Warrants.

     In the event that a holder of the First June 1998  Warrants  exercises  for
not less than 250,000  shares of the Company's  Common Stock (25,000 in the case
of the 50,000 warrant holder),  within 180 days of June 1, 1998 and exercise for
at least an  additional  50,000 shares of Common Stock (5,000 in the case of the
50,000 warrant holder), within 360 days of June 1, 1998, the Company shall issue
to such  holder of the First  June 1998  Warrants  additional  warrants  for the
purchase of a number of shares equal to the number of shares purchased under the
First June 1998 Warrants  within 180 and 360 days of June 1, 1998.  The exercise
price of these additional  warrants is equal to $2.00 per share. Such additional
warrants may be exercised at any time up until 5 PM Eastern Standard Time on the
first business day after the twenty-four (24) month period following the date of
the  effectiveness  of  the  Company's   registration  statement  in  which  the
additional warrants are registered.

         In  connection  with the sale of the  First  June  1998  Warrants,  the
Company  committed  to register  the First June 1998  Funding  shares  under the
Securities  Act for resale by, and for the benefit of,  such  shareholders.  The
Company has  committed to register the  additional  warrants  within ninety (90)
days of issuance.
<PAGE>
The Second June 1998 Financing

         In June 1998,  the  Company  raised  gross  proceeds of $425,000 in the
private placement of the Company's 12% subordinated convertible notes, which are
due on the earlier of  December  1999 or upon the receipt by the Company of debt
or equity or revenue from the sale of leases or other  property of not less than
$4 million (the "Second June 1998  Notes"),  and warrants to purchase  shares of
Common  Stock  (the  "Second  June  1998  Warrants")  to  a  limited  number  of
"accredited"  investors.  The maximum number of shares of Common Stock which may
be issued by the Company upon the conversion of the Second June 1998 Notes (at a
base conversion price of $1.00 per share),  subject to certain adjustments,  and
the exercise of the Second June 1998 Warrants (at an exercise  price of $.50 per
share for the first two years and $.85 per share  thereafter)  is up to  425,000
shares and 531,250 shares, respectively.  The Form S-1 covers the 956,250 shares
of Common Stock  issuable upon the  conversion of the Second June 1998 Notes and
the  exercise  of  the  Second  June  1998  Warrants.  Based  on the  number  of
outstanding  shares of Common  Stock of the Company as of the date  hereof,  the
Second June 1998 shares represent  approximately 2.49% of the outstanding Common
Stock of the Company.  As of the date hereof, none of the Second June 1998 Notes
or the Second June 1998 Warrants had been exercised.

         All of the  shares to be held upon  conversion  by the  holders  of the
Second  June 1998 Notes may be  offered  in that,  under the terms of the Second
June 1998 Notes,  such holders may convert 100% of the  principal  amount of the
Second June 1998 Notes at any time after the issuance date. The conversion  rate
of the  Second  June 1998  Notes is equal to $1.00 per share and this  price was
used for purposes of  registering  the maximum  number of shares of Common Stock
upon  conversion  of the Second June 1998 Notes  under the Form S-1.  The Second
June 1998 Notes are subordinated to any senior debt incurred by the Company. All
of the shares to be held upon  exercise  by the  holders of the Second June 1998
Warrants  may be  offered  in that,  under  the  terms of the  Second  June 1998
Warrants,  holders may exercise at any time until June 2002.  The exercise price
of the Second  June 1998  Warrants  is equal to $.50 per share for the first two
years and $.85 per share  thereafter  (subject to  adjustment)  and these prices
were used for  purposes of  registering  the maximum  number of shares of Common
Stock under the Form S-1 for exercise of the Second June 1998  Warrants.  In the
event the Company has not registered the Second June Warrants  within six months
of issuance,  the exercise price for the entire term through June 14, 2000 shall
remain at $.50 per  share.  The  Second  June  1998  Warrants  contain  cashless
exercise and  anti-dilution  provisions  which include,  but are not limited to,
anti-dilutive protection against stock or management option issuances below $.50
per share.  Additionally,  the exercise  price of the Second June 1998  Warrants
will be  adjusted  downward to 50% of fair  market  value when the  registration
statement  becomes  effective,  if after 90 days the share  price of the  Common
Stock falls below $.75 per share for more than five consecutive  trading days or
seven out of ten trading days.  In  connection  with the sale of the Second June
1998 Notes and the Second June 1998 Warrants,  the Company committed to register
the Second June 1998 shares under the  Securities Act for resale by, and for the
benefit of, such shareholders.

The Third June 1998 Financing

     In June 1998,  the Company raised gross proceeds of $1,250,000 in a private
placement of the Company's 5.5%  convertible  notes due in June 2000 (the "Third
June 1998  Notes") and  warrants to purchase  shares of Common Stock (the "Third
June 1998  Warrants") to one  "accredited"  investor.  The  conversion  price is
calculated  pursuant  to a formula as the lower of (i) the  average  closing bid
price for the five days prior to the closing ($.7195) or (ii) 80% of the average
closing  bide price for the five days prior to notice of intent to  convert.  In
the event that the lower price were the  average  closing bid price for the five
days prior to the  closing,  the maximum  number of shares of Common Stock which
may be issued by the Company upon  conversion of the Third June 1998 Notes would
be 1,798,124 shares. For purposes of registering the maximum number of shares of
Common Stock under the Form S-1, the  conversion  rate is assumed to be the base
price of $.7195.  Because  the  conversion  rate of the Third June 1998 Notes is
based in part on future average  trading prices of the Common Stock,  the number
of shares  which may  actually  be sold  pursuant  to the Form S-1 could  differ
significantly.  For example,  in the event the average closing bid price for the
five days prior to notice of intent to convert were  $.7195,  80% of such number
would equal a share price of $.5756, resulting in a total of 2,247,655 shares of
Common Stock issuable upon  conversion,  exclusive of the exercise of any of the
Third June 1998 Warrants. The maximum number of shares of Common Stock which may
be issued by the Company upon the  exercise of the Third June 1998  Warrants (at
an exercise price of 120% of the average closing bid price for the five (5) days
prior to the  closing  which is equal to  $.8634)  is  230,000  shares.  Certain
penalties  were to be paid to the Third June 1998 Note Investor in the event the
registration  statement  was not  effective  within sixty days.  In lieu of such
payments,  the Investor has elected to take  282,016  additional  shares in full
liquidation of all penalties due through  December 1998. The Form S-1 covers the
up to 2,310,140 total shares of Common Stock issuable, with certainty,  upon the
conversion  of the Third June 1998  Notes,  the  exercise of the Third June 1998
Warrants and payment of penalties  through December 1998. Based on the number of
outstanding  shares of Common  Stock of the Company as of the date  hereof,  the
Third June 1998 shares represent  approximately  6.02% of the outstanding Common
Stock of the Company.  As of the date hereof,  none of the Third June 1998 Notes
had been converted and none of the Third June 1998 Warrants had been exercised.
<PAGE>
         All of the  shares to be held upon  conversion  by the  holders  of the
Third June 1998 Notes may be offered,  except that, under the terms of the Third
June 1998 Notes, such holders could convert the original principal amount of the
Third  June 1998 Notes only to the  extent of  one-third  of such  amount on and
after each of July 23,  1998,  August  23,  1998 and  September  23,  1998.  The
conversion  rate of the Third June 1998  Notes  equal to $.72 per share was used
for purposes of  registering  the maximum  number of shares of Common Stock upon
conversion  of the Third June 1998 Notes under the Form S-1. The Third June 1998
Notes are subordinates to any senior debt incurred by the Company.

         All of the shares to be held upon  exercise by the Holders of the Third
June 1998  Warrants  may be offered  in that,  under the terms of the Third June
1998  Warrants,  such holders may exercise at any time until June 23, 2003.  The
exercise  price of the Third June 1998  Warrants  is equal to $.87 per share and
this price was used for purposes of registering  the maximum number of shares of
Common Stock under the Form S-1 for exercise of the Third June 1998 Warrants. In
connection  with the sale of the Third  June 1998  Notes and the Third 1998 June
Warrants,  the Company  entered into a  Registration  Rights  Agreement with the
Third June 1998 Investors,  pursuant to which the Company agreed to register the
Third  June 1998  shares  under the  Securities  Act for  resale by, and for the
benefit of, such shareholders.

         The  Company  used  $1,000,000  of the net  proceeds  as an  additional
concession  fee  payment  in  connection  with its Sao Tome joint  venture.  The
balance was used for  working  capital.  The Company has failed to register  the
shares into which the Third June 1998 Notes are  convertible  and the Third June
1998 Warrants are exercisable  during the 60-day period following the completion
of this  transaction.  As a result,  the  Company is  required  to make  certain
payments  to the  Third  June  1998  Investors.  The  Company  is  currently  in
negotiations with these Investors to determine the amounts to be paid.

         The firm of  Joseph  Charles &  Associates  which is  located  at Lenox
Center,  3355 Lenox Road,  #750,  Atlanta,  GA 30326 acted as the underwriter of
this placement.

The July/August 1998 Funding

         In  July  and  August  1998,  the  Company  raised  gross  proceeds  of
$1,200,000, $275,000 and $1,010,000 respectively in a private placement of up to
$3,000,000 in three(3)  tranches of the Company's 8.0% convertible  notes due in
July and August  2000 (the "July  Notes")  to a limited  number of  "accredited"
investors.  The  conversion  price of the July Notes is calculated by formula as
the  lower  of (i)  120% of the  average  closing  bid  price  per  share of the
Company's  Common  Stock  for the five (5) days  preceding  the  closing  of the
transaction  or (ii) 75% of the  average  closing  bid  price  per  share of the
Company's  Common  Stock for the five (5) days  preceding  the date  upon  which
notice of conversion is given by the investor to the Company.  In the event that
the lower price were the 120% of the average  closing bid price for the five (5)
days prior to the  closing  bid price for the five (5) days prior to the closing
of each tranche,  the maximum  number of shares of the Common Stock which may be
issued by the  Company  upon  conversion  of the July  Notes (at a base price of
$.8925,  $.8775  and $1.19  respectively)  is  2,506,668.  However if 75% of the
average closing bid price for the five (5) days prior to the notice of intent to
convert were the lower price, there is no way to ascertain the maximum number of
shares of Common Stock which may be issued by the Company upon conversion of the
July Notes at this time.  Because the conversion rate of the July Notes is based
in part on future  average  trading  prices of the Common  Stock,  the number of
shares which may actually be issued upon conversion could differ  significantly.
For  example,  in the event the average  closing bid price for the five (5) days
prior to the note of intent to convert  were  $.74375,  75% of such number would
equal a share  price of  $.55781  resulting  in a total of  4,454,922  shares of
Common Stock  issuable upon  conversion  exclusive of the exercise of any of the
warrants.  Warrants  were  issued  to the  placement  agent at the close of each
tranche  (the "July  Warrants").  The maximum  number of shares of Common  Stock
which may be issued by the Company upon the exercise of the July Warrants (at an
exercise price of $.74375,  $.73125 and $.99375 respectively) is 223,650 shares.
Based on the number of outstanding  shares of the Common Stock of the Company as
of the date hereof,  the shares  issuable under the July Notes and July Warrants
represent  approximately  9.19%  of the  outstanding  stock of the  Company.  In
October 1998,  July Notes  totally  $412,350 and accrued  interest  thereon were
converted at prices  ranging from $.321 to $.399 per shares for a total issuance
of 1,210,686.  As of the date hereof, no other July notes had been converted and
none of the July Warrants had been exercised. The Form S-1 covers the maximum of
up to 3,530,490 (2,506,668 total shares of Common Stock issuable upon conversion
of the July Notes at the base prices plus  800,172  total  shares as an adjusted
amount to reflect the October conversions and 223,650 total shares issuable upon
exercise of the July Warrants).

         Under the terms of the July Notes,  the holders  thereof  could convert
the  original  principal  amount of the notes only to the extent of one-third of
such amount on and after each thirty (3) day period following the issuance date.
The July Notes are subordinate to any senior debt incurred by the Company.

         Under the terms of the July Warrants,  the holders thereof may exercise
at any time up until 5 PM Eastern  Standard  Time on July 30, 2003 and August 5,
1998 respectively. The exercise price of the July Warrants are equal to $.74375,
$.73125 and $.99375 respectively.
<PAGE>
         In  connection  with the sale of the July Notes and the July  Warrants,
the  Company  entered  into a  Registration  Rights  Agreement  with the Selling
Shareholders,  pursuant  to which the Company  agreed to register  the July 1998
Funding  shares under the  Securities Act for resale by, and for the benefit of,
such shareholders.

     The Company used $1,000,000 of the net proceeds as an additional concession
fee payment in connection with its Sao Tome joint venture.  The balance was used
for working  capital.  The Company has failed to register  the shares into which
the July Notes are convertible and the July Warrants are exercisable  during the
60-day period  following the completion of this  transaction.  As a result,  the
Company is required to make certain payments to the July/August  Investors.  The
Company is  currently in  negotiations  with these  Investors  to determine  the
amounts to be paid.

     The firm of J.P.  Carey  Securities,  Inc.  which  is  located  at  Atlanta
Financial Center,  East Tower, 3343 Peachtree Road, Suite 500, Atlanta, GA 30326
acted as the underwriter of this funding.

The September 1998 Financing

         By documents dated September 1998, the Company raised gross proceeds of
$500,000 in October 1998 in a private placement of the Company's 20% convertible
note due in October 2000 (the  "September  1998 Note") and a warrant to purchase
shares of Common  Stock  (the  "September  1998  Warrant")  to one  "accredited"
investor.  The conversion price is calculated pursuant to a formula as the lower
of (i)  90% of the  average  closing  bid  price  for the  five  days  prior  to
conversion  or (ii) $1.00.  In the event that the lower price were $1.00 maximum
number  of  shares of Common  Stock  which  may be  issued by the  Company  upon
conversion of the September 1998 Note would be 750,000 (assuming the lower price
is $1.00 and  pursuant  to the terms of the  September  1998 Note which  require
registration to initially cover 150% of the shares underlying the September 1998
Note).  For purposes of registering the maximum number of shares of Common Stock
under the Form S-1,  the  conversion  rate is assumed to be $1.00.  Because  the
conversion  rate of the September  1998 Note is based in part on future  average
trading  prices of the Common Stock,  the number of shares which may actually be
sold pursuant to the Form S-1 could differ  significantly.  For example,  in the
event the average  closing bid price for the five days prior to notice of intent
to convert  were $.50,  90% of such  number  would  equal a share price of $.45,
resulting  in a  total  of  1,111,111  shares  of  Common  Stock  issuable  upon
conversion,  exclusive of the exercise of any of the September  1998 Warrant and
the requirement of  registration of 150% would equal 1,666,666  shares of Common
Stock.  The maximum  number of shares of Common Stock which may be issued by the
Company upon the exercise of the September 1998 Warrant (at an exercise price of
$.40) is 1,500,000 shares.  The Form S-1 covers the up to 2,250,000 total shares
of Common Stock issuable,  with certainty,  upon the conversion of the September
1998 Note and the exercise of the September 1998 Warrant. Based on the number of
outstanding  shares of Common  Stock of the Company as of the date  hereof,  the
September 1998 shares represent  approximately  1.95% of the outstanding  Common
Stock of the Company. As of the date hereof, none of the September 1998 Note had
been converted and none of the September 1998 Warrant had been exercised.

         The September 1998 Note precludes the holder from converting all or any
part of said note prior to the first  anniversary date of issuance  (October 26,
1999).  The conversion  rate of the September 1998 Note equal to $1.00 per share
was used for  purposes of  registering  the  maximum  number of shares of Common
Stock  upon  conversion  of the  September  1998 Note  under  the Form S-1.  The
September 1998 Note is  subordinates to any senior debt incurred by the Company.
Commencing on the first  anniversary of the issuance of said note, the remaining
principal  amount and all accrued and unpaid  interest and fees,  if any,  shall
automatically and without further action on the part of the holder be payable in
twelve monthly installments  commencing with a first payment on November 1, 1999
and a final payment on the maturity date. The Company has the option at any time
prior to the first  anniversary of said note to prepay all or any portion of the
remaining  principal  plus an amount  equal to twenty  percent on the portion so
paid.

     Under the terms of the September  1998 Warrant , the holder may exercise at
any time from the issuance date until October 26, 2008, for up to 750,000 shares
of Common Stock and from October 26, 1999 until October 26, 2008, 750,000 shares
of Common Stock.  The exercise  price of the September  1998 Warrant is equal to
$.40 per share and this price was used for purposes of  registering  the maximum
number  of  shares  of  Common  Stock  under  the Form S-1 for  exercise  of the
September Warrant.

         In  connection  with  the  sale  of the  September  1998  Note  and the
September  1998  Warrant,  the  Company  agreed  (i) to use its best  efforts to
register 150% of the  September  1998 Note shares under the  Securities  Act for
resale by, and for the benefit of, such shareholders within one year of issuance
and to have such  registration  remain  effective  until the earlier of the date
upon which the Note is sold or the term of said note and  further,  granted  the
holder certain piggy-back  registration rights; and (ii) to use its best efforts
to register 100% of the  September  1998 Warrant  under the  Securities  Act for
resale  by,  and for the  benefit  of,  such  shareholders  within  two years of
issuance and to have such registration remain effective until the earlier of the
date upon which the Warrant is sold or for the life of said  warrant and further
granted the holder certain piggyback registration rights.
<PAGE>
         The Company used $250,000 of the net proceeds to make certain  payments
necessary  for Sao Tome other than the  concession  fee and the balance was used
for working capital.

The October 1998 Financing

         In October 1998, the Company  commenced a the private  placement for up
to  $1,500,000  under which it has raised  gross  proceeds in three (3) closings
totaling 800,000 of the Company's 12% subordinated  convertible notes, which are
due on December 31, 1999 (the "October 1998 Notes"), and "A" and "B" warrants to
purchase  shares of Common Stock (the "October 1998 "A" and "B"  Warrants") to a
limited number of "accredited" investors. The maximum number of shares of Common
Stock which may be issued by the Company upon the conversion of the October 1998
Notes  (at a base  conversion  price of $1.25 per  share),  subject  to  certain
adjustments, the exercise of the October 1998 "A" Warrants (at an exercise price
of $.50 per share) and the  exercise of the  October  1998 "B"  Warrants  (at an
exercise price of $3.00 per share) is up to 640,000 shares, 1,200,000 shares and
1,200,000  shares,  respectively.  The Form S- 1 covers the 3,040,000  shares of
Common  Stock  issuable  upon the  conversion  of the October 1998 Notes and the
exercise  of the  October  1998 "A" and "B"  Warrants.  Based on the  number  of
outstanding  shares of Common  Stock of the Company as of the date  hereof,  the
October 1998 shares  represent  approximately  7.92% of the  outstanding  Common
Stock of the Company.  As of the date hereof,  none of the October 1998 Notes or
the October 1998 "A" or "B" Warrants had been exercised.

     All of the shares to be held upon  conversion by the holders of the October
1998 Notes may be offered in that,  under their terms,  such holders may convert
100% of the principal  amount of said notes at any time after the issuance date.
The  conversion  rate of the October  1998 Notes is equal to $1.25 per share and
this price was used for purposes of registering  the maximum number of shares of
Common Stock upon  conversion  of the October 1998 Notes under the Form S-1. The
October 1998 Notes are  subordinated to any senior debt incurred by the Company.
All of the shares to be held upon  exercise  by the  holders of the  October "A"
1998  Warrants  may be offered in that,  under the terms of the October 1998 "A"
Warrants, holders may exercise at any time until December 31, 2003. The exercise
price of the October  1998 "A"  Warrants is equal to $.50 per share  (subject to
adjustment)  and these prices were used for purposes of registering  the maximum
number of shares of Common  Stock under the Form S-1 for exercise of the October
1998 "A" Warrants.  All of the shares to be held upon exercise by the holders of
the October  "B" 1998  Warrants  may be offered in that,  under the terms of the
October 1998 "B" Warrants, holders may exercise at any time until the earlier of
(i) five years from the date of exercise of the October 1998 "A" Warrant or (ii)
December 31, 2008.  The exercise price of the October 1998 "B" Warrants is equal
to $3.00 per share  (subject  to  adjustment)  and  these  prices  were used for
purposes of  registering  the maximum number of shares of Common Stock under the
Form S-1 for exercise of the October 1998 "B"  Warrants.  The October 1998 Notes
and the October 1998 "A" and "B" Warrants have certain  piggy-back  registration
rights.  The October 1998 "A" and "B"  Warrants  contain  cashless  exercise and
anti-dilution  provisions which include,  but are not limited to,  anti-dilutive
protection  against stock or management  option  issuances below $.50 per share.
The Company has the right to call the October 1998 "A" Warrant at any time after
the underlying  shares are registered if the Common Stock of the Company exceeds
a price of $4.50 per share for an average of twenty  consecutive  trading  days.
The  Company  has the right to call the  October  1998 "B"  Warrants at any time
after  eighteen  months  after the holder has  exercised  its  October  1998 "A"
Warrant and after the  underlying  shares are  registered if the Common Stock of
the  Company  exceeds  a price of $9.00  per  share  for an  average  of  twenty
consecutive  trading  days.  The  Company has agreed not to call the "A" and "B"
warrants  simultaneously.  In connection with the sale of the October 1998 Notes
and the October 1998 "A" and "B" Warrants, the Company committed to register the
October 1998 shares under the  Securities Act for resale by, and for the benefit
of, such shareholders.

         The  Company  used   $500,000  of  the  net  proceeds  to  fulfill  its
obligations  under its  contract  with Sao Tome and the balance was used to fund
operating  costs  relative  to the Sao Tome  operation  and to  provide  working
capital.

Uinta Settlement

         In  January  1999,  the  Company  agreed to a  settlement  with  Uinta.
Pursuant to such settlement,  the maximum number of shares of Common Stock which
may be issued by the Company on or about  January 18, 1999  (assuming the strike
price is the closing price on January 7, 1999 of $ .30 (the "Strike  Price")) is
1,144,000.  Since the Strike  Price is based in part on future  average  trading
prices of the Common  Stock,  the number of shares  which may  actually  be sold
pursuant to the Form S-1 could differ  significantly.  For example, in the event
the  average  closing bid price for the five days prior to January 18, 1999 were
less than the assumed  Strike Price,  such number of shares offered hereby would
be higher.  The Form S-1 covers the up to 1,144,000 total shares of Common Stock
issuable, with certainty, upon the completion of the Uinta settlement.  Based on
the number of  outstanding  shares of Common Stock of the Company as of the date
hereof,  the  Uinta  settlement  shares  represent  approximately  2.98%  of the
outstanding Common Stock of the Company.
<PAGE>
     Under the  terms of the  executed  settlement,  for the  500,000  shares of
restricted  stock  which  were  issued  at a  guarantee  price of $2 per  share,
additional restricted shares will be issued which reflect the difference between
$2 and the price on October  16, 1998 and  December  30, 1998 (under the formula
set forth in the  agreement,  861,111 and 1,312,500  shares of restricted  stock
respectively) and the 500,000 shares of restricted stock which were to be issued
in early  1998  will be  issued  and  treated  as if  issued  at the  time  such
deliverance was initially  required,  which shares bear registration  rights and
are offered  hereby . In addition,  the parties will receive  additional  shares
equal to the difference  between the value on a date certain in January 1999 and
$2 for the second block of 500,000 (assuming the Strike Price,  2,833,333 shares
of restricted stock). The Company will reimburse certain filing fees,  attorneys
fees and will pay for  certain  office  equipment.  The Company  will  receive a
quitclaim deed and assignments to perfect the Company's  interest in the leases.
In addition,  (1) Uinta will be issued shares of the Company's  Common Stock the
amount of which shall be  determined  by dividing  $250,000 by the Strike Price,
half of which  shares shall be included in this  registration  and half of which
shall be restricted  securities  (assuming the Strike Price,  416,667  shares of
restricted  stock and  416,667  shares  which bear  registration  rights and are
offered  hereby) , (2) in exchange for  assignment  of a 4%  overriding  royalty
interest,  Uinta will  receive  restricted  shares the amount of which  shall be
determined by dividing  $677,000 by the Strike Price (assuming the Strike Price,
2,256,667 shares of restricted  stock),  (3) a deficiency value equal to $41,200
for the Utah office building will be liquidated by issuance of shares the amount
of which shall be equal to $41,200  divided by the Strike  Price,  (assuming the
Strike Price,  137,333  shares of Common Stock,  which shares bear  registration
rights and are offered  hereby,  (4) Uinta will  receive no more than $10,000 to
cost its  court  costs  and  attorneys  fees,  and (5)  payment  of  outstanding
production  service  invoices to third parties  totally $27,000 shall be paid in
the form of shares included in this registration  statement,  which shares shall
be equal to $27,000  divided by the Strike  Price  (assuming  the Strike  Price,
90,000 shares which are offered hereby).

Stock Ownership

         The  following  table  sets forth the names of and the number of Shares
beneficially owned by each Selling Shareholder as of the date hereof.  Since the
Selling Shareholders may sell all, some or none of their Shares, no estimate can
be made of the aggregate  number of Shares that are to be offered  hereby or the
number or  percentage  of Shares  that each  Selling  Shareholder  will own upon
completion of the offering to which the Form S-1 relates.
<TABLE>
<S>                                     <C>                 <C>             <C>
                      Shares Owned Before the Offering (1)
                  --------------------------------------------
Name of                                   Underlying          Underlying       Total
Selling Shareholder                         Notes             Warrants         Shares
- -------------------                        -----            --------         ------
1997 Investor Private Placement
- -------------------------------
Banque Edouard Constant SA                  320,000           24,000            344,000
11, Cours de Rive
Case Postale 3754
1211 - 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

JMG Capital Partners L.P.                   320,000           24,000             344,000
c/o JMG Capital Management Inc.
1999 Avenue of the Stars
Suite 1950
Los Angeles, CA  90067
<PAGE>
Triton Capital Investments, Ltd.            320,000           24,000             344,000
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, S.A.                         400,000           30,000            430,000
1, Rue Toepffer
1206 - Geneva
Switzerland

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


Kingsbridge Line of Credit
- --------------------------
Kingsbridge Capital Limited                 12,658,228        100,000           12,758,228
Main Street                                      (2)
Kilcullen, County Kildare
Republic of Ireland


April 1998 Financing
- --------------------
Robert and Jessica Baron                    16,667            17,500             34,167
4664 Coco Plum Way
Delray Beach, FL 33445

Frank Ferrante                              8,333             8,750             17,083
4 Twilight Place
Fort Monmouth, NJ 07758

Rosemary Friedman Trust                     50,000            52,500            102,500
4420 Bocaire Boulevard
Boca Raton, FL 33487

Diane Hom                                   16,667            17,500            34,167
205 West End Avenue, #22J
New York, NY 10025

Stanley Katz                                16,667            17,500            34,167
10 Bonnie Drive
Northport, NY 11768

Howard Talks/Carol Hall, JTWROS             50,000             52,500           102,500
249 Tradewind Drive
Palm Beach, FL 33480

Kenneth Tice                                6,666             7,000             13,666
181 Drake Lane
Ledgewood, NJ 07852

Stephen Warner                              25,000           26,250             51,250
8 Shannon Circle
West Palm Beach, FL 33401

David Warren                                10,000            10,500            20,500
2004 Lake Osbourne Drive, #9
Lake Worth, FL 33461

<PAGE>
First June 1998 Financing
- -------------------------
Corporate Builders                          -                 50,000                    50,000
777 S. Flagler Drive
Suite 909
West Palm Beach, FL 33401

Legal Computer Technology, Inc.      --                       500,000           500,000
277 Royal Poinciana Way
Suite 155
Palm Beach, FL 33480

Howard Talks                                -                 500,000           500,000
249 Tradewind Drive
Palm Beach, FL 33480


Second June 1998 Financing
- --------------------------
Azriel and Sheila Nagar                     25,000            31,250             56,250
342 Irving Avenue
South Orange, NJ 07079

Edward R. Rohquin                            30,000           37,500            67,500
9906 White Sands Place
Bonita Springs, FL 34135

Joseph and Valerie Spano                    100,000           125,000           225,000
150 Tamiami Trail North
Naples, FL 34102

David B. Thornburgh                         100,000           125,000           225,000
420 W. San Marino Drive
Miami Beach, FL 33139

David B. Thornburgh Family Trust            170,000           212,500           382,500
420 W. San Marino Drive
Miami Beach, FL 33139


Third June 1998 Financing
- -------------------------
Intercontinental Holding Company            17,373             --               17,373
8351 Roswell Road, #239
Atlanta, GA 30350

Joseph Charles & Associates                 43,433            75,000            118,433
Lenox Center
3355 Lenox Road, #750
Atlanta, GA 30326

ProFutures Special
 Equities Fund, L.P.                        2,019,334        155,000        2,174,334
1310 Highway 620
Suite 200
Austin, TX 78734


July/August Funding
------------------------------------
Closing No. 1-

Atlantis Capital Fund Ltd.                  907,371           -                 907,371
c/o Thomas Kernaghan &                        (3)
         Company Ltd.
365 Bay Street
10th Floor
Toronto, Ontario
Canada M5H 2V2

Atlas Capital Fund Ltd.                     494,044           -                 494,044
c/o Citco Fund Services                       (3)
         (Cayman Island) Ltd.
Corporate Center
West Bay Road
P.O. Box 31106-SMB
Grand Cayman
Cayman Islands
British West Indies

Oscar Brito                                 168,067           -                 168,067
Calle Neveri
Qnta Shanti
Colinas de Tamaneco 1080
Caracas, Venezuela
<PAGE>
Correllus International Ltd.                112,045           -                 112,045
c/o Azucena 37
Torreblanca del Sol
296 40 Fuengirola
Malaga, Spain

Sandro Grimaldi                             168,067           -                 168,067
Calle Neveri
Qnta Shanti
Colinas de Tamaneco 1080
Caracas, Venezuela

J.P. Carey                                  -                 108,000           108,000
Atlanta Financial Center
East Tower
3343 Peachtree Road
Suite 500
Atlanta, GA 30326


Closing No. 2 -

Holden Holding Ltd.                         255,497           -                 255,497
c/o City Trust                                (3)
3rd Floor
Murdoch House
South Quay
Douglas
Isle of Mann 1M1 5AS

PrimeCap Management Group                   170,940           -                 170,940
         Ltd.
c/o Midland Walwyn
#200
32555 Simon Avenue
Abbotsford
British Columbia
Canada V2T 4Ys

J.P. Carey                                  -                 24,750             24,750
Atlanta Financial Center
East Tower
3343 Peachtree Road
Suite 500
Atlanta, GA 30326


Closing No. 3 -

GPS America Fund Ltd.                       434,170           -                 434,170
c/o Citco Fund Services                       (3)
         (Europe) B.V.
World Trade Center
         Amsterdam
Tower B, 17th Floor
Strawinskylaan 1725
P.O. Box 7241
1007 JE Amsterdam
the Netherlands

Mohammed Khalifa                            596,639           -                  596,639
P.O. Box 3207
Dubai, U.A.E.

J.P. Carey                                  -                 90,900             90,900
Atlanta Financial Center
East Tower
3343 Peachtree Road
Suite 500
Atlanta, GA 30326


September 1998 Funding
-------------------------------------

Talisman Capital Opportunity                750,000          1,500,000           2,250,000
    Fund Ltd.
16101 La Grande Drive
Suite 100
Little Rock, AR 72211

<PAGE>
October 1998 Funding
-----------------------------------
David Abelove                               80,000            300,000             380,000
7529 Foote Road                                                  (4)
Clinton, NY 13323

Prudential Securities Inc. C/F              240,000           900,000           1,140,000
David Thornburgh - IRA                                           (4)
         dated 3/10/98
A/C # AFG-813978
1 New York Plaza
11th Floor
New York, NY 13323
Attn: Retirement Operations

1300 Windlass Corporation                   80,000             300,000           380,000
Unit 1204                                                        (4)
4401 Gulf Shore Boulevard
Naples, FL 34103

David B. Thornburgh Family                   240,000           900,000          1,140,000
  Trust                                                          (4)
420 W. San Marino Drive
Miami Beach, FL 33139


Uinta Settlement
----------------------------------
Uinta Oil & Gas Inc.                        478,517                -             478,517
3954 East 200
North East Highway 40
Ballard, UT 84066

Pine Valley Exploration, Inc.                185,650                -            185,650
19307 West Warren
Detroit, MI 48228

Coconino, S.M.A., Inc.                      247,500                 -             247,500
1567 W. Silver Springs Road
Park City, UT 84098

Joseph H. Lorenzo                               5,000               -               5,000

Craig Phillips                                82,400                 -             82,400
Ballard, UT

Robert Ballou     (5)                          54,933                -              54,933

Stripper Operators Inc                         60,000                -              60,000

Production Service Company                     30,000                -              30,000

               Total                      24,644,208          6,528,700         31,172,908
</TABLE>

     (1) All Shares are  beneficially  owned and the sole voting and  investment
power is held by the persons named.

     (2) The number of shares beneficially owned by Kingsbridge will be modified
to reflect the number of such shares acquired by Kingsbridge,  if any, from time
to time as set forth in a Prospectus  Supplement  to the Form S-1.  Although the
shares  associated  with the put option  exercise  will not be issued until such
time as a put  option  exercise  notice is given,  pursuant  to the terms of the
Registration  Rights  Agreement,  the Company is required to register all of the
shares of Common  Stock  subject to the put option,  as well as those into which
the Kingsbridge Warrant is exercisable.

     (3) The Investor made partial conversion of its July Note in October 1998

     (4) Half of which warrants are "A" and half of which warrants are "B".

     (5) Robert Ballou is now employed as a geologist with the Company,  but was
not affiliated at the time the original transaction was concluded.

   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 Securities Act.

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

     See Part II, Item 5. "Market for the Registrant's  Common Stock and Related
Security Holder Matters - (b) Recent Sales of Unregistered Securities."
<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 was
then the Company's Chairman of the Board, President and Chief Executive 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  shares of Common Stock to Mr. Bass in
exchange for the outstanding  capital stock of BAPCO.  In addition,  the Company
issued  3,000,000  shares of Common  Stock to BEW, a company  controlled  by Mr.
Bass, in connection with the assignment of the Chevron master service agreement.
See "Business  Environmental  Remediation Services." Mr. Bass transferred 12,500
of his shares to his son, Alfred L. Cotten, currently a Director of the Company.

         In June 1997,  the Company issued 150,000 shares of its Common Stock to
two  independent  consultants  (75,000 each) in exchange for services  valued at
$28,125. One of the consultants, Robert McKnight subsequently became employed by
BAPCO and now serves as the Acting Chief Financial Officer and a Director of the
Company.

     In July 1997,  the Company  issued  1,500,000  shares of its Common  Stock,
500,000 each, to James R. Callender, Sr., Noreen G. Wilson and William Beaton.

     In  September  1998,  the  Company,  under a mistaken  interpretation  of a
contingent  obligation  of the Company to issue  shares in  connection  with the
efforts to close the Sao Tome  contract,  authorized the issuance and in October
1998 issued  2,000,000  shares to each of Sam L. Bass,  Jr., James R. Callender,
Sr., Noreen Wilson and James A. Griffin. When it was discovered that such shares
were issued in error,  by vote of the Board of Directors,  on December 18, 1998,
such issuance was rescinded. Mr. Bass, Mr. Callender and Mr. Griffin have agreed
to tender their shares  immediately to the transfer agent for cancellation.  The
transfer  agent has been  notified to place a stop upon the shares of Ms. Wilson
in the event her shares are not tendered in a timely fashion.  On the same date,
the Company issued  425,000 shares to Robert  McKnight and 100,000 to Kenneth M.
Waters in connection  with their serving on the Board of Directors.  Such shares
are not subject to the  rescission.  Mr.  Waters has tendered his shares back to
the Company for cancellation because of personal tax considerations.

         From  time to time,  Noreen  G.  Wilson  and  James A.  Griffin,  while
executive  officers and  directors of the Company,  have  advanced  funds to the
Company in the total amount of $1,469,559  through September 30, 1998,  pursuant
to 8.5% demand  promissory notes, of which $738,231 was repaid through September
30, 1998, and $731,328 remains outstanding at September 30, 1998. Such notes are
convertible into Common Stock at a conversion rate equal to 1/2 the market price
per share of Common Stock at the time of the advance.


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

         (1)      Index to Exhibit Pages

     10.1 Master Service Order and Agreement, dated October 1, 1996, between the
Company  and  Chevron  U.S.A.  Inc.  [incorporated  herein  by  reference  tothe
Company's  Annual  Report on Form10-K  for the fiscal year ended  September  30,
1997, filed on December 29, 1997, Commission File No. 0-17325]

     10.2 Joint Venture Agreement,  dated December 12, 1996, between the Company
and Centram  Marine  Services,  S.A.  [incorporated  herein by  reference to the
Company's  Annual  Report on Form10-K  for the fiscal year ended  September  30,
1997, filed on December 29, 1997, Commission File No. 0-17325]

     10.3  *  Letter  of  Intent  dated  May  18,  1997,  between  Environmental
Remediation  Holding  Corporation,   Procura  Financial  Consultants,   and  the
Democratic Republic of Sao Tome Principe.

     10.4 Joint Venture Agreement,  dated July 28, 1997, between the Company and
MIII  Corporation.  [incorporated  herein by reference to the  Company's  Annual
Report on  Form10-K  for the fiscal  year ended  September  30,  1997,  filed on
December 29, 1997, Commission File No. 0-17325]
<PAGE>
     10.5  Memorandum  of  Agreement,  dated  September  30,  1997,  between the
Company,  the Government of the Democratic Republic of Sao Tome & Principe,  and
Procura Financial  Consultants,  c.c.  [incorporated  herein by reference to the
Company's  Annual  Report on Form10-K  for the fiscal year ended  September  30,
1997, filed on December 29, 1997, Commission File No. 0-17325]

     10.6 Form of Securities  Purchase  Agreement,  dated as of October 15,1997,
between the Company and each of the  Purchasers  listed  therein,  together with
forms of the 5.5% Convertible  Senior  Subordinated  Secured Note and Warrant to
Purchase Common Stock.

     10.7 Form of Registration  Rights Agreement,  dated as of October 15, 1997,
between the Company and each of the Purchasers listed therein.

     10.8 Private Equity Line of Credit  Agreement,  dated as of March 23, 1998,
between the Company and Kingsbridge Capital Limited.

     10.9 Form of the  Company's  12.%  Convertible  Note  ("April  1998 Notes")
[incorporated  herein by reference to Form 10-Q for the quarter  ended March 31,
1998 , Commission File No. 0-17325]

     10.10 Form of the Company's Warrants ("April 1998 Warrants") [ incorporated
herein  by  reference  to Form  10-Q  for the  quarter  ended  March  31,  1998,
Commission File No. 0-17325]

     10.11 Form of the Company's Warrants ("June 1998 Warrants) [incorporated by
reference to Form 10-Q for the quarter ended June 30, 1998,  Commission File No.
0-17325]

     10.12 Form of the Company's 12% Convertible Note ("Second June 1998 Notes")
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.13  Form  of  the  Company's   Warrant  ("Second  June  1998  Warrants")
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.14 Form of the Third June 1998 Financing  Securities  Purchase Agreement
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.15 Form of the Company's 5.5% Convertible Note ("Third June 1998 Notes")
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.16  Form  of  the  Company's   Warrant   ("Third  June  1998  Warrants")
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.17 Form of the Third June 1998 Financing  Registration  Rights Agreement
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.18 Form of the July/August 1998 Financing  Securities Purchase Agreement
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.19  Form  of  the   Company's  8%   Convertible   Note  ("July   Notes")
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.20 Form of the Company's  Warrant and Warrant Agreement ("July Warrants)
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.21 Form of the July/August 1998 Financing  Registration Rights Agreement
[incorporated  herein by reference  to Form 10-Q for the quarter  ended June 30,
1998, Commission File No. 0-17325]

     10.22 Joint Venture Formation of the Sao Tome Principe  National  Petroleum
Company  executed July 9, 1998  (English  translation)  [incorporated  herein by
reference to Form 10-Q for the quarter ended June 30, 1998,  Commission File No.
0-17325]

     10.23 * Settlement  Agreement dated August 18, 1998 between the Company and
Procura Financial Corporation relative to participation in Sao Tome

     10.24 * Technical  Assistance Agreement by and among Democratic Republic of
Sao Tome Principe and Sao Tome and Principe National Petroleum Company, S.A. and
Mobil Exploration and Producing Services Inc. [Partially Redacted - Subject to a
Confidential Treatment Application filed with the SEC]

     10.25  *  Form  of  the  Securities  Purchase  Agreement  ("September  1998
Financing")
<PAGE>
     10.26 * Form of the Company's 20% Convertible Note ("September 1998 Note")

     10.27 * Form of the Company's  Warrant  ("September  1998 Warrant") and the
Warrant Agreement

     10.28 * Form of the Company's 12% Convertible Note ("October 1998 Notes")

     10.29 * Form of the Company's Warrants ("October 1998 "A" and "B" Warrants)
and Warrant Agreement

     10.30  *  Memorandum  of  Compromise  and  Settlement   Agreement   between
Environmental Redmediation Holding Corporation,  Pine Valley Exploration,  Inc.,
Coconino,  S.M.A.,  Inc., Uinta Oil & Gas, Inc.,  Craig Phillips,  and Joseph H.
Lorenz dated January 4, 1999.

     21.1 Subsidiaries of the Company. [previously filed]

     27.1  *   Financial Data Schedule.
- ------------------------------------
*        Incorporated  herein  by  reference  to  Amendment  3 to the  Company's
         Registration  Statement  on Form S-1  expected  to be filed on or about
         January 25, 1999.

         (B)      List of Exhibits and Reports on Form 8-K and 8K/A incorporated
                  by reference in this report:

                  Form 8K filed February 2, 1998
<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 by the undersigned,  thereunto duly authorized, in the City
of Lafayette, State of Louisiana, on the 13th day of January 1999.

                                   ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

                                   By: /s/ James R. Callender, Sr.
                                      ------------------------------------------
                                      James R. Callender, Sr.
                                      President, Chief Executive Officer and
                                      Director

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

Signature                         Title                               Date
- ---------                       -----                              ----

/s/ Sam. L. Bass, Jr.           Chairman of the Board           January 27, 1999
- ---------------------------   and Vice President
    Sam L. Bass, Jr.


/s/ James R. Callender, Sr.     President and Chief Executive  January 27, 1999
- ---------------------------   Officer and Director
  James R. Callender, Sr.


/s/ Robert McKnight             Acting Chief Financial Officer, January 27, 1999
- ---------------------------   President of BAPCO and
    Robert McKnight             Director (principal financial
                                or accounting officer)


   /s/ James A. Griffin         Secretary, Treasurer and        January 27, 1999
- ---------------------------   Director
     James A. Griffin


/s/ William Beaton              Director                        January 27, 1999
- ---------------------------
      William Beaton


/s/ Alfred L. Cotten            Director                        January 27, 1999
-----------------------------
     Alfred L. Cotten


 /s/ Kenneth M. Waters              Director                    January 27, 1999
------------------------------
     Kenneth M. Waters
<PAGE>