U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
   
                            FORM 10-K AMENDMENT NO. 1
    
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1997

                                                  Commission File Number 0-17325

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

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

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

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

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

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-K contained  herein,  and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form10-K [ ]

Issuer's revenue for its most recent Fiscal Year were: $108,000

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

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

                      Documents Incorporated by Reference:

                                      None
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION

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

                                TABLE OF CONTENTS

                                     PART I

                                                                            Page

Item 1.           Description of Business

Item 2.           Properties

Item 3.           Legal Proceedings

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

                                     PART II

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

Item 6.           Selected Financial Data

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

Item 8.           Financial Statements and
                  Supplementary Data

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

                                    PART III

Item 10.          Directors and Executive Officers
                  of The Company

Item 11.          Executive Compensation

Item 12.          Security Ownership of Certain
                  Beneficial Owners and Management

Item 13.          Certain Relationships and
                  Related Transactions

                                     PART IV

Item 14.          Exhibits and Financial Statements Schedule
                                       2
<PAGE>

                                    PART I
   
ITEM 1.  DESCRIPTION OF BUSINESS

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

         The  Company  has  entered  into a number  of  recent  transactions  in
connection  with its  workover  and recovery  operations. In September 1997, the
Company  acquired a 37.5%  interest  in a 49,000  acre  natural gas lease in the
Nueces River area of south Texas,  known as the "Nueces  River  Project," one of
the  largest  natural  gas  field  areas  in the  United  States.  According  to
independent  reserve reports, it is estimated that this area contains 100 BCF of
natural gas per 640 acre section.  In  October 1997, the Company  re-entered the
first of two existing  shut-in wells on the property,  and expects to ultimately
recover up to 5 BCF per well using 5% of the  estimated  inplace  reserves.  The
daily  production rates from these wells cannot be determined at this time until
well  stimulation is completed in March 1998. In addition,  the Company acquired
in February and March 1997 two leases on oil fields located in Henderson  County
and  Wichita  Falls,      Texas.  These  oil  fields,  which  together  comprise
approximately  1,200 acres and 200 wells,  have  proven  reserves  totaling  2.5
million  barrels of oil  verified  by an  independent  reservoir  engineer.  The
Company  estimates  that,  after  reworking the wells using  various  techniques
including  its  proprietary  drill,  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  "test" oil from the Wichita
Falls field.
    
         The  Company  also holds  interests  in oil and  natural  gas leases in
Utah.  In  July  1997,  the  Company  entered  into  a  joint  venture with MIII
Corporation,   a   Native   American   oil   and   gas  company,   to  workover,
                                       3
<PAGE>
   
recomplete  and operate 335  existing  oil and gas wells on the Uintah and Ouray
Reservation in northeastern  Utah. It is estimated that the first  approximately
36 wells will be scheduled for  recompletion  and stimulation in early 1998 and,
the Company  estimates  that after initial  workover  operations  are completed,
these wells could produce in excess of 3,900 barrels of oil per day. Independent
reserve  reports  indicate,  based on a study of 133 of such  wells,  proven and
producing  reserves of approximately  5.5 million barrels of oil and 23.4 BCF of
natural gas on these  sites.  In  October  1997,  the Company  acquired  working
interests  ranging  from  80% to 84% in a  13,680  acre  oil  and  gas  property
adjoining the MIII fields,  currently producing approximately 200 barrels of oil
per day from  eight  producing  wells.  As of  December  29,  1997,  this is the
Company's only commercially  producing property,  which began realizing revenues
for the Company in November 1997. A 1997  independent  reserve report  indicates
the property's  gross  recoverable  reserves total  approximately  4.055 million
barrels of oil and 4.258 BCF of natural gas.
    
         Another  significant  aspect  of  the  Company's  current  business  is
providing  environmental  remediation services to oil and gas operators.  All of
the  Company's  revenues  during the fiscal year ended  September  30, 1997 were
attributable   to  providing  these   services,   which  include   environmental
engineering,  hazardous waste disposal (including  naturally occurring radiation
material),  oil spill, soil  decontamination and non-hazardous waste cleanup, as
well as "plug and  abandonment"  of oil and gas wells,  all in  accordance  with
strict federal,  state and local  environmental  guidelines.  In April 1997, the
Company  entered  into a master  service  agreement  with  Chevron  Oil  Company
("Chevron")  to  rework,   in  order  to  draw   additional   production   from,
approximately  400  depleting  oil and gas wells and to remediate  and "plug and
abandon"  these and other  wells  when  depleted,  in  Chevron's  oil  fields in
southern  Louisiana along the Gulf of Mexico. The Chevron agreement provides for
a three-year work schedule,  commencing upon the completion of the Company's 140
foot "plug and  abandonment"  barge.  The Company has designed this  specialized
"plug and  abandonment"  barge to  remediate  off-shore  well  locations  and is
capable  of working in  coastal  waters as  shallow as 19 inches.  In  addition,
through its extensive relationships in the oil and gas industry, the Company has
obtained a ten-year concession with the Panama Canal Commission, through a joint
venture  with  Centrum  Marine,  to supply fuel to tankers and other  commercial
vessels  traversing the Panama Canal.  These operations are expected to commence
in mid-1998, provided adequate funding is secured.

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

         Beginning in the early 1990's,  both secondary recovery of oil reserves
and environmental  remediation of abandoned oil wells have become major items of
interest in the oil and gas industry.  According to current industry statistics,
it is estimated  that only 7.5% to 10% of proven oil  reserves are  recovered in
primary drilling operations due to the significant incremental costs involved in
exploiting  far-reaching  reservoirs  of an  oil  formation.  Following  primary
drilling  operations,  large independent oil companies have typically contracted
some  or all of the  required  "plug  and  abandonment"  work  to  environmental
remediation  firms,  such as the  Company.  By  conducting  enhanced  primary or
secondary  recovery  operations  utilizing  the  BAPCO  Tool  on  the  otherwise
abandoned wells, the Company believes that it is able to effectively  extend the
economic  life of an oil field and increase oil recovery by up to 30%,  prior to
formal abandonment.  The Company, which provides primary and secondary recovery,
"plug and abandonment" and environmental remediation services, believes that, in
the United States  alone,  there are hundreds of oil and natural     gas  fields
which could benefit from these services.
                                       4
<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  petroleumproducing  region of the Gulf of
Guinea.  The Sao Tome  islands  are  located  approximately  200  miles  west of
mainland Gabon, and southwest of Equatorial Guinea and Cameroon, and are located
directly on a well-known geologic feature known as the "Cameroon Volcanic Line."
   
         The  exclusive  25-year  joint  venture  agreement   provides  for  the
establishment  of a national oil and gas company owned jointly by Sao Tome,  the
Company and, as a junior partner,  Procura Financial Consultants,  c.c., a South
African corporation ("Procura").  Under the agreement, the venture has the first
right to select the oil and gas concessions it desires to explore and develop in
an area encompassing approximately 64,550 square miles in the Gulf of Guinea. On
behalf of Sao Tome, the Company has agreed to negotiate with major international
oil and gas companies to grant leases to oil and gas concessions not selected by
the joint venture.  The Company is entitled to receive an overriding  royalty on
the production from those  concessions.  Pursuant to the terms of the agreement,
Sao Tome has the right to terminate the agreement in the event the Company fails
to make the remaining  concession fee payment of $3 million at the time Sao Tome
determines, and the United Nations accepts and approves, the 200  mile exclusive
    
                                       5
<PAGE>
   
economic   zone   boundaries   (expected to be by March 1998) or fails to timely
commence  the orderly  development  of the  national  oil and gas joint  venture
company. The Company is currently exploring funding sources for this payment. In
December 1997, the Company made an initial $2 million  payment in respect of the
concession fee from the proceeds of it's 1997 private placement.
    
         The Company is  currently in the initial  phase of project  development
and  is  conducting  seismic  surveys,  processing  existing  seismic  data  and
environmental  and  engineering  feasibility  studies.  The  Company has already
provided to Sao Tome initial feasibility studies including seismic  interaction,
sedimentology biostatgraph,  geochemistry and petrographics and diagnostics. The
Company  expects to expend at least $2.3  million in the  initial  phase of this
project.  Following further studies,  the Company  anticipates  coordinating the
drilling of a "test" well in late 1998. The costs  associated  with drilling and
testing  such a well cannot be  determined  until the 2-D seismic data have been
processed and evaluated in mid to late 1998.

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

         The Company  believes that this venture  provides it with a significant
foothold in the potentially oil-rich Gulf of Guinea, in which the venture is the
largest single  concession holder in the entire Gulf. The offshore oil potential
of Sao Tome has been studied by numerous oil  companies,  including  Mobil Corp.
and Elf Aquitaine, since at least the late 1970s.

Workover and Recovery Activities

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

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

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

         The Company's  staff focuses on maximizing  the value of the properties
within its reserve base. The results of their efforts are reflected in additions
and revisions to reserves.
   
         For  the  fiscal  year  ended  September  30,  1997,  the Company spent
approximately $53,000 on workover
    
                                       6
<PAGE>
and       recompletion  operations,  involving  9 wells in  Texas.  The  Company
anticpates  spending  in excess  of  $1,825,000  on  workover  and  recompletion
operations  during fiscal 1998,  although there can be no assurance it will have
funding to do so.

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

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

         Nueces River Natural Gas Project
   
     The Company has a 37.5% working interest in a 49,000 acre natural gas lease
in the Nueces River area of McMullen and LaSalle counties in south Texas,  known
as the "Nueces River Project," one of the largest natural gas field areas in the
United  States.  A  1997   independent   reserve  report  prepared  by  Sandwood
Consultants of Nacogdoches,  Texas  estimated that the field's reserve  contains
100 BCF of natural  gas per 640 acre  section.  In  December  1997,  the Company
re-entered the first of two existing shut-in wells on the property,  and expects
to  ultimately  recover up to 5 BCF per well using 5% of the  estimated  inplace
reserves.  The daily  production  rates from these wells cannot be determined at
this time  until well  revitalization  is  completed  in March  1998.  Following
revitalization,  the Company  estimates that such wells have the  possibility of
producing in excess of 500,000 MCF (million  cubic feet) of natural gas per day.
A 20-inch diameter  transcontinental gas pipeline is located approximately three
miles from the wells to provide  access to a gas  market.  The  Company  jointly
operates the field with Autry  Stephens & Co., a large  independent  operator in
west and south  Texas.  The Company  acquired  its  interest in the Nueces River
in  October 1997 in consideration for $200,000 and the issuance of 50,000 shares
of its common stock.
    
         In 1998, the Company intends, with its operating partner, to drill from
15 to 20 new wells at this site.  The  Company expects   to  spend approximately
$7.5 million to drill these wells, provided it receives adequate   financing  in
the future.

         Gunsite and Woodbine Oil Fields

         The Company holds directly two leases on producing oil fields in Texas,
known as the Gunsite Field in Wichita Falls, north Texas, and the Woodbine Field
in  Henderson   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.  estimated that proven reserves  ("behind pipe")
total 2.5  million  barrels of oil.  Through  December  1997,  the  Company  had
recompleted  18 wells and is  currently  producing  and selling  "test" oil. The
Company  anticipates  moving a BAPCO Tool on site in January 1998 and commencing
an  active  rework  and  recompletion  program  on the  remaining  wells.  After
reworking  the fields using the BAPCO Tool and other  drilling  techniques,  the
Company  believes  that these wells could produce from 500 to 800 barrels of oil
per day.

         The Company  acquired  the Gunsite and  Woodbine oil fields in February
and March 1997,  respectively,  in  consideration  for a total of 500,000 shares
of its common stock.

         MIII Project in Utah

         In July  1997,  the  Company  entered  into a joint  venture  with MIII
Corporation  ("MIII"),  a  Native  American  oil and gas  company  based in Fort
Duchesne,  Utah.  Under the  agreement,  the  Company  has  agreed to  workover,
recomplete  and  operate  361 oil and gas wells  located on the  4,000,000  acre
Uintah and Ouray  Reservation  in  northeastern  Utah. It is estimated  that the
first   approximately   36  wells  will  be  scheduled  for   recompletion   and
restimulation in early 1998.  After initial  workover  operations are completed,
the Company  estimates that these wells could produce in excess of 3,900 barrels
of oil per day. A 1993  independent  reserve report  prepared by Richard Stephen
Shuster,  P.E.  indicates,  based on a study of 133 of such  wells,  proven  and
producing  reserves of approximately  5.5 million barrels of oil and 23.4 BCF of
natural gas at this site.  The Company's  production  estimates at this site are
based  predominately  on the multiple  sandstone  reservoirs  of the Wasatch,  a
transition zone and Green River  Formations that can occur at depths of 5,000 to
16,000 feet.

         Under the terms of the joint venture agreement,  once the production of
natural gas reaches 5 BCF, MIII has agreed to construct a gas gathering plant on
such site, with the Company retaining a 25% interest in the plant. As of
                                       7
<PAGE>
this date,  there can be no  assurance as to when,  if ever,  such plant will be
constructed.

         The Company has a 27.762% working  interest in the wells located on the
MIII  property,  and is entitled to receive a $2.50 per barrel  operator  fee on
production  in the  fields.  The  Company  also  has the  right  to  receive  an
additional  5%  working   interest  in  the  wells  after   start-up   costs  of
approximately  $1.5 million are repaid to certain  original MIII  investors from
overall  production.  The remaining  working  interests in the MIII property are
held by MIII,  the Ute Tribe and the  allotted  members  of the Ute  Tribe.  The
Company paid $55,000 and  contemplates  issuing 250,000 Common Shares to MIII in
connection  with  entering  into this venture.  In 1998, the Company  plans,  to
recomplete and  restimulate 36 wells and to drill five to seven  development and
extension wells at this site provided adequate financing is secured.

         Uinta Project
   
         In  October 1997,  the Company acquired working  interests ranging from
80% to 84% in a 13,680 acre oil and gas  property  adjoining  the MIII fields in
the  Uinta  Basin  with  24 oil  and  natural  gas  wells,  currently  producing
approximately 200 barrels of oil per day from eight continuously producing wells
and ten wells on intermittent  production.  As of December 29, 1997, this is the
Company's only commercially  producing  property,  which began realizing revenue
for the Company in November 1997. A 1997  independent  reserve report  indicates
the property's  gross  recoverable  reserves total  approximately  4.055 million
barrels  of oil and  4.258  BCF of  natural  gas.  Wells in this  field  produce
primarily from multiple sandstone  reservoirs of the lower Green River Formation
at depths  averaging 5,500 feet. The remaining  working  interests in this field
are held by the Ute Tribe.
    
     Provided adequate financing is secured, the Company plans extensive work in
this field during 1998,  including a 20 well program to develop infill and field
extension  locations,  a 40-acre pilot  waterflood  project and the workover and
recompletion  of the 22 existing  wells to test the  viability  of more  shallow
formations for potential future development.

Reserves

         The  following  table  sets forth  estimates  of the proved oil and gas
reserves of the Company as of September 30, 1997:
<TABLE>
<CAPTION>
                                                                                                    Oil Equivalent
                                            Oil                                   Gas                 (millions of
                                    (millions of barrels)               (billion cubic feet)            barrels)
<S>                               <C>         <C>            <C>        <C>         <C>            <C>          <C>
             Field                Developed    Undeveloped     Total    Developed    Undeveloped    Total        Total
             -----                ---------    -----------     -----    ---------    -----------    -----        -----

Nueces River Project, Texas           -            -              -          -             -           -            -

Henderson Co. Field, Texas.          1.5           -             1.5         -             -           -           1.5
Wichita Falls Field, Texas.          1.0           -             1.0         -             -           -           1.0
Uintah, Ouray Reservation,            -            -              -          -             -           -            -
   Utah....................
Uinta Project, Utah........           -            -              -          -             -           -            -
                                     ----         -----         -----      ----         -----        -----        -----
         Total.............          2.5           -             2.5         -             -           -           2.5
                                    ======        ======        ======     =====         =====       ======       ======
</TABLE>
   
     The  Company is  currently  evaluating  the  existing  reserve  reports and
underlying data on all leases and has contracted another  independent  appraiser
to complete new reserve reports.
    
                                       8
<PAGE>
     Estimates of the  Company's  proved  reserves set forth above 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 Form 10-K  represent  only  estimates.
Reserve   engineering  is  a  subjective   process  of  estimating   underground
accumulations  of oil and gas that cannot be measured  in an exact  manner.  The
accuracy of any reserve  estimate is a function of the quality of available data
and of engineering  and  geological  interpretation  and judgment.  As a result,
estimates of different  engineers often vary. In addition,  results of drilling,
testing  and  production  subsequent  to the  date of an  estimate  may  justify
revision of such estimate. Accordingly,  reserve estimates often differ from the
quantities  of  oil  and  natural  gas  that  are  ultimately   recovered.   The
meaningfulness  of such  estimates is highly  dependent upon the accuracy of the
assumptions upon which they were based.

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

BAPCO Tool

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

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

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

Environmental Remediation Services

     The Company provides  environmental  remediation services, to other oil and
gas operators. These services, which the Company is licensed to provide, include
environmental  engineering,  hazardous  material disposal  (including  naturally
occurring   radiation   material),   oil  spills,   soil   decontamination   and
non-hazardous  waste cleanup  related to the  production of oil and natural gas,
all in accordance with strict federal, state and local environmental guidelines.
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. The Company utilizes standard Class
1-4  decontamination  machines.  The Class I machine  is used to  process  soils
contaminated  with  gasoline  and  diesel  and which  require  little or no soil
conditioning.  The Class II machine offers increased  temperatures to treat soil
with  contaminants up to No. 6 fuel oil,  lubricating  oils, heavy oil residuals
and crude oils.  The Class III  machines are an upgrade to the Class II machines
and accommodate slightly higher temperatures and add acid gas neutralization for
handling  chlorinated  compounds.  The Class IV  machines  are  hazardous  waste
incinerators.
                                       9
<PAGE>
     The Company's  staff is certified in the use of many types of products used
in tank and pit cleaning services and emergency response spill and clean-up. The
Company uses a "sludge-buster"  robotic water cannon to expedite the cleaning of
tanks.  The  Company's  staff is also  experienced  in the use of a closed  loop
system for pit cleaning.  The closed loop system  separates solids from liquids,
chemically treats the liquids and solids in accordance with local  environmental
standards.  The Company can deliver  emergency crews trained in chemical and oil
spill containment and clean-up throughout many parts of the world.

     In April 1997,  the Company  entered into a master  service  agreement with
Chevron  Oil  Company  ("Chevron")  to  rework,  in  order  to  draw  additional
production  from,       approximately  400  depleting  oil and gas  wells and to
remediate  and  "plug and  abandon"  these and other  wells  when  depleted,  in
Chevron's oil fields in southern Louisiana along the Gulf of Mexico. The Chevron
agreement  provides  for  a  three-year  work  schedule,   commencing  upon  the
completion of the Company's 140 foot "plug and  abandonment"  barge.  This barge
will be used to remediate offshore oil rigs and be capable of working in coastal
waters as shallow as 19 inches.  A deposit of  approximately  $131,000  has been
made by the Company to secure the barge and  additional  funding is being sought
to purchase and equip the barge.  It is estimated that the Company's  barge will
be ready to  operate  60 days  following  funding.  The  Chevron  agreement  was
originally entered into by BAPCO and Bass Environmental Worldwide,  Inc. ("BEW")
in September  1996,  prior to the  acquisition  of BAPCO by the Company in April
1997, and was assigned to the Company with Chevron's  consent at the time of the
acquisition.  The Company issued 4,000,000 shares of it's common stock to BEW in
connection with the assignment of this agreement.

     The Company's "plug and  abandonment"  services  involve  shutting down and
discontinuing the use of old, unsafe or marginally-producing  oil or natural gas
wells.  There  are  many  ecological  ramifications  if oil  and gas  wells  are
abandoned without following  federal  Environmental  Protection Agency and state
Department of Environmental Quality mandated guidelines. These ramifications are
caused   due   to  aging equipment and pipe ceilings which can lead   to   "blow
outs," oil and gas seepage into the water and ground water contamination. If not
"plugged," these problems can lead to major environmental problems and expensive
pollution cleanup for the well owners.

Offshore Logistics Services

         Panama Refueling Concession

         In March 1997, the Company entered into a joint venture  agreement with
Centrum  Marine,  pursuant to which the venture  obtained a ten-year  concession
agreement  with the Panama Canal  Commission.  The  concession  grants the joint
venture  the right to supply  fuel and other  petroleum  supplies to tankers and
other   commercial   vessels   traversing   the  Panama   Canal.   Historically,
approximately  55 to 60 such vessels  traverse the Panama Canal daily. The joint
venture is currently in negotiations to purchase a 1.5 million gallon fuel barge
and an 85 foot flat deck tugboat.  These  operations are expected to commence by
mid-1998, provided adequate funding is secured.

         Pursuant to the terms of the joint  venture  agreement,  the Company is
entitled to receive 51% of all net profits of the venture.  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 600,000 gallons of fuel a
day.

Growth Strategy

         The Company's goal is to maximize its value through  profitable  growth
in its oil and gas  reserves  and  production.  The  Company  has taken steps to
achieve   this   goal   through   its   growth   strategy   of   (i)   acquiring
marginallyproducing  oil and gas  properties,  at favorable  prices,  with still
significant   resource  recovery  potential  through  workovers   utilizing  the
Company's  proprietary  drilling  technology,  (ii)  managing  the  exploration,
exploitation and development of non-producing  properties in known oil-producing
areas,   such   as   the   Gulf  of   Guinea  in  West  Africa, with industry or
                                       10
<PAGE>
government partners,  and (iii) continuing to pursue  environmental  remediation
service  contracts  for oil and gas  well  rework  and  "plug  and  abandonment"
services in the United States and internationally.

         Key elements of the Company's growth strategy include:

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

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

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

Marketing

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

Environmental Regulation and Claims

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

         Laws  protecting the environment  have generally  become more stringent
that in the past and are expected to continue to do so.  Environmental  laws and
regulations  typically  impose  "strict  liability"  which  means  that  in some
situations the Company could be exposed to liability for 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 and could
have a material adverse effect on the Company's financial condition.
                                       11
<PAGE>
         Under  the  Comprehensive  Environmental  Response,   Compensation  and
Liability  Act,  also  known  as   "Superfund,"   and  related  state  laws  and
regulations, liability can be imposed without regard to fault or the legality of
the  original  conduct on certain  classes of persons  that  contributed  to the
release of a "hazardous substance" into the environment.  Changes to federal and
state  environmental  regulations may also negatively impact oil and natural gas
exploration  and  production  companies,  which in turn  could  have a  material
adverse effect on the Company.  For example,  legislation has been proposed from
time to time in Congress  which would  reclassify oil and natural gas production
wastes as "hazardous  wastes." If enacted,  such legislation could  dramatically
increase  operating  costs for domestic oil and natural gas  companies  and this
could  reduce the market for the  Company's  services by making may wells and/or
oilfield  uneconomical  to  operate.  To  date,  such  legislation  has not made
significant progress toward enactment.

Patents and Trademarks

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

Competitive Conditions

         Although the number of available rigs has materially decreased over the
past ten years, the workover and drilling 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.
                                       12
<PAGE>
Employees

         As of  December  31,  1997,  the Company  had 25  full-time  employees,
including three petroleum engineers and two geologists. None of its employees is
represented  by a  collective  bargaining  unit.  Management  believes  that the
Company's relationship with its employees is satisfactory.

ITEM 2.           PROPERTIES

         The Company's principal  executive offices are located in Jericho,  New
York in  approximately  1,200 square feet of leased  office  space.  The Company
currently pays $1,200 per month in rent under its lease,  which extends  through
February  1998. The Company also leases  approximately  7,000 square feet of its
main  operational  facility in  Lafayette,  Louisiana  and pays $4,000 per month
under  a lease  extending  through  October  2002.  The  Company  believes  that
additional office and operational space will be required  following the Offering
to accommodate planned expansion.   
   
     The oil and gas leases  owned by the  Company  at  September  30,  1997 are
located in Ector,  Texas and Henderson  County,  Texas.  The reserve  reports on
these leases were prepared by Dr. Joseph Shoaf.
    
ITEM 3.           LEGAL PROCEEDINGS

     Piedra Drilling  commenced an action against the Company in District Court,
Denver  Colorado in 1997.  The plaintiff  brought forth this action to enforce a
contract  for the  issuance  of  300,000  shares of  unregistered  shares of the
Company's  common stock in  consideration  for the sale by the  plaintiff to the
Company of certain drilling equipment and designs. The Company did not issue the
shares  because the necessary  equipment  and designs were not delivered  and/or
validity assigned to the Company. Although the plaintiff obtained a judgement in
the amount of  approximately  1.2 million,  Colorado counsel for the Company has
had the judgement  vacated as of November 6, 1997. The company believes that the
Company has a number of meritorious defenses and potential counterclaims.

         Connecticut Bank of Commerce commenced an action against the Company in
Lafayette  Parish,  Louisiana,  subsequently  to March 15, 1997.  The  Plaintiff
brought this action to enforce  collection of a note in the principal  amount of
$175,000.00.  The Company did not pay the note because of a dispute with respect
to the total  amount due,  but has been able to resolve  that issue.  Funds have
been set aside in an escrow  account  for  payment of an amount  agreed  upon by
Plaintiff that will satisfy the full amount of the claim.

         Charles Daum, Esq. has asserted a claim against the Company   for   the
total   sum    of   $11,671.46   for   unpaid  legal services.  Company disputes
the claim  at this point primarily because it does not have any documentation to
determine whether the claim is in fact owed.

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

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

         NONE.
                                       13
<PAGE>
                                    PART II

ITEM 5.           MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
                  HOLDERS MATTERS
   
     (a) Market  Information.  Shares of the  Company's  common  stock have been
traded on the OTC Bulletin  Board under the symbol  "ERHC" since  September  11,
1996. The following table sets forth the high and low sales prices of the Common
Stock as quoted on the OTC Bulletin  Board for the periods  indicated.  The high
and low sales prices for the Common  Stock below  reflect  inter-dealer  prices,
without  retail  mark-up,  mark-down,  or  commission,  and may not  necessarily
represent actual transactions.
<TABLE>
<CAPTION>
                                                                                High             Low
<S>                                                                           <C>               <C>
Fiscal Year 1996
4th Quarter (September 11 - 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, 1995)....................................    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 22, 1997)..............................       3-3/8            2-1/2
    
<FN>
         (b)      Holders.    The    number   of record holders of the Company's
common stock as of December 15, 1997, was 1,967 based on the   records   of  the 
transfer agent.

         (c)      Dividends.  The Company has not  paid any cash dividends since
its inception.  The Company's  credit agreement  restricts  payment of dividends
to amounts that are less than 50 percent of net income. The Company  anticipates
that all earnings will be retained for the  development of its business and that
no cash dividends on its common stock will  be   declared   in  the  foreseeable
future.

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

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

         Such common stock was issued in reliance  upon Section 4(2) and Section
506 of Regulation D.
</FN>
</TABLE>
                                       14
<PAGE>
ITEM 6.           SELECTED FINANCIAL DATA

Note (2)
<TABLE>
<S>                                         <C>                 <C>               <C>
Revenues                                       1995 (1)              1996              1997
Sales- environmental remediation svcs       $            0                  0           108,000
Sales- oil and gas production                            0                  0                 0
Cost of sales                                            0                  0            53,991
Operating expenses                                   3,404            913,225        17,033,549
Other income and expense                                 0             60,477           (33,456)
Net loss                                            (3,404)          (852,748)      (17,012,052)
Net loss per share                                   (0.01)             (0.35)            (1.62)
</TABLE>
 
Note (1)  Reflects the activity of the predecessor entity.

Note (2)  Only  three years are presented as the entity has only existed for the
 past three years.
 
 
 

          



























                                       15
<PAGE>
ITEM 7.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS

         General

     Environmental Remediation Holding Corporation is an independent oil and gas
company engaged in the exploration,  development,  procuction and sales of crude
oil and natural gas properties with current  operations  focused in Texas, Utah,
and the Democratic Republic of Sao Tome and Principe in West Africa.
   
     The Company's strategy in the United States is to increase  oil and natural
gas  reserve,  production,  and cash flow  through  (1) the  exploration  of its
existing  acreage  position in Texas,  Utah, and the Democratic  Republic of Sao
Tome  and  Principe;  (2) the  acquisition  of  additional  properties  in known
producing  areas that provide  significant  development in exploratory  drilling
potention;  (3) the  exporation  for  oil  and  natural  gas  reserves;  (4) the
maintenance  of a low  operating  and  cost  structure;  and,  (5)  environmenal
remediation as it relates to the oil and gas industry.
    
          The  Company  has  acquired  substantially  all  of  its  oil  and gas
properties within the past year. The Company's current development plans require
substantial capital expenditures in connection with the exploration, development
and  exploitation  of oil and natural gas  properties.  Although the Company has
historically  funded  capital  expenditures  through  a  combination  of  equity
contribution and short-term  financing  arrangements,  the Company's  ability to
meet its estimated capital  expenditure in Fiscal year 1998 are dependent on the
Company's ability to realize the proceeds of the Company's pending debt offering
discussed below under "capital expenditures".

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

RESULTS OF OPERATIONS

During fiscal 1997 the Company incurred a net loss of $17,012,052  compared to a
net loss of 852,748 in fiscal  1996.  In fiscal 1997 common  stock was issued in
lieu of cash  compensation  to  directors  and  outside  consultants  valued  at
$12,303,512.  In fiscal 1997 common stock was issued to acquire geologic data on
Sao Tome valued at  $2,000,000,  which was  immediately  charged to expense.  In
fiscal 1997 $960,000 was accrued,  but not paid in cash as compensation to three
officers of the Company. Depreciation and amortization amounted to $497,000. The
Company's  net cash  operating  loss for the 1997  fiscal  year was  $1,283,900,
compared to 83,700 for the 1996 fiscal year.

The  Company had  revenues  of $109,000 in fiscal 1997  compared to $0 in fiscal
1996.  Cost of sales were  $54,000 in fiscal 1997 and $0 in fiscal  1996.  These
revenues  and cost of  sales  were  entirely  in the  environmental  remediation
industry.

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

CAPITAL EXPENDITURES

During  fiscal 1997 the Company  issued  500,000  shares of its common  stock to
acquire  two  oil  and  gas  leases  in  north  east  Texas   comprised  of  100
non-producing  wells on each lease,  with proven  reserves  totalling  2,500,000
barrels of oil. Late in the year the Company  started the the necessary  repairs
and well rework to begin placing the wells back in production.

During fiscal 1997 the Company  issued  3,000,000  shares of its common stock to
acquire the Chevron master P&A service agreement.

During fiscal 1997 the Company  issued  1,000,000  shares of its common stock to
acquire geological data on Sao Tome.

During fiscal 1997 the Company  issued  4,000,000  shares of its common stock to
acquire Bass American Petroleum Company, (BAPCO), a non-operating oil production
company with significant well rework equipment assets.
                                       16
<PAGE>
         RESERVES AND PRICING

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

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

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 and developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general economic,
market or business conditions; the business opportunities (or lack thereof) that
may be presented to and pursued by the Company;  changes in laws or  regulation;
and  other  factors,  most of which  are  beyond  the  control  of the  Company.
Consequently  all of the  forward-looking  statements made in this Form 10-K are
qualified by these cautionary  statements and there can be no assurance that the
actual results or  developments  anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequences to
or effects on the Company or its business or operations.
                                       17
<PAGE>
ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>





                                           INDEX TO FINANCIAL STATEMENTS


                                                                                                               
<S>                                                                                                            <C>   
                                                                                                               Page

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

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

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

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

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

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




</TABLE>
































                                                        F-1
<PAGE>














                         REPORT OF INDEPENDENT AUDITORS



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


We have audited the  accompanying  balance sheets of  Environmental  Remediation
Holding Corp.,  (the  "Company") as of September 30, 1995, 1996 and 1997 and the
related  statements of operations,  stockholders'  equity and cash flows for the
period since inception and the two years then ended. These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

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

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




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

Palm Beach, Florida
December 12, 1997

















                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                                   ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                                            Consolidated Balance Sheets
                                                   September 30,
<S>                                                         <C>                     <C>                 <C>
                                                                     1995                1996                 1997
                                                                ---------------     --------------      -----------------
                          ASSETS
CURRENT ASSETS
  Cash                                                       $                0                  0                327,743
  Prepaid expenses and other current assets                                   0                  0                215,708
                                                                ---------------     --------------      -----------------
    Total Current Assets                                                      0                  0                543,451
                                                                ---------------     --------------      -----------------
PROPERTY AND EQUIPMENT
  Equipment (note 1b)                                                         0          3,348,000              5,226,000
                                                                ---------------     --------------      -----------------
    Total Property and Equipment                                              0          3,348,000              5,226,000
                                                                ---------------     --------------      -----------------
OTHER ASSETS
  Deposits on fixed assets                                                    0              5,000                136,560
  Crude oil reserves, net (note 1f)                                           0                  0             12,500,000
  Chevron P&A master service agreement (note 1h)                              0                  0              3,000,000
  Deferred compensation, net (note 1d)                                  500,000            427,500                250,000
                                                                ---------------     --------------      -----------------
    Total Other Assets                                                        0            432,500             15,886,560
                                                                ---------------     --------------      -----------------
Total Assets                                                 $          500,000          3,780,500             21,656,011
                                                                ===============     ==============      =================
           LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accrued expenses and other current payable                 $            3,316                  0                111,054
  Stockholder loans (note 1c)                                                 0              6,730                465,094
  Accrued interest (note 1c)                                                  0                  0                 37,228
  Accrued salaries (note 4)                                                   0                  0                960,000
  Short term bank loan (note 1c)                                              0                  0                175,000
                                                                ---------------     --------------      -----------------
    Total Current Liabilities                                             3,316              6,730              1,748,376
                                                                ---------------     --------------      -----------------
LONG-TERM LIABILITIES
  Long-term debt                                                              0                  0                      0
                                                                ---------------     --------------      -----------------
    Total Long-Term Liabilities                                               0                  0                      0
                                                                ---------------     --------------      -----------------
Total Liabilities                                                         3,316              6,730              1,748,376
                                                                ---------------     --------------      -----------------
STOCKHOLDERS' EQUITY
  Common stock, $0.0001 par value; Authorized
    950,000,000 shares: issued and outstanding 1,639,450
    at September 30, 1995; 3,239,374 at September 30,
    1996 and 22,989,526 at September 30, 1997 (note 3)                      164                324                  2,299
  Preferred stock, $0.0001  par value, authorized
    10,000,000 shares; issued and outstanding 0 at
    September 30, 1995, 1996 and 1997.                                        0                  0                      0
  Additional paid in capital in excess of par                           499,924          4,629,598             38,686,840
  Stock subscriptions receivable                                              0                  0              (913,300)
  Retained earnings (deficit)                                           (3,404)          (856,152)           (17,868,204)
                                                                ---------------     --------------      -----------------
Total Stockholders' Equity                                              496,684          3,773,770             19,907,635
                                                                ---------------     --------------      -----------------
Total Liabilities and Stockholders' Equity                   $          500,000          3,780,500             21,656,011
                                                                ===============     ==============      =================
</TABLE>
     The accompanying notes are an integral part of the financial statements
                                       F-3
<PAGE>
<TABLE>
<CAPTION>
                                   ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                                       Consolidated Statements of Operations
                       For the period since  inception  ended  September  30, 1995,  and the years
                                        ended September 30, 1996 and 1997
<S>                                                     <C>                    <C>                    <C>
                                                               1995                   1996                    1997
                                                         -----------------     ----------------       -----------------
                       REVENUE
Sales - environmental remediation services              $                0                    0                 108,944
Sales - crude oil                                                        0                    0                       0
                                                            --------------        -------------        ----------------
  Total sales                                                            0                    0                 108,944
                                                            --------------        -------------        ----------------
                     COST OF SALES
Cost of sales - environmental remediation services                       0                    0                  53,991
Cost of sales - crude oil                                                0                    0                       0
                                                            --------------        -------------        ----------------
  Total cost of  sales                                                   0                    0                  53,991
                                                            --------------        -------------        ----------------
   Gross profit/(loss)                                                   0                    0                  54,953
                  OPERATING EXPENSES
Automotive expenses                                                      0                7,257                  55,864
Bank charges                                                             0                  184                     421
Compensation - officers                                                  0              147,326               1,185,000
Compensation - directors                                                 0                    0               3,492,981
Consultant fees                                                          0              337,956               8,883,356
Depletion                                                                0                    0                       0
Depreciation                                                             0              372,000                 372,000
Donations                                                                0                    0                  10,500
Dues, fees, licenses and taxes                                           0                    0                   9,552
Insurance                                                                0                    0                 204,099
Geological data and reports (note 1i)                                    0                    0               2,008,848
Oil lease transfer fees                                                  0                    0                  55,000
Office expenses                                                          0                1,072                  97,226
Oil well rework expenses                                                 0                    0                  53,355
Professional fees                                                    3,404               19,500                 244,230
Research and development                                                 0                    0                  17,000
Rent                                                                     0                8,550                  45,950
Telephone                                                                0                    0                  48,528
Travel and entertainment                                                 0               19,380                 235,856
Miscellaneous                                                            0                    0                  13,783
                                                            --------------        -------------        ----------------
  Total operating expenses                                           3,404              913,225              17,033,549
                                                            --------------        -------------        ----------------
Income(loss) from operations                                       (3,404)            (913,225)            (16,978,596)
Interest expense                                                         0                    0                (40,787)
Interest income                                                          0                    0                     601
                                                            --------------        -------------        ----------------
Income(loss) before tax & extraordinary item                       (3,404)            (913,225)            (17,018,782)
Extraordinary item - forgiveness of debt                                 0               60,477                   6,730
                                                            --------------        -------------        ----------------
Income(loss) before taxes                                          (3,404)            (852,748)            (17,012,052)
Income tax expense/(benefit)                                             0                    0                       0
                                                            --------------        -------------        ----------------
Net income(loss)                                        $          (3,404)            (852,748)            (17,012,052)
                                                            ==============        =============        ================
Weighted average number of shares outstanding                      398,643            2,469,511              10,500,293
                                                            ==============        =============        ================
Net loss per share                                      $           (0.01)               (0.35)                  (1.62)
                                                            ==============        =============        ================
</TABLE>
    The accompanying notes are an integral part of the financial statements.
                                       F-4
<PAGE>
<TABLE>
<CAPTION>
                                   ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                                  Consolidated Statements of Stockholders' Equity
                                         September 30, 1995, 1996 and 1997
   
<S>                         <C>               <C>          <C>      <C>            <C>             <C>               <C>
                                Number           Common      Pf'd       APIC         Stk Subs       Accumulated         TTL S/H
                              of Shares          Stock       Stock                    Receivable        Deficit            Equity
                            --------------    ------------ -------- ------------ --------------  ----------------  ----------------
BALANCE,September 5, 1995                0    $          0        0            0              0                 0                 0
9/23 - cash                        884,407              88        0            0              0                 0                88
9/25 - services                    755,043              76        0      499,924              0                 0           500,000
  Net loss                               -               0        0            0              0           (3,404)           (3,404)
                            --------------    ------------ -------- ------------ --------------  ----------------  ----------------
    
BALANCE,
September 30, 1995               1,639,450             164        0      499,924              0           (3,404)           496,684
10/1 - equipment                   744,000              74        0    3,719,926              0                 0         3,720,000
10/10 - cash                        20,000               2        0       49,998              0                 0            50,000
8/9 - cash                          20,500               2        0       42,890              0                 0            42,892
8/19 - reverse merger              356,317              36        0     (243,366)             0                 0         (243,330)
8/19 - S-8 services                 73,277               7        0       73,270              0                 0            73,277
8/30 - services                     10,000               1        0       69,999              0                 0            70,000
9/15 - services                     55,000               6        0      384,994              0                 0           385,000
9/15 - cash                        320,830              32        0       31,963              0                 0            31,995
  Net loss                               -               0        0            0              0         (852,748)         (852,748)
                            --------------    ------------ -------- ------------ --------------  ----------------  ----------------
   
BALANCE,
September 30,  1996              3,239,374             324        0    4,629,598              0         (856,152)         3,773,770
2/10 - S-8 services              1,600,000             160        0    1,099,840              0                 0         1,100,000
3/4 - oil wells/leases             300,000              30        0    4,999,970              0                 0         5,000,000
3/5 - oil wells/leases             200,000              20        0    7,499,980              0                 0         7,500,000
3/13 - S-8 services                300,000              30        0      374,970              0                 0           375,000
4/5 - Chevron contract           3,000,000             300        0    2,999,700              0                 0         3,000,000
4/5 - services                   1,342,981             134        0    1,342,847              0                 0         1,342,981
4/5 - contributed to corp        (100,000)            (10)        0      (99,990)              0                 0         (100,000)
4/9 - BAPCO acquisition          4,000,000             400        0    2,249,600              0                 0         2,250,000
5/14 - S-8 services              1,500,000             150        0      562,350              0                 0           562,500
6/19 - services                    150,000              15        0       28,110              0                 0            28,125
7/8 - cash                         800,000              80        0      399,920              0                 0           400,000
7/15 - DRSTP information         1,000,000             100        0    1,999,900              0                 0         2,000,000
7/25 - S-8 services              2,335,000             233        0    6,464,798              0                 0         6,465,031
7/30 - services                  1,500,000             150        0    2,249,850              0                 0         2,250,000
7/30 - cash                        147,000              15        0      146,985              0                 0           147,000
8/8 - cash                          74,000               8        0      147,992              0                 0           148,000
9/4 - services                     400,000              40        0      307,960              0                 0           308,000
9/10 - cash stk subs recv          727,273              73        0      799,927      (800,000)                 0                 0
9/15 - cash & stk subs recv        473,898              47        0      482,533      (113,300)                 0           369,280
  Net loss                               -               0        0            0              0      (17,012,052)      (17,012,052)
                            --------------    ------------ -------- ------------ --------------  ----------------  ----------------
    
BALANCE,
September 30,  1997             22,989,526     $     2,299         0  38,686,840      (913,300)      (17,868,204)        19,907,635
                             ==============    ============ ========= ========== ==============  ================  ================
</TABLE>
    The accompanying notes are an integral part of the financial statements.
                                       F-5
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                      Consolidated Statements of Cash Flows
     For the period since inception ended September 30, 1995, and the years
                        ended September 30, 1996 and 1997
<TABLE>
<CAPTION>
<S>                                                                  <C>                      <C>                   <C>   
                                                                                1995                      1996                  1997
                                                                           --------------      ---------------      ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss)                                                     $            (3,404)            (852,748)          (17,012,052)
Adjustments to reconcile net loss to net cash used for operating
  activities:
    Amortization of deferred compensation                                               0              142,500               125,000
    Non-cash gain on forgiveness of debt                                                0             (60,477)               (6,730)
    Stock issued for services rendered                                                  0              315,000            12,345,329
    Stock issued for DRSTP geological data                                              0                    0             2,000,000
    Depreciation                                                                        0              372,000               372,000
Changes in operating assets and liabilities:
   (Increase) decrease in prepaid expenses                                              0                    0             (215,708)
   Increase (decrease) in accrued interest expense                                      0                    0                37,228
   Increase (decrease) in accrued expenses                                          3,316                    0               111,054
   Increase (decrease) in accrued salaries                                              0                    0               960,000
                                                                           --------------      ---------------      ----------------
Net cash (used) provided by operating activities                                     (88)             (83,725)           (1,283,879)

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

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

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

CASH, beginning of period                                                               0                    0                     0
                                                                           --------------      ---------------      ----------------
CASH, end of period                                                  $                  0                    0               327,743
                                                                           ==============      ===============      ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash                                                $                  0                    0                 3,559
                                                                           ==============      ===============      ================
   
Non cash financing activities:
   Stock issued to acquire environmental remediation equipment       $                  0            3,720,000                     0
                                                                           ==============      ===============      ================
   Stock issued to acquire crude oil reserves and wells              $                  0                    0           12,500,000
                                                                           ==============      ===============      ================
   Stock issued to acquire Chevron master P&A service agmt           $                  0                    0             3,000,000
                                                                           ==============      ===============      ================
   Stock issued to acquire BAPCO                                     $                  0                    0             2,250,000
                                                                           ==============      ===============      ================
    
</TABLE>
    The accompanying notes are an integral part of the financial statements.
                                       F-6
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements
                        September 30, 1995, 1996 and 1997

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

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

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

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

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

         The consolidated  financial  statements include the accounts of SSI and
         BAPCO,  its  wholly  owned  subsidiaries.   Intercompany  accounts  and
         transactions have been eliminated in consolidation.
   
     b)  Equipment  Environmental remediation equipment was purchased by ERFC in
         exchange for common  stock.  The fair market value of the equipment was
         determined  through the use of an  independent  third  party  equipment
         appraiser.  The then  determined  fair market  value was lower than the
         previous owners cost basis, and the fair market value of the ERFC stock
         exchanged was undeterminable,  therefore the Company chose to value the
         equipment received using the appraiser's valuation, or $3,720,000.  The
         Company has chosen to depreciate the equipment  using the straight line
         method  over  its  estimated   remaining  useful  life  of  ten  years.
         Expenditures  for  maintenance and repairs are charged to operations as
         incurred.  Depreciation  expense for the period since  inception  ended
         September  30, 1995 was $0 and for the years ended  September  30, 1996
         and 1997 was $372,000 and $372,000.
    
                                       F-7
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies, continued
         In the BAPCO  acquisition the Company acquired  ownership of all rights
         to BAPCO's  proprietary  oil well reworking  tool,  "the BAPCO Tool" as
         well as other oil and natural gas well reworking equipment. The control
         of this  proprietary  tool has enhanced the  Company's  position to the
         extent  that it would not have been able to enter into the  contract to
         control the Utah oil fields and the  reworking  of the  Indonesian  oil
         fields.  The control of this tool also enabled the  acquisition  of the
         200 Texas oil wells to be  economically  feasible to a greater  extent.
         The fair market value of the equipment was  determined  through the use
         of an independent third party equipment appraiser. The Company chose to
         value the  equipment  received  using  the  appraiser's  valuation,  or
         $2,250,000,  because at the time the  acquisition  was  negotiated  the
         Company's  common  stock was  highly  volitile  in price and  extremely
         thinly traded which led the Company to determine that the equipment was
         the easier to value  under APB 16. The  Company  expects to  depreciate
         this  tool and  technology  over  five  years,  beginning  in the first
         quarter of fiscal 1998.

     c)  Notes payable The Company issued two notes payable to stockholders  who
         are also  officers  and  directors  in exchange  for cash  amounting to
         $233,398 and $526,883. These notes carry no stated maturity date and an
         8.5% rate of interest.  The Company has repaid  $236,787 and $58,500 on
         these  notes,   including  interest  on  one.  The  remaining  note  is
         convertible  into restricted  stock at 50% of the average bid price for
         the month in which the loan was made.  The  conversion is at the option
         of the  noteholder.  Accrued  interest  on these  notes  is $0,  $0 and
         $21,273 for the period since inception ended September 30, 1995 and for
         the years ended September 30, 1996 and 1997.

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

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

         On August 30,  1996,  the Company  issued  10,000  shares of its common
         stock, valued at $70,000, to an attorney for services to be rendered at
         below market rates for a period of 4 months.  Accordingly,  the Company
         amortized this expense over the term of the agreement.
                                       F-8
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies, continued
     e)  Net loss per share Net loss per share is computed  by dividing  the net
         loss by the number of shares outstanding during the period.
   
     f)  Crude oil  reserves At September  30, 1996,  the Company had no oil and
         gas  reserves.  In March 1997,  the Company  acquired an undivided  8/8
         interest  in a 100 well  lease  located  in the  Gunsite  Sand Lease in
         Ector,  Texas,  in exchange for 300,000 shares of the Company's  common
         stock.  The Company  received an  independent  evaluation of this field
         which  reflected  1,000,000  barrels of proven oil  reserves.  In March
         1997,  the Company  acquired an  undivided  8/8  interest in a 100 well
         lease  located  in  the  Woodbine Sand Lease Block in Henderson County,
         Texas, in  exchange  for  200,000 shares of the Company's common stock.
         The Company received an  independent  evaluation  of this  field  which
         reflected 1,500,000  barrels of  proven oil  reserves.  The Company has
         valued the proven reserves at current market value, less lifting costs,
         less projected  well rework    costs,    less    projected    equipment
         repair/replacement costs, less estimated dismantlement, restoration and
         abandonment costs and less a discount of approximately 50% to allow for
         potential  errors  in the  estimated  costs  and  reserve  reports  and
         fluctuations  in the market  value of crude oil.  The Company  chose to
         value  these  acquisitions  on the  basis of the asset  value  received
         rather  than the value of the common  stock  given up as at the time of
         the acquisition the stock price was highly volatile and thinly traded.
    
         Both  acquisitions  also included all existing  equipment on site.  The
         Company has not  recorded  the fair market  value of the  equipment  in
         place,  as all of such equipment has minimal scrap value,  which is the
         only valuation  method available due to the  non-operational  status of
         the wells at  acquisition  and for several years prior to  acquisition.
         The Company spent $53,000 for the year ended September 30, 1997 on well
         equipment  repairs  and well  rework,  all on the  Gunsite  lease.  The
         Company expects to capitalize and depreciate repairs which are believed
         to extend the useful life of such existing  equipment  beyond one year,
         as well as the cost of replacement equipment.

         The  Company  expects  to  utilize  the  sucessful  efforts  method  of
         accounting for its oil and gas producing activities once it has reached
         the producing stage. The Company expects to regularly assess proved oil
         and gas  reserves  for possible  impairment  on an  aggregate  basis in
         accordance with SFAS 121.

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

     h)  Chevron   master  P&A  service   agreement  In   September   1996  Bass
         Environmental  Services Worldwide,  Inc., (BESW), entered into a Master
         Service Agreement with Chevron to plug and abandon oil wells located in
         the Gulf of Mexico  off the coast of  Louisiana.  In April  1997,  BESW
         assigned this contract to the Company in exchange for 3,000,000  shares
         of the Company's common stock. Chevron has reissued the contract in the
         Company's name. The Company valued this acquisition on the basis of the
         Company's  bid price on the date the  agreement  was signed,  or $1 per
         share.  The Company expects to begin  commercializing  the agreement in
         fiscal 1998,  therefore it will begin  amortizing  this contract  value
         over a five year period beginning in fiscal 1998.
                                      F-9
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies, continued
     i)  DRSTP geological data  In July 1997, the Company  acquired  substantial
         geologic  data and  other  information  from an  independent  source in
         exchange for one million  shares of the Company's  common  stock.  This
         data was valued at $2,000,000  based the agreement with the seller that
         Company would  repurchase  these shares for $2,000,000 at a rate of 25%
         per  quarter  should the seller so choose.  The Company  expensed  this
         acquisition cost immediately.
   
(2)      Income  taxes  The  Company  has  a  consolidated  net  operating  loss
         carry-forward amounting to $17,868,204,  expiring as follows: $3,404 in
         2010,  $852,748  in 2011 and  $17,012,052  in 2012.  The  Company has a
         $7,147,282  deferred tax asset  resulting from the loss  carry-forward,
         for which it has  established  a 100%  valuation  allowance.  Until the
         Company's  current plans begin to produce  earnings it is unclear as to
         the ability of the Company to utilize these carry-forwards.
    
(3)      Stockholders'  equity The Company has authorized  950,000,000 shares of
         $0.0001 par value  common  stock and  10,000,000  shares of $0.0001 par
         value preferred  stock. On September 30, 1995, the predecessor  entity,
         ERFC,  had  1,639,450  shares  issued and  outstanding,  which had been
         issued  during the month since  inception as 884,407  shares for $88 in
         cash and 755,043 shares for a four year consulting  agreement valued at
         $500,000 with a then independent consultant who subsequently became the
         Company's Chairman, President and CEO.

         In  October  1995,   ERFC  issued   744,000   shares  in  exchange  for
         environmental  remediation equipment valued by an independent appraiser
         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
         valued at $1.00 per share  related to the merger.  In August 1996,  the
         Company issued 10,000 shares of its common stock, valued at $70,000, to
         an attorney  for  services to be rendered at below  market  rates for a
         period of 4 months. In September 1996, the Company issued 55,000 shares
         of  its  common  stock  under  three  consulting  contracts  previously
         negotiated,  valued at $385,000.  In September 1996, the Company issued
         320,830 shares of its common stock in exchange for $31,995 in cash.

         In February 1997, the Company issued  1,600,000  shares of common stock
         via an S-8  registration  in exchange for consulting  and  professional
         services  valued at $1,100,000.  In March 1997, the Company  acquired a
         100 oil well lease  with one  million  barrels  of proven oil  reserves
         valued at  $5,000,000  in exchange for 300,000  shares of the Company's
         common stock. In March 1997, the Company  acquired a 100 oil well lease
         with one and one-half  million barrels of proven oil reserves valued at
         $7,500,000  in exchange  for  200,000  shares of the  Company's  common
         stock. In March 1997, the Company issued 300,000 shares of common stock
         via an S-8  registration  valued at  $375,000  in  exchange  for public
         relations services,  of which approximately  150,000 had been earned at
         fiscal year end. The balance will either be earned or returned to ERHC.
                                      F-10
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

(3)  Stockholders' equity, continued
         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  $3,000,000.  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 by an independent appraiser at $2,250,000. 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 shares of common
         stock to two  independent  consultants  for services valued at $28,125.
         One of these consultants became an employee of the Company in September
         1997.

         In July 1997,  the Company  issued  800,000 shares under a Section 4(2)
         exemption from registration to a previously unrelated party in exchange
         for $400,000 in cash. In July 1997,  the Company  acquired  substantial
         geologic  data and  other  information  from an  independent  source in
         exchange for 1,000,000 shares of the Company's common stock.  This data
         was valued at  $2,000,000  based the  agreement  with the  seller  that
         Company would  repurchase  these shares for $2,000,000 at a rate of 25%
         per  quarter  should the seller so choose.  In July 1997,  the  Company
         issued   2,335,000   shares  of  common  stock  to  three   independent
         consultants for services valued at $6,465,031,  principally relating to
         the Company's  acquisition  of the MIII  agreement.  In July 1997,  the
         Company issued  1,500,000  shares of common stock to three directors in
         lieu of cash  compensation for services  rendered to the Company valued
         at  $2,250,000.  In July 1997,  the Company  issued  147,000  shares of
         common  stock  under a  Regulation  D Rule  506  private  placement  in
         exchange for $147,000 in cash. In 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.

         The Company is contingently  liable to issue up to three million shares
         of  restricted  stock in total to three  officers and  directors of the
         Company for their efforts in closing the Sao Tome & Principe  contract.
         These shares will be issued upon the joint venture oil production level
         of 20,000  barrels a day being  attained.  The Company is  contingently
         liable to issue up to two  million  shares of  restricted  stock to two
         officers and  directors of the Company for their efforts in closing the
         M III contract in Utah upon the joint venture oil  production  level of
         4,000 barrels a day being  attained.  This two million shares  includes
         the 500,000 shares the Company is to issue to 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.
                                      F-11
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

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

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

(6)      Segment  information  The Company has three  distinct lines of business
         through its two wholly owned subsidiaries,  Site Services, Inc., (SSI),
         and Bass  American  Petroleum  Company,  (BAPCO),  and a joint  venture
         agreement.  SSI operates in the environmental  remediation industry and
         BAPCO  will  operate  in the  oil and gas  production  industry.  SSI's
         principal   identifiable  assets  consist  of  $2,976,000,   (net),  of
         environmental  equipment,  a barge  deposit of $131,000 and the Chevron
         P&A master service  agreement  valued at $3,000,000,  (net). All of the
         Company's 1997 revenues of $109,000 and cost of sales of $54,000 relate
         to SSI.  BAPCO's  principal  identifiable  assets  consist of crude oil
         reserves valued at $12,500,000 and equipment valued at $2,250,000.  The
         Company also expects to operate in the supply industry  through a joint
         venture  agreement  to supply fuel and other goods to ships  transiting
         the Panama Canal.  No pricipal  identifiable  assets yet exist for this
         line of business.

(7) Subsequent events
     a)  Stockholder's  equity The 830,273 shares of common stock were issued by
         the Company upon  receiving  the $913,300 in cash in October 1997 which
         had been  subscribed for at September 30, 1997. In October and November
         1997, the Company issued 175,599  additional  shares of common stock in
         exchange  for  $183,359  in  cash  under  the  same  private  placement
         memorandum offering in August and September 1997.

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

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

     d)  Utah oil wells and reserves On September 29, 1997, the Company  entered
         into an agreement to acquire 22 oil, gas and mineral  leases located in
         Uintah  and  Duchesne  Counties,  Utah from  three  joint  owners.  The
         purchase agreement was closed on October 8, 1997, at which time the the
         Company received the lease assignment. The terms of the
                                      F-12
<PAGE>
                  ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
                   Notes to Consolidated Financial Statements

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

     f)  Firm commitment letter of intent In December 1997, the Company received
         a firm  commitment  letter of intent form a registered  brokerage house
         which  contemplates a public offering of  approximately  $50,000,000 of
         the Company's debt securities. This  offering,   if  it  proceeds,   is
         contemplated for early 1998.
    
     g)  Test  oil  production  In  late  November  1997,  test  oil  production
         amounting to approximately  444 barrels was picked up from the tanks at
         the Gunsite Sand lease.  At that time the Company had  approximately  9
         wells back on line and pumping.  In late  November  and early  December
         1997, test oil production  amounting to approximately 1,292 barrels was
         picked  up from the  tanks at the 22  leases  in  Uintah  and  Duchesne
         Counties, Utah.

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

















                                      F-13                                     
<PAGE>
ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE.

         NONE.


ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Directors and Executive Officers


         The  names  and age of the  directors  and  executive  officers  of the
Company, and their positions with the Company, are as follows:
<TABLE>
<CAPTION>
Name                                            Age                 Position
<S>                                            <C>                  <C>


Sam L. Bass, Jr............................     63                  Chairman of the Board, President and Chief
                                                                    Executive Officer
James R. Callender, Sr.....................     57                  Chief Operating Officer, Vice President and
                                                                    Director
Noreen G. Wilson...........................     45                  Chief Financial Officer, Vice President and
                                                                    Director
James A. Griffin...........................     43                  Secretary, Treasurer and Director
Robert McKnight............................     62                  President of BAPCO
William Beaton.............................     75                  Director
</TABLE>
         The  principal  occupations  for the  past  five  years  (and,  in some
instances,  for prior years) of each of the directors and executive  officers of
the Company are as follows:

         Sam L. Bass, Jr. has been the Chairman   of   the  Board, President and
Chief Executive Officer of the Company   since   September 1996.   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.

         James R. Callender,  Sr. has served as Chief Operating Officer and Vice
President of the Company since August 1997 and a Director since  September 1996.
He has also been the  President  and owner of CalSons Co. Inc.,  an ostrich farm
and cattle ranch located in Louisiana,  since November  1990.  From July 1997 to
August 1997,  Mr.  Callender  served as a Consultant to the Company.  From March
1997 to April 1997, he served as a Consultant to Forcenergy Inc., an independent
oil and gas company.  From September 1996 to March 1997, Mr. Callender served as
a Management  Consultant to Arctic  Recoil,  Inc., a maker of high pressure well
control units. He acted as an Investment Consultant to Coburn Inc., an oil field
construction and heavy equipment operator, from February 1996 to September 1996.
From January 1993 to December  1995, Mr.  Callender  served as Chief Engineer to
the Chief  Executive  Officer and Senior  Consultant  at Unocal  Corp.,  a fully
integrated  energy resources  company whose 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.
   
         Noreen G. Wilson has served as Chief  Financial  Officer of the Company
since June 1997.  She has been a Director of the Company  since  December  1996.
From January 1995 to the present  time,  Mrs.  Wilson has served as President of
Supertrail  Manufacturing  Company, Inc., a real estate development firm located
in Aberdeen,  Mississippi.  Supertrail  Manufacturing  Company,  Inc.  filed for
Chapter 11  reorganization  under  the U.S. Bankruptcy Code in January 1995.  At
that point in time, Mrs. Wilson became  President,  in order to guide and manage
the company  through its  reorganization,  and she devotes  minimal time in this
position.  From  February  1993 to  December  1996,  Mrs.  Wilson  served  as an
    
                                       31
<PAGE>
International  Consultant for the financing of American builders and contractors
overseas,  primarily working through the Export/Import  Bank and the World Bank.
During the same time period, Mrs. Wilson served as Vice President of Traditional
Enterprises, a financial consulting firm located in Roswell, Georgia. Ms. Wilson
is the first cousin of James A. Griffin.

         James A.Griffin has been the Secretary, Treasurer and a Director of the
Company since  September  1996. From April 1992 to April 1996, Mr. Griffin was a
founding  and  managing  partner  in the law firm of Griffin &  Pellicane,  Esq.
located in Westbury, New York. In April 1996, he formed the law firm of James A.
Griffin, Esq., but he is currently minimally involved in the practice of law. He
received his J.D. from Touro College, Jacob D. Fuchsberg Law Center, in 1987. He
received his B.A. degree from Dowling College in 1976 and his B.S. degree at the
State  University of New York at Stony Brook,  School of Allied Health Sciences,
in 1979. He is admitted to practice law in the State of New York and is a member
of the  American Bar  Association,  the New York State Bar  Association  and the
Nassau  County Bar  Association.  Mr.  Griffin is the first  cousin of Noreen G.
Wilson.

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

         William Beaton has been a Director of the Company since September 1996.
He  currently  serves as the Chairman of The  Institute  of  Petroleum  (West of
Scotland  Branch)  and has been in that  position  for more  than the past  five
years. He was the General Manager of Clydsedale Bank of Glasgow,  Scotland until
his retirement in 1982.  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.

         All directors hold office until the next annual meeting of shareholders
and until their  successors are duly elected and qualified,  unless their office
is vacated in accordance with the Certificate of  Incorporation  of the Company.
Officers  are  elected  to  serve,  subject  to the  discretion  of the Board of
Directors,  until their  successors are appointed.  Except for the  relationship
between  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.
                                       32
<PAGE>
         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 the International  Human Assistance  Programs,  the
New  York  Hall of  Science  and  Technology,  the New York  Commission  for the
Development  of Flushing  Meadows,  Federated  Finance  Corp.,  First  Federated
Savings  Bank,  and McCrane & Co. He received his A.B.  from the  University  of
Evansville in 1941, and his J.D. from Indiana  University  School of Law in 1948
where he was Editor in Chief of the Indiana Law Journal.

         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.

         Ken Water  has been a member  of the  Company's  Advisory  Board  since
September 1996.

         All directors hold office until the next annual meeting of shareholders
and until their successors are dully elected and qualified,  unless their office
is vacated in accordance with the Articles of the Company.  Officers are elected
to serve,  subject to the  discretion  of the Board of  Directors,  until  their
successors are appointed.
                                       33
<PAGE>
ITEM 11.                     EXECUTIVE COMPENSATION

         The  following  table sets forth,  in summary  form,  the  compensation
received during each of the Company's last year by the Chief  Executive  Officer
of the Company and by the four other most highly compensated  executive officers
whose compensation exceeded $100,000 during the year ended September 30, 1997:
<TABLE>
<CAPTION>
                                            SUMMARY COMPENSATION TABLE
   
                                   Annual Compensation(c,d,e)                 Long-Term Compensation(f,g,h)
<S>              <C>           <C>           <C>            <C>               <C>               <C>          <C>
(a)               (b)           (c)           (d)           (e)                 (f)              (g)          (h)

NAME AND                                                                        RESTRICTED
PRINCIPAL         FISCAL                                    OTHER ANNUAL        STOCK            OPTIONS/     LTIP
POSITION          YEAR (1)      SALARY (2)    BONUS         COMPENSATION        AWARDS (4)       SARs         payout

Sam L. Bass,      1997          $480,000           0            $125,000              0                     0          0
Jr., CEO,                                                            (3)
President

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

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

Noreen G.         1997          $360,000           0                  0         500,000               0          0
Wilson,                                                                         shares
Executive
Vice
President,
Chief
Financial
Officer
<FN>
(1)      James R. Callender joined the Company as its Chief Operating Officer in July 1997.  Noreen G.
Wilson joined the Company as Executive Vice-President and Chief Financial Officer in January 1997.
    
(2)      Salaries for Sam L. Bass, Jr., James A. Griffin, and Noreen G. Wilson are accrued and not paid in cash.
Each has an option to convert all or part of any accrued salary to common stock of the Company at a price
reasonably established by the Board of Directors.
   
(3)      Represents amortization of Common Stock of ERFC distributed in 1995 to Sam L. Bass, Jr. (see Financial
Statements note 1d).
    
(4)      Restricted stock awards to Messrs. Griffin and Callender and Ms. Wilson were awarded in fiscal year 1997
and were vested as of the date of grant.
</FN>
</TABLE>
                                       34
<PAGE>
Compensation of Directors

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

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

Limitation of Liability and Indemnification

         Pursuant to the provisions of the Delaware General Corporation Law (the
"Delaware  Law"),  the Company  has adopted  provisions  in its  Certificate  of
Incorporation  which  provide  that  directors  of  the  Company  shall  not  be
personally  liable for monetary damages to the Company or its stockholders for a
breach of fiduciary duty as a director,  except for liability as a result of (i)
a breach of the director's  duty of loyalty to the Company or its  stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing  violation  of law,  (iii) an act  related  to the  unlawful  stock
repurchase or payment of a  dividend under Section 174 of the Delaware Law,  and
(iv) transactions from which  the director derived an improper personal benefit.
Such limitation of liability   does   not   affect the availability of equitable
remedies such as injunctive relief or rescission.

         The Company's  Certificate of Incorporation also authorizes the Company
to indemnify its officers,  directors and other agents,  in accordance  with the
Company's by-laws,  agreements or otherwise,  to the full extent permitted under
the Delaware Law. The Company intends to enter into  indemnification  agreements
with its  directors and officers  which may, in some cases,  be broader than the
specific   indemnification   provisions  contained  in  the  Delaware  Law.  The
indemnification  agreements  may require the  Company,  among other  things,  to
indemnify such officers and directors against certain liabilities that may arise
by reason of their  status or service  as  directors  or  officers  (other  than
liabilities  arising from willful  misconduct of a culpable nature),  to advance
their expenses  incurred as a result of any proceeding  against them as to which
they could be indemnified,  and to obtain directors' and officers'  insurance if
available on reasonable terms.

         At present,  there is no pending  litigation or proceeding  involving a
director,  officer,  employee or agent of the Company where indemnification will
be required or permitted.  The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.

Compensation of Executive Officers
   
         During the fiscal year ended  September  30, 1997,  the Company did not
make cash payments to any of its executive officers for salary, except for James
R. Callender,  Sr., the Company's Chief Operating Officer,  who was paid a total
of  $100,000  in  July,  August  and  September  1997,  and Robert McKnight, the
President of BAPCO, who was paid a total of $20,000 in August and September 1997
The  Company  continues  to  compensate  Messrs.  Callender and  McKnight at the
current  rate  of  $40,000  and  $10,000  per  month, respectively. The Company,
however, made lease payments on automobiles for each of Sam L. Bass, Jr., Noreen
G. Wilson,  James A. Griffin  and  Mr. McKnight  during  the  fiscal  year ended
September 30, 1997, in each case of approximately $450 per  month.  The  Company
the  balance  of  the  salaries as reflected in the Executive Compensation chart
above.
    
         In addition, in August 1996, at the time Mr. Bass joined the Company as
a consultant,  he was issued,  in lieu of  consulting  fees for the fiscal years
ended September 30, 1997, 1998, 1999 and 2000, a total of 375,000 Common Shares,
vesting annually in one-fourth increments.
                                       35
<PAGE>
Employment Agreements

         The Company contemplates entering into three-year employment agreements
with each of Sam L. Bass,  Jr., James A.  Callender,  Sr.,  Noreen G. Wilson 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. 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.

         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,  key  employees,  and  consultants of the Company will be eligible to
receive  incentive  stock  options and  non-qualified  stock options to purchase
Common Shares.  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 will first be exercisable  by an option holder
during any one calendar year will not exceed $ 100,000.
    
                                       36
<PAGE>
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
   
         The following  table sets forth certain  information as of December 29,
1997, with respect to the beneficial ownership of the Company's Common Stock  by
each shareholder known by the Company to be the beneficial owner of more than 5%
of its  outstanding  shares,  by each director of the Company,  by the executive
officers named in the table below and by the directors and executive officers of
the Company as a group.  Except as otherwise  noted,  the persons  named in this
table,  based upon  information  provided by such persons,  have sole voting and
investment power with respect to all Common Stock beneficially owned by them.
    
<TABLE>
<CAPTION>
                                                     Common Shares Beneficially Owned
                Name and Address (1)                 Number (2)               Percentage
                --------------------                                                              
<S>                                                  <C>                        <C>
Sam L. Bass, Jr.............................          8,679,568                   39.7%
James R. Callender, Sr......................          500,000                     2.3
Noreen G. Wilson............................          500,000                     2.3
James A. Griffin............................          500,000                     2.3
Robert McKnight.............................          75,000                      *
William Beaton..............................          500,000                     2.3
All officers and directors as a group                 10,754,568                  49.2%
   (six persons)............................
<FN>
-------------------
*        Represents less than 1% of outstanding Common Shares or voting power.

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

(2)      Shares  beneficially  owned and  percentage  of ownership  are based on
         21,858,000   Common  Shares   outstanding  as  of  December  29,  1997.
         Beneficial  ownership is determined in accordance with the rules of the
         Securities  and Exchange  Commission and generally  includes  voting or
         dispositive power with respect to such shares.
   
         The Company is not aware of any arrangements which may at a later date
result in a change of control of the Company.
    
</FN>
</TABLE>
                                       37
<PAGE>
ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The Company's predecessor, Environmental  Remediation Funding Corporation
("ERFC"),  was incorporated under the laws of the State of Delaware in September
1995. In August 1996, the  stockholders of ERFC exchanged all of their shares of
ERFC for 2,433,950 authorized and unissued shares of common stock,  representing
87.2% of such  then  outstanding  shares,  of  Regional  Air  Group  Corporation
("RAIR"), a Colorado  corporation.  RAIR was a publicly-owned  corporation which
had ceased  operations and as a result had only nominal assets and  liabilities.
ERFC was then merged  into RAIR.  Following  the  acquisition  of  control,  the
stockholders of RAIR approved the change in the Company's name to  Environmental
Remediation Holding Corporation.
   
         In April 1997,  the Company  acquired  all of the  outstanding  capital
stock of BAPCO, a privately-held company controlled by Sam L. Bass, Jr., who has
been the Company's Chairman of the Board,  President and Chief Executive Officer
since September 1995.  Through this  acquisition,  the Company  acquired,  among
other  assets,  ownership of all rights to the BAPCO Tool and  assignment of the
Chevron master service agreement.  The Company issued 4,000,000 Common Shares to
Mr. Bass in exchange for the  outstanding  capital stock of BAPCO.  In addition,
the Company issued 3,000,000  Common Shares to BEW, a company  controlled by Mr.
Bass, in connection with the assignment of the Chevron master service agreement.
See " Item 1. Description of Business - Environmental Remediation Services."

         From  time to  time,  Noreen  G.  Wilson  and  James A.  Griffin,  both
executive  officers and  directors of the Company,  have  advanced  funds to the
Company in the total amount of approximately  $760,500,  pursuant to 8.5% demand
promissory notes of which $295,300 was repaid in 1997. The balance of such notes
are  convertible  into  Common  Stock  at the  option  of  the  noteholder  at a
conversion  rate per share equal to the fair market  value of a Common  Stock at
the time of the advance.
    
                                       38
<PAGE>
ITEM 14.          EXHIBITS

Index to Exhibits                                                          Page
   

10.1 Chevron Master Service Order and Letter Agreement dated 10/1/96

10.2 Centrum Marine Services, S.A. Joint Venture Agreement dated 12/6/96

10.3 Memorandum of Agreement Between M III Corporation
     and ERHC dated 6/28/97

10.4 Sao Tome Memorandum of Understanding dated 9/30/97

21   List of Subsidiaries

27   Financial Data Schedule

    



















                                       39
<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,  thereunder duly authorized,  this 29th
day of December, 1997.



                                                       Environmental Remediation
                                                       Holding Corporation


                                             By:/s/Sam L. Bass, Jr.
                                                   Sam L. Bass, Jr., CEO

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



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


SIGNATURE                              TITLE                        DATE



/s/James A. Griffin                  Secretary                 December 29, 1997
James A. Griffin, Esq.              and Director


/s/Sam L. Bass, Jr.
Sam L. Bass, Jr.                  CEO and Director             December 29, 1997


/s/James Callender
James Callender                       Director                 December 29, 1997


/s/William Beaton
William Beaton                        Director                 December 29, 1997


/s/Noreen Wilson                   Vice President
Noreen Wilson                      and Director                December 29, 1997



                                       40
<PAGE>