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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1996
Commission File Number 0-18275
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: $0
The aggregate market value of the 1,590,634 shares of voting stock held by
non-affiliatesof the Registrant as of September 30,1996 was $8,759,044
(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, 1996 was 3,239,374
Documents Incorporated by Reference:
Form 8-K filed on September 4, 1996
Form S-8 filed on September 13, 1996
PART I
ITEM 1. DESCRIPTION OF BUSINESS
On August 23, 1996 the Shareholders of Environmental Remediation
Funding Corporation (ERFC) a privately held Delaware Corporation incorporated in
September 1995 obtained control of Regional Air Group Corporation ("RAIR"), by
way of a Reverse Triangular Merger. RAIR issued a total of 2,433,950 shares of
it $.0001 par value Common Stock (restricted) to Regional Air Opportunity
Development Corp., ("RAODC"), a wholly owned subsidiary of RAIR. Subsequently,
RAODC acquired 100% of the issued and outstanding stock of ERFC from ERFC's
shareholders in exchange for 2,433,950 shares acquired from RAIR. On August 29,
1996 RAIR filed an amendment to the Articles of Incorporation authorizing a
change in the name of the corporation from Regional Air Group Incorporation to
Environmental Remediation Holding Corporation.
Environmental Remediation Funding Corporation (ERFC) was founded to
pursue environmental remediation contracts both in the United States and
overseas, primarily in the oil industry. ERHC's goal is to acquire small to
medium size environmental companies and create the only full service
environmental company available to the petroleum industry today. In industry
terms, ERHC will be a "cradle to grave" environmental company. ERHC goal is to
eliminate the current fragmentation of remedial services prevalent today, and ,
there by, increase overall quality control. ERHC as part of this goal will
reduce the need for multiple levels of subcontractors and thereby increases its
potential for profit while reducing overall costs to its customers.
ERHC has specifically targeted the environmental needs of the oil and
gas industry. Moreover, with ERHC's organization and expertise, ERHC is fully
capable of utilizing its knowledge and equipment to handle
a variety of difficult and/or hazardous waste streams.
What ERHC hopes to be to its regional, national and international
clients is an " all inclusive" environmental service company. ERHC will offer
full services such as environmental engineering, consultations, hazardous
(including NORM waste) and non hazardous waste cleanup, the manufacture and
distribution of waste cleanup materials, waste management, waste transportation
and disposal, as well as, plug and abandonment of oil and gas wells. ERHC has
access to a technology that when proven will increase the output of existing low
producing oil wells using standard methods of A.P.I. maintenance and further
increase production by utilizing BAPCO tool a "state of the art" method of
lateral drilling". This is one of the major reasons that ERHC is in serious
negotiation for the purchase of BAPCO. ERHC hopes to complete the purchase of
BAPCO in early 1997.
ERHC hopes to have signed a "Master Service Agreement" with Chevron Oil
to complete the plug and abandonment (P & A) of over 400 wells in Louisiana in
early 1997. This contract could be worth in excess of 70 million dollars over
the next few years to ERHC. This is the first of three large contracts under
negotiation with the oil and gas industry. In addition, ERHC is in the final
stages of negotiation with two other major oil companies to take over all of
their plug and abandonment work now being performed "in house". The major oil
companies would prefer to have the environmental work completed by an outside
firms as it reduces their costs and overall environmental exposure. Chevron and
the other major oil companies are working with ERHC for this work not only
because of ERHC "cradle to grave" approach but because of the oil companies
prior experience in working with ERHC's Chief Executive Officer, Sam L. Bass,
Jr.
Mr. Sam Bass, Jr. is ERHC's well-known and highly experienced
CEO. Mr. Bass has a long standing and respected relationship with all the
major and minor oil companies in the U.S. and abroad. ERHC, under
Mr. Bass's guidance, is in a unique position to obtain P & A work from all the
major oil companies in Louisiana and Texas. The State of Louisiana has
mandated that 12,000 oil wells owned by the State, as well as 30,000+ owned
by the oil companies, must be plugged and abandoned in the next two (2)
years. ERHC has all the necessary management and technical qualifications
for the plug and abandonment of oil wells and because of those qualifications,
is being contacted by all of the major oil companies.
2
ERHC with the assistance of Chevron is desiging a "state of the art" P
& A barge that will handle pressure up to 10,000 psi, work in waters as shallow
as 19 inches and house up to fifteen (15 ) people. This barge will be the only
one of its kind on the gulf coast with a triad of capabilities: P & A work,
reworking of wells and environmental clean-up. ERHC will require a minimum of
four (4) barges if we are to complete the Chevron contract in the time frame
allotted under the agreement under discussion.
.
ERHC is in the final stages of negotiation to purchased two petroleum
fields, the Woodbine Field located in Henderson County , Texas and the Gunsite
Oil Field located in Wichita Falls, Texas. ERHC is negotiating to obtain the
rights to a number of other oil and gas producing properties in Texas and
Louisiana. As these contracts are consummated, ERHC will use standard A.P.I.
methods of "reworking" the fields to increase production twenty-five (25%)
percent in the first six months. ERHC will then utilize the "BAPCO" tool
(lateral drilling) along with "rework" techniques to significantly increase the
fields production. The Woodbine and Gunsite Fields are expected to close inthe
first half of 1997. They are comprised of 1200 acres and 200 wells. After
reworking the fields using both traditional A.P.I. methods of reworking and the
BAPCO tool , oil production is expected to increased a minimum of 5 times from
initial production levels to 1600 barrels a day. (Oil is currently selling for
approximately twenty (20) dollars per barrel). ERHC is in the process of
obtaining independent geologist's report on both the Poloxy Gunsite Field and
the Henderson Field which our reports revealed proven primary reserves ("behind
pipe") of over a million barrels. These figures do not include the additional
reserves located within the sands above Gunsite.
ERHC believes that the above stated markets have been neglected and are
a profitable market niche that can be exploited. This would allow ERHC, to
become a major player in the oil industry in a relatively short period without
the necessity of costly drilling routinely associated with oil exploration. All
of the fields that have been and will be acquired by ERHC have proven reserves
verified by independent geologists.
ERHC is also negotiating with a number of companies who have
concessions to rework oil and gas wells overseas specifically in Trinidad,
Indonesia and the Middle East. ERHC intends to offer rework techniques using the
"BAPCO" tool to obtain joint venture agreements with these companies. Given
ERHC's knowledge and ability to considerably increase a field's oil production.
ERHC looks forward to successfully entering a number of long term partnerships
in the near future.
ERHC, with a joint venture partner, is close the completing a
concession agreement with the Panama Canal Commission that allows ERHC to supply
fuel and supplies to tankers moving through the canal.
ERHC
anticipates, in its first phase, to deliver up to one million gallons of fuel
and supplies daily to the ships. This agreement requires ERHC to provide a two
and a half million dollar Letter of Credit to Texaco for the fuel they will
provide. ERHC upon the signing of the concession will enter into negotiation for
the purchase of two fuel barges and two tugs. This Panama concession could
conservatively generate 40 to 60 thousand dollars a day in gross income. This
contract should expand past the million gallons a day in sales if the company
adds additional fuel barges.
There are no environmental remediation businesses that control more
than two percent of the market. The industry is fragmented and subcontract to
local firms specializing in specific needs for general remediation projects.
Small firms offering a limited scope of services and locations are having an
increasingly difficult time competing (therefore open to acquisition by ERHC)
and many principals of small firms suggest that they need to merge to survive.
Environmental remediation firms can generally be categorized into two
groups: small firms with one or few regional offices and giant, multi-office
firms with multi-million dollar revenues. Small firms typically lack the
resources to complete may of the more complex multiple jobs. The very large
firms are
3
often only interested in the colossal, large dollar projects.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company leases approximately 1200 square feet of office space at
420 Jericho Turnpike, Suite 321, Jericho, New York for use as its primary
offices. The lease payments are presently $1200.00 per month.
The Company leases approximately 7,000 square feet of warehouse and
office space at 111 Tubing Road, Lafayette, Louisiana. The lease payments are
$550.00 per month.
ITEM 3. LEGAL PROCEEDINGS
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5. MARKET PRICE OF, DIVIDENS ON THE REGISTRANT'S COMMON EQUITYAND
RELATED STOCKHOLDER MATTERS.
The Company's Common stock has been traded on the over-the -counter
market and reported on the OTC Bulletin Board, under the symbol "ERHC" since
August 23, 1996, and under the symbol RIAR prior to that. The following table
sets forth the high and low bid price of the Company's Common Stock as reported
on the over-the-counter market for the periods indicated. The price represents
inter-dealer quotations, without retail mark-up, mark-down commission, and may
not necessarily represent actual transactions.
Stock Price Comparisons
Quarter Ending High Sales Price Low Sales Price
September 30, 1996 6.2854 2.0951
There was no trading in the Company's common stock since 1989.
As of September 30, 1996, There were in excess of 1,800 recorded shareholders of
the Company's Common Stock. The Registrant has not declared any dividends from
its inception. Management anticipates
that any future profits will be retained to finance the growth..
4
ITEM 7. PLAN OF OPERATION.
During FY 1996 the Company has placed themselves in a position to be
very profitable in the coming years. There is expanding pressure from
govermental agencies to resolve the major difficulties created by oil and gas
enterprises. ERHC addresses theses concerns by providing services to the
petroleum industry, such as, planning for the prevention pollution problems, the
confining and mitigation of potential pollution and the actual cleanup of oil
spills both on the ground and in the water.
If ERHC is successful in obtaining a Master Service Agreement with
Chevron to plug and abandon wells in the Gulf of Mexico, it could be worth up to
70 million dollars during the next three years to
ERHC.
This Master Service Agreement from Chevron is expected to allows for further
sites to be added to the original
agreement, which may include a significant number of wells in Louisiana..
Environmental Remediation Holding Corporation, is in the process of
developing a Plug and Abandonment Division under the guidance of Sam L. Bass
Jr., CEO of ERHC, who will utilize the company's extended family of technical
experts and the combined experience of ERHC's management and staff. There is
great confidence by ERHC of its ability to service the needs of its clients,
using cutting edge technology and knowledge of all environmental remediation
disciplines
The plug and abandonment of oil and gas wells is a detailed process of
shutting down and discontinuing the use of an older, unsafe or marginally
producing oil or gas wells. There are many ecological ramifications if oil and
gas wells are abandoned without following EPA and DEQ mandated guidelines. These
ramificationsare caused due to aging equipment and pipe casings can lead to
"blow outs", oil and gas seepage into the water, or ground and ground water
contamination. These problems can lead to major environmental problems and
expensive pollution cleanup.
Environmental Remediation Holding Corporation has targeted the
environmental remediation needs of the oil and gas industry, as well as other
difficult to handle waste streams. Additionally, ERHC will begin to acquire
under valued, marginally producing oil and gas properties with significant
verifiable reserves. When those oil and gas properties are acquired, the Company
will use its exclusive "workover techniques" to increase the wells' production.
The Company believes that the above stated market has been neglected and will
become a profitable market niche that can be exploited.
ERHC has been in negotiation for the last month to purchase 60% of the
outstanding shares of Bass American Petroleum Company (BAPCO), which is expected
to become a subsidiary of Environmental Remediation Holding Corporation. Bass
American Petroleum Company main focus is to obtain a marginally producing well
and increase production of that well eight to ten time via a "lateral drilling
process using what is called a "lateral I. P. Tool". This process is minimal
when it is compared to actually drilling a new well and gambling on an oil find.
Certainly, the I. P. Tool process is a simple, but effective way to build an oil
company without the high risk and drilling costs. It has been discovered that
there is an eighty percent positive ratio of success. ERHC can buy old producing
wells and increase production at a ten to fifteen times increase in production
versus the cost of drilling
5
With ERHC's broad range of different specialization's and led by
experienced management, the Company can offer its regional, national and
international clients an all inclusive environmental service. Services such as
environmental engineering and consultation, hazardous (including NORM waste) and
non hazardous waste cleanup, the manufacture and distribution of waste cleanup
products, waste management, waste transportation and disposal, as well as plug
and abandonment of oil and gas wells.
ERHC's growth concentration will be on the acquisition of
complementary, small to medium environmental remediation companies, primarily
energy related. Also the company will seek transportation opportunities
associated with the environmental remediation of energy industries.
Stock and Security Transactions Subsequent to September 30, 1996
None
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements are included in a separate Section of this
report following Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the names of all Directors and Executive Officers of
the Company.
NAME AGE POSITION DATE OF AFFILIATION
Sam L. Bass Jr. 65 CEO August 1996
Chairman
James Day 67 President September 1996
James A. Griffin 43 Secretary September 1996
Treasurer
James Calendar 58 Director September 1996
William Beaton 60 Director September 1996
CFO
6
All Directors will serve until the next annual general meeting unless his office
is vacated in accordance with the Articles of the Company. The Executive
Officers serve at the pleasure of the Board of Directors.
Sam L. Bass, Jr., CEO and Chairman of the Board Sam L Bass, Jr. joined ERHC
in 1996, at the time of the merger with RIAR, Mr. Sam L Bass Jr. has over thirty
years experience in the petroleum industry both in the United States and
overseas. It is this 30 year history and his close relationship with many of the
heads of the oil companies that has allowed ERHC access to contracts .
Mr. Bass has founded over twenty corporations, predominantly Oil and
Gas related so his involvement with ERHC helps to guarantee our success. Mr.
Bass have been a pioneer in downhole drilling and stabilization and holds many
patens in the oil industry. Sam Bass is recognized by several major
publications, government agencies, Fortune 500 Companies and foreign countries
for his endeavors that have resulted in seven inventions. Many of which are
presently being used around the world. Sam Bass through Bass Environmental World
Wide was in Kuwait right after the Gulf War putting out oil well fires. It is
this experience that Mr. Sam Bass Jr. as CEO brings to ERHC. It is Mr. Basses
intention to build a company that will make a positive impact on cleaning up the
environment both in the Unites States and overseas. ERHC will also be able to
draw on this 30 years of experience in determining which fields are worth ERHC
pursuing.
Senator James Day, President
Retired United States Senator from Texas. Deceased.
James A. Griffin, Esq. Corporate Secretary and Treasurer
Mr. Griffin has served as Secretary / Treasurer and Director and Corporate
Counsel of ERHC since September of 1996 shortly after the Company was acquired
through merger. Since that time he has continued as corporate secretary and a
director of the company. Mr. Griffin received his Doctor of Jurisprudence from
Tonro law school in Huntington, NY in 1986.
William Beaton CFO and Director
Mr. Beaton has over 30 years experience in management and finance. He
is the former CEO of Clydesdale Bank of Glasgow, Scotland until his retirement
in 1995. Since then, he has been a self-employed consultant providing a variety
of management and financial consulting to small private and public corporation.
Mr. Beaton has been involved in international oil industry for the last 20 years
that will help ERHC meet its financial obligations.
Jim Calendar Director
Mr. Calendar was appointed a Director with ERHC in September of 1997. Mr.
Calendar has over 30 years experience in the field of oil and gas exploration,
drilling, plug and abandon, blow-out control. Mr. Calendar has assisted in the
design, construction, sea trials, and supervision of the first semi-submersible
oil rig operated in the Gulf of Mexico by Unocal. Mr. Calendar supervised the
first offshore well drilled by Unocal utilizing Louis Record's Control Unit and
Kick System for Blow- and functioned as UNOCAL's sole supervisor on the first
well drilled by Unocal. Offshore, Texas. Functioned as UNOCAL's supervisor
working with "Red Adair" and "Boots & Coots" for Blow-out scenarios. Gulf of
Mexico until 1972 Designed well and
7
supervised first drill-ship operated by Unocal in lower Cook Inlet of Alaska.
Introduced "snow-makers" for ice road and ice pad construction on remote area
exploratory wells in Southern Alaska. Technology extended drilling season
markedly. Designed, constructed and supervised UNOCAL's first remote all-season,
Hercules supported exploratory drill site. Designed, constructed and supervised
first offshore Ice Island exploratory well drilled in Arctic Ocean (Beaufort Sea
Ice Island). Designed, constructed, and supervised first year-around, remote
site, air-supported exploratory drilling pad north of the Arctic Circle.
Designed and supervised drilling of the first U.S. offshore Arctic exploratory
well utilizing a drill-ship system in Beaufort Sea. Recalled, from on-site at
drill-ship in Arctic Ocean to supervise control of Grayling Blowout, Cook Inlet
of Alaska. Designed and supervised semi-submersible exploratory well, Offshore
California (Platform Irene Discovery). Supervisor for the development and field
testing of UNOCAL's patented Horizontal and Extended Reach Drilling Technology.
Initiated and supervised development of UNOCAL's current well control technology
and in-house training program. Other numerous technological and drilling system
developments, platforms, rig designs and specifications. Mr. Calendar will be an
asset to ERHC in the coming year especially in pursuing our goal of becoming a
major player in the oil industry.
Pursuant to Section 16 of the Securities Exchange Act, the Company's executive
officers and directors and beneficial owners of more than 10% of the Company's
common stock are required to file certain, within specified time periods,
indicating their holdings of and transactions in the Company's Common Stock.
Based solely on the review of such reports provided to the Company, and/or
written representations from such persons regarding the necessity to file such
reports, the Company is not aware of any failures to file reports or report
transactions in a timely manner during the Company's fiscal year ended September
30, 1996.
ITEM 10. EXECUTIVE COMPENSATION
The Company has not paid any salaries to the officers or directors of ERHC. The
Company has placed 755,043 shares in escrow for the benefit of Sam L. Bass, Jr.
as compensation to be earned by Mr. Bass over a four year contract. These shares
were valued at $125,000 per year, for a total of $500,000. ERHC authorized stock
to a number of the board, but it has not been issued yet. The directors are to
be compensated $25,000 per calendar year which shall be payable with Rule 144
Restricted Shares of ERHC.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this Report, the number of
shares of the Company's outstanding common stock, $.0001 par value, beneficially
owned (as such term is defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended), by each director of the Company, by each named executive
officer of the Company, by each beneficial owner of more than 5% of the
Company's common stock and by all of the Company's directors and officers as a
group.
8
Title of Class Name and Address Amount and Nature % of
of Beneficial Owner of Beneficial Ownership Class
Common Sam L. Bass Jr. 1,499,043 46.28%
Common Marvin Gibbons 157,019 4.85%
Common James A. Day 50,000 1.54%
Common Ken Krausman 10,000 0.31%
Common James Logan 352,019 10.87%
All directors and officers as a group (3 persons) 1,716,062 52.98%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The company has no knowledge of any transaction or series of
transactions or any currently proposed transactions, or series of transactions,
to which ERHC was or is to be party, in which the amount involved exceeds
$60,000 involving management, or any person owning 5% or more of the common
stock, or any member of the immediate family of any of the foregoing persons.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
Index to financial statements Page
Independent Auditors Report F-1
Consolidated Balance Sheets F-2
Consolidated Statement of Operations F-3
Consolidated Statement of Stockholders Equity F-4
Consolidated Statement of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
27. Financial Data Schedule
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunder duly authorized.
Registrant Environmental Remediation Holding Corp
By: /s/ Sam L. Bass, Jr.
Sam L. Bass Jr. CEO and Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
in the capacities and on the dates stated:
Signature Title Date
/s/ Sam L. Bass, Jr.
Sam L. Bass, Jr. CEO and Chairman May 12, 1997
(Deceased)
Senator James Day President
/s/ James A. Griffin
James A. Griffin, Esq. Secretary and Treasurer May 12, 1997
/s/ James Calendar
James Calendar Director May 12, 1997
/s/ William Beaton
William Beaton Director and CFO May 12, 1997
10
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors Report..................................................F-1
Consolidated Balance Sheets .................................................F-2
Consolidated Statements of Operations ......................................F-3
Consolidated Statements of Stockholders' Equity..............................F-4
Consolidated Statements of Cash Flows .....................................F-5
Notes to Consolidated Financial Statements .................................F-6
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 and 1996 and the related
statements of operations, stockholders' equity and cash flows for 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,
1996 and the results of its operations and its cash flows for the two years then
ended in conformity with generally accepted accounting principles.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
May 9, 1997
F-1
ENVIRONMENTAL REMEDIATION HOLDING CORP.
Consolidated Balance Sheets
September 30,
1995 1996
------------------ ------------------
ASSETS
CURRENT ASSETS
Cash $ 0 0
Prepaid expenses 0 0
------------------ ------------------
Total current assets 0 0
------------------ ------------------
FIXED ASSETS (note 1b)
Equipment 0 3,720,000
Accumulated depreciation 0 (372,000)
------------------ ------------------
Total fixed assets 0 3,348,000
------------------ ------------------
OTHER ASSETS
Deposits 0 5,000
Deferred compensation expense, net (note 1d) 0 427,500
------------------ ------------------
Total other assets 0 432,500
------------------ ------------------
Total Assets $ 0 3,780,500
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 0 0
Notes payable to officer (note 1c) 0 6,730
------------------ ------------------
Total current liabilities 0 6,730
------------------ ------------------
LONG TERM LIABILITIES
Long term debt 0 0
------------------ ------------------
Total long term debt 0 0
------------------ ------------------
Total Liabilities 0 6,730
------------------ ------------------
STOCKHOLDERS' EQUITY
Common stock, $0.0001 par value, authorized
950,000,000
shares; 884,407 and 3,239,374 issued and outstanding 88 324
at
September 30, 1995 and 1996. (note 5)
Additional paid in capital in excess of par 3,316 4,629,598
Retained earnings (deficit) (3,404) (856,152)
------------------ ------------------
Total Stockholders' Equity 0 3,773,770
------------------ ------------------
Total Liabilities and Stockholders' Equity $ 0 3,780,500
================== ==================
The accompanying notes are an integral part of the financial statements.
F-2
ENVIRONMENTAL REMEDIATION HOLDING CORP.
Consolidated Statements of Operations
Year ended September 30,
1995 1996
REVENUE
Revenue $ 0 0
----------------- ---------------
Total revenue 0 0
----------------- ---------------
EXPENSES
Automobile 0 7,257
Bank charges 0 184
Compensation - officers 0 147,326
Consultant fees 0 337,956
Professional fees 0 19,500
Office rent 0 8,550
Office expenses 3,404 1,072
Travel 0 19,380
Depreciation 0 372,000
Miscellaneous 0 0
----------------- ---------------
Total expenses 3,404 913,225
----------------- ---------------
Net loss before tax benefit and extraordinary item (3,404) (913,225)
----------------- ---------------
Extraordinary item - forgiveness of debt 0 60,477
----------------- ---------------
Income tax benefit (note 3) 0 0
----------------- ---------------
Net loss $ (3,404) (852,748)
================= ===============
Weighted average number of shares outstanding 884,407 3,239,374
================= ===============
Net loss per share $ (0.00) (0.26)
================= ===============
The accompanying notes are an integral part of the financial statements.
F-3
ENVIRONMENTAL REMEDIATION HOLDING CORP.
Consolidated Statements of Stockholder's Equity
Additional Stock Total
Common Paid in Subscrip Accumulated Stockholders'
Stock Capital Receiv Deficit Equity
BALANCE, September
30, 1995 *A $ 88 3,316 0 (3,404) 0
Capital Transactions:
*B 198 4,209,325 0 0 4,209,523
*C 32 31,963 0 0 31,995
*D 6 384,994 0 0 385,000
Net loss 0 0 0 (852,748) (852,748)
------------- -------------- ----------- ------------------ -----------------
BALANCE, September
30, 1996 $ 324 4,629,598 0 (856,152) 3,773,770
============= ============== =========== ================== =================
*A - 884,407 shares of common stock outstanding.
*B - 2,433,950 shares issued for the acquisition of Environmental Remediation
Funding Corp. - 2,863,544 shares ofcommon stock outstanding.
*C - 320,830 shares issued for $31,995 in cash - 3,184,374 shares of common
stock outstanding.
*D - 55,000 shares issued for services - 3,239,374 shares of common stock
outstanding.
The accompanying notes are an integral part of the financial statements.
F-4
ENVIRONMENTAL REMEDIATION HOLDING CORP.
Consolidated Statements of Cash Flows
Year ended September 30,
1995 1996
------------------ -------------------
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
Net loss $ (3,404) (852,748)
Adjustments to reconcile net loss to net cash used for development
activities:
Amortization 0 142,500
Stock issued for services rendered 0 315,000
Depreciation expense 0 372,000
Forgiveness of debt 0 (60,477)
--------------- ------------------
Net cash used for development activities (3,404) (83,725)
--------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Barge deposit 0 (5,000)
--------------- ------------------
Net cash used by investing activities 0 (5,000)
--------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock issued by subsidiary for cash 0 50,000
Stock issued for cash 0 31,995
Funds advanced by stockholder 3,404 22,730
Funds repaid to stockholder 0 (16,000)
--------------- ------------------
Net cash provided by financing activities 3,404 88,725
--------------- ------------------
(Decrease) increase in cash 0 0
--------------- ------------------
CASH, beginning of period 0 0
--------------- ------------------
CASH, end of period $ 0 0
=============== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ 0 0
=============== ==================
Noncash transactions:
Stock issued to acquire fixed assets $ 0 3,720,000
=============== ==================
The accompanying notes are an integral part of the financial statements.
F-5
ENVIRONMENTAL REMEDIATION HOLDING CORP.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
The Company. Environmental Remediation Holding Corp. is a Colorado
chartered corporation which conducts
business from its headquarters in Jericho, New York and was
incorporated on May 12, 1986 with the name Regional Air Group Corp.,
which was changed in August 1996.
The 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 Regional Air Group
Corp. to Environmental Remediation Holding Corp. The financial
statements reflect the financial position and results of operations of
ERFC prior to the acquisition by the Company and on a consolidated
basis subsequent to the acquisition.
b) Basis of consolidation The consolidated financial statements
include the accounts of the Company and its
subsidiary. Intercompany transactions have been eliminated.
c) Equipment Equipment was received by ERFC in exchange for
common stock of ERFC. 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.
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 years ended September 30, 1995
and 1996 was $0 and $372,000, respectively.
d) Note payable The Company issued a note payable to an officer
in exchange for cash. This note carries no stated
maturity date or rate of interest. The Company expects to repay this
note within twelve months.
e) Deferred compensation ERFC issued 755,043 shares of its
common stock into escrow in exchange for services
to be rendered by its Chairman 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. These ERFC shares were exchanged for shares of the Company on
August 19, 1996.
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
is amortizing this expense over the term of the agreement.
On October 6, 1995, and modified on January 2, 1996, the Company
entered into an agreement with a financial advisor to issue 30,000
shares of its common stock, valued at $210,000, in exchange for
services rendered by the advisor to assist in effecting the merger
which occured on August 19, 1996.
On July 15, 1996, the Company entered into an agreement with a general
business advisor to issue 15,000 shares of its common stock, valued at
$105,000, in exchange for services rendered by the advisor.
f) Net loss per share Net loss per share is computed by
dividing the net loss by the number of shares outstanding during
the period.
(2) Income taxes The Company has a consolidated net operating
loss carry-forward amounting to $856,152, expiring
as follows: $3,404 in 2010 and $852,748 in 2011. The Company has a
$342,500 deferred tax asset resulting from the loss carry-forward, for
which it has established a 100% valuation allowance, as until the
Company proceeds with its current development plans it is unclear as to
the ability of the Company to utilize these carry-forwards.
F-6
ENVIRONMENTAL REMEDIATION HOLDING CORP.
Notes to Consolidated Financial Statements
(3) Stockholders' equity The Company has authorized 950,000,000
shares of $0.0001 par value common stock. On
December 31, 1995, the Company had 746,483,333 shares issued and
outstanding. On August 14, 1996, the Company completed a 1 for 2,095
reverse split of its shares, leaving 429,594 shares issued and
outstanding.
On August 19,1996, the Company issued 2,863,544 shares of common stock
to acquire 100% of the issued and outstanding common stock of ERFC. In
September 1996, the Company issued 320,830 shares of its common stock
in exchange for $31,995 in cash. In September 1996, the Company issued
55,000 shares of its common stock under three consulting contracts
previously negotiated.
F-7