UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 21, 1999
(May 14, 1999)
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 0-17325 88-0218499
(State or other jurisdiction (Commission file number) (IRS Employer
of incorporation) Identification No.)
777 South Flagler Drive
Suite 903
West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip Code)
Copy of Communications to:
Mercedes Travis, Esq.
Mintmire & Associates
265 Sunrise Avenue
Suite 204
Palm Beach, FL 33480
(561) 832-5696
Registrant's telephone number, including area code: (561) 833-5560
Item 1. Change in Control of Registrant
The Letter of Intent
On April 1, 1999, the Board of Directors was presented with an offer to
acquire fifty-one percent (51%) of the issued and outstanding shares of the
Company's Common Stock on a fully diluted basis from ERHC Investor Group Inc., a
Florida corporation ("ERHCIG"). One of the principals of ERHCIG was a holder of
certain convertible notes of the Company and certain of its warrants. At the
time, the Company was facing a financial crisis, was investigating certain
claims relative to the title to certain of its assets and had to weigh the
alternatives available to it, including seeking protection under the Federal
Bankruptcy Act. Certain aspects of the ERHCIG offer required clarification and
negotiations. After due deliberation, the Board agreed to review any subsequent
offer from ERHCIG provided it was received by April 8, 1999 and to defer
consideration of other alternatives until such date.
On April 8, 1999, the Board took certain actions relative to realigning
certain of its assets between itself and its wholly-owned subsidiary, Bass
American Petroleum Company ("BAPCO") which it felt were in the best interest of
the Company and its shareholders. Principally, the realignment (i) brought all
of the assets acquired from Sam Bass and his companies into BAPCO and (ii)
transferred to ERHC assets acquired by ERHC in BAPCO's name and liabilities
incurred by BAPCO with regard to such ERHC acquired assets. ERHC also rescinded
all of the Bass and Bass companies transactions since investigation had shown
that it would be virtually impossible to resolve the cloud on title without an
undue burden on the Company. Following such realignment, all rights, title and
interest in BAPCO, as realigned, were transferred to a new corporation,
unaffiliated with ERHC, held for the benefit of Sam Bass, Jr., former Chairman
of the Board. See Item 2. "Acquisition and Disposition of Assets."
In addition, the Board reviewed several prior actions of the Board and
resolved to correct certain share issuances and commitments which, upon
retrospective review, it felt required final resolution. See Item 5. "Other
Events".
On April 8, 1999, the Company was presented with an executed Letter of
Intent and Term Sheet which set forth the terms of a revised offer from ERHCIG.
After deliberation, the Board, on April 9, 1999 accepted the terms of the Letter
of Intent and Term Sheet and authorized the execution of same by not only its
President but by members of the Board of Directors as well (the "Letter of
Intent").
Under the Letter of Intent, ERHCIG and its affiliates and assigns,
committed to purchase, in installments, an aggregate of fifty-one percent of the
issued and outstanding shares of the Company's voting Common Stock on a fully
diluted basis (the "Committed Shares") for total purchase price of
$3,000,000(the "Purchase Price"). For purposes of the Letter of Intent, fully
diluted basis included all outstanding shares not otherwise rescinded or
canceled and the assumption that all of the convertible notes were converted,
all of the outstanding warrants were exercised and all of the shares and
warrants required by the Term Sheet attached to the Letter of Intent or
otherwise contemplated by it were issued.
The Purchase Price was payable (i) $165,000 at an initial closing as
defined in the Letter of Intent, with $835,000 to be invested as needed from and
after such closing to pay agreed portions of the Company's liabilities,
including accrued salaries, and for working capital; (ii) after closing and upon
approval of ERHCIG and its counsel of agreements with the Democratic Republic of
Sao Tome and Principe ("DRSTP"), $1,000,000 to escrow for release to DRSTP
pursuant to the terms of such escrow agreement [ the balance of the Concession
Fee owed by the Company]; and (iii) $1,000,000 to the Company upon approval by
DRSTP and execution by Sao Tome Petroleum Company ("STPETRO") and Mobil Oil
Corporation ("Mobil") of a production sharing agreement providing for a five
percent (5%) override to the Company (the "Production Sharing Agreement"). Such
Production Sharing Agreement was anticipated under the terms of a previously
executed Technical Assistance Agreement between STPETRO and Mobil.
ERHCIG, pursuant to the Letter of Intent, was given the right to assign any
part of its right to purchase the Company's shares to affiliates and other
assigns, provided that such assignments were contingent upon assumption of a pro
rata share of the obligations under the Letter of Intent and any other
investment documents executed as part of the transaction.
The forty-nine percent (49%) of the Company's Common Stock remaining with
the existing investors, shareholders, existing directors, officers, employees
and committed in the event of conversion of all its convertible notes and the
exercise of all of its warrants is subject to further dilution only in the event
the Company agrees to issue any additional shares to Procura Financial
Consultants, for whom it is holding 2,000,000 shares, in connection with any
final settlement with them.
The Committed Shares are to be issued to ERHCIG or its assigns (i) fifteen
percent (15%) upon the total investment of $1,000,000 on a pro rata basis; (ii)
fifteen percent (15%) upon the investment of $1,000,000 to be said to DRSTP;
(iii) fifteen percent (15%) upon approval of the Production Sharing Agreement;
and (iv) within ten (10) days of the final payment of the total Purchase Price,
six percent (6%).
The Initial Closing under the Letter of Intent was scheduled to be on or
before April 19, 1999, unless extended by the parties, and was subject to the
satisfaction of certain conditions. On April 19, 1999, the Board approved an
extension until April 26, 1999. The conditions for the Initial Closing included
(i) execution and delivery of a standstill agreement from a majority of the
noteholders in each of the Company's Convertible Note transactions which
provided for a standstill until October 15, 1999 in respect to certain matters,
including, but not limited to the conversion of stock, acceleration, collection,
bankruptcy or foreclosures; (ii) modification of the conversion price on all
Convertible Notes to a fixed price of not more than $.25 (later changed to $.20
based upon the consensus of the noteholders) and waiver of all antidilution
provisions relative to the transaction contemplated; (iii) execution and
delivery by the Company of a letter representing and warranting the capital
structure of the Company with full dilution and providing indemnity to ERHCIG;
and (iv) resolutions by the Board approving and authorizing the transactions
contemplated by the Letter of Intent and the Term Sheet and all actions required
to be taken as conditions of the Initial Closing.
At the Initial Closing, the Company is to enter into appropriate consulting
and settlement agreements, which include the issuances of restricted Common
Stock and warrants, with Sam Bass, Jr., James Callender, Richard Magar, James
Griffin, Robert McKnight, Al Cotton, Ken Waters, Tom Wilson, William Beaton and
Nando Rita. In addition, at the Initial Closing, employees and consultants to
the Company are to be provided with severance agreements which include a
schedule of payments of outstanding salaries and expenses, and in some cases the
issuance of restricted stock or warrants. All of the existing Officers, Director
and Employees are to provide a written release to the Company.
Within thirty (30) days of the Initial Closing, the Company is committed to
pay certain outstanding bills to its accountants and its attorneys and to
establish a payment schedule for all verifiable accounts payable.
The Letter of Intent relies upon certain prior actions of the Board taken
on April 8, 1999 including (i) the realignment of BAPCO and the rescission of
the Bass related transactions by transfer of all rights, title and interest in
BAPCO, as realigned, to Sam Bass or his assigns in exchange for the return of
4,000,000 shares issued to Mr. Bass when the Company acquired BAPCO from him,
the return of 744,000 shares issued to Bass World Wide Services when the Company
acquired the environmental remediation equipment and the return of 3,000,000
shares issued to Bass Environmental Services Worldwide, Inc. when the Company
acquired the Chevron Master Service Agreement; (ii) the placement of a stop
transfer order on the 200,000 shares issued to Mytec & Associates; (iii) the
rescission of a portion of the five percent (5%) overriding royalty interest
granted and distributed to several Board members, employees and consultants in
February 1999 when the Company was not otherwise able to pay their salaries and
fees; (iv) the rescission of a conditional issuance of 3,000,000 shares to Mr.
Bass, Mr. Callender and Noreen Wilson in June 1997; (v) the rescission of a
conditional issuance granted under the MIII agreement in July 1997; (vi) the
rescission of the suspension of James Griffin, effective March 17, 1999, from
negotiating for and on behalf of the Company until further notice; and (vii) the
approval of the issuance of 2,000,000 shares of the Company's Common Stock to
Mr. Bass, Mr. Callender, Ms. Wilson and Mr. Griffin in consideration of the
formation and legislative adoption of STPETRO and the execution of the Mobil
Technical Assistance Agreement. See Item 5. "Other Events."
Upon approval of the transaction by the Board and prior to the Initial
Closing, the existing Board is required to cause all of the officers of the
Company and three (3) of the existing Board members to resign. ERHCIG is granted
the right to designate replacements for the three (3) resigning Board members
and after the Final Closing, as defined in the Letter of Intent, to cause the
four (4) remaining Board members to resign and to be replaced by four (4) new
members designated by ERHCIG.
The Final Closing is scheduled to occur upon the signing of a securities
purchase agreement (the "SPA"), but no later than ninety (90) days from the date
of the Initial Closing. The Final Closing is conditioned upon a mutually
satisfactory SPA; completion by ERHCIG of its business, tax, accounting,
regulatory, environmental, legal and other due diligence reviews and receipt of
all necessary governmental and regulatory approvals and consents, if any. The
Company granted ERHCIG permission to open discussions during the due diligence
period with STPETRO, DRSTP, Mobil, Procura Financial Consultants and its
shareholders. In the event the Final Closing does not occur, the Company is
required to issue ERHCIG Common Stock based on a $5,882,353 valuation of the
Company, as adjusted by the actions of the Board taken on April 8, 1999. At the
Final Closing, the Company will reimburse ERHCIG all reasonable fees and
expenses incurred in connection with the proposed investment.
Following the Final Closing, should the actions taken so require, the
Company is committed to take all actions reasonably necessary to promptly hold a
shareholders' meeting for the purpose of obtaining shareholder ratification of
the transactions completed as part of the Letter of Intent transaction. Since
the BAPCO transfer was a rescission, the Company has received an opinion from
its counsel that shareholder ratification is not necessary under Colorado law
unless otherwise required by an action or actions pursuant to the terms and
conditions of the SPA.
The Standstill Agreement
Pursuant to the terms of the Letter of Intent, the Company was required to
secure standstill agreements from its noteholders. This was due to the fact that
certain adjustment provisions contained in each of the notes and warrants made
it impossible for the Company to issue the requisite control interest. Such
impossibility is the result of the fact that proposed issuance under the Letter
of Intent required adjustments to the notes and warrants, which adjustments
caused additional issuances under the Letter of Intent and a continuing spiral
thereafter.
Commencing on April 16, 1999, the Company began submitting standstill
agreements to all of its convertible noteholders listed as selling shareholders
in the Company's Amendment No. 2 of its Form S-1 ("S-1/A3") filed with the
Securities and Exchange Commission in January 1999 (the "Standstill
Agreements").
The Company had entered into Securities Purchase Agreements with investors
in the October 1997 Financing, Third June 1998 Financing, the July/August 1998
Financing and the September 1998 Financing. Under each such agreement, any of
the terms and conditions of any of the investment documents could be amended and
modified by the vote of 66 2/3% of the Investors. The Standstill Agreements
provided to the noteholders in these transactions included a provision regarding
the binding effect of a vote by 66 2/3% of the noteholders for such program.
Each of the Standstill Agreements was specific to the documents for such
investment. However, all of the Standstill Agreements contained at least the
following: (1) each contained as Exhibit A a copy of the executed Letter of
Intent and Term Sheet; (2) each contained a provision that stated that the
information provided was confidential, non-public information and required the
investor to agree not to disclose, use or trade on such information directly or
indirectly in any manner until the filing of this Form 8-K; (3) all adjustments
in the Securities Purchase Agreement, if applicable, were deleted; (4) all
conversion prices were changed from that which was in the note to $.20 [thereby
eliminating the conversion formulas which were in a majority of the notes
requiring conversion at the lesser of some number at inception or some number at
conversion]; (5) to the extent the adjustment provisions in the note varied from
the note adjustment provisions attached as an exhibit to the Standstill
Agreements, all original provisions were deleted and the attached exhibit
provisions substituted in their place [thereby eliminating inconsistent
adjustment provisions in the notes]; (6) to the extent antidilution provisions
in the warrant varied from the warrant antidilution provisions attached as an
exhibit to the Standstill Agreement, the original provisions were deleted and
the attached exhibit provisions substituted in their place [thereby eliminating
inconsistent antidilution provisions in the warrants]; (7) to the extent the
note did not provide for the payment of interest in the form of Common Stock,
such note was amended to provide for the payment of interest in Common Stock;
(8) to the extent the note did not provide for the conversion of interest and
penalties, if any, into Common Stock, at the time of a voluntary conversion of a
part or all of the principal sum of the note, such provision was amended to
provide for the conversion of interest and penalties, if any, into Common Stock,
at the same time as the conversion of a part or all of the principal sum of the
note; (9) all interest on the note is waived from the date of the Initial
Closing until October 15, 1999 [thereby allowing the Company to stay current on
its interest payments]; (10) all penalties for failure to have a registration
statement declared effective within a specified period of time are waived from
the date of the Initial Closing until October 15, 1999 [thereby allowing the
Company to stay current on its penalty payments]; (11) each investor agreed,
from the date of the Initial Closing until October 15, 1999, not to convert all
or any part of their notes, not to declare a default or seek acceleration of any
payments under the notes; not to commence any foreclosure or bankruptcy actions
under the note; not to declare an event of default or commence any arbitration
action under any of the transaction document; (12) each investor waived all
rights in prior rights, adjustments or antidilution provisions relative to the
Letter of Intent and any settlement with Procura Financial Consultants; (13)
each investor agreed to accept shares of restricted Common Stock through the
Initial Closing date in lieu of payments in cash for all accrued and unpaid
interest and penalties on the notes at a conversion price of $.20 [thereby
allowing the Company to become current on all of its interest and penalty
payments]; (14) each investor agreed, to the extent any third party commenced
any bankruptcy or foreclosure action, to vote with the Company; (15) each
agreement provided that in the event no Final Closing occurred, that all
amendments, modification and consents would be void ab initio; and (16) each
investor ratified the acts of the Board taken in compliance with the Business
Judgment Rule from inception through the Initial Closing.
Further, the Company was in default on its notes due January 1999 under the
April 1998 Financing. As part of their Standstill Agreement, each noteholder in
this transaction agreed to extend the time for payment until December 1999.
Certain of the noteholders elected to convert their notes, including
principal, interest and penalties into Common Stock rather than execute the
Standstill Agreement. Of these, $750,000 of principal notes were converted from
the October 1997 Financing, and all of the remaining notes from the July/August
1998 Financing were converted with the exception of a total of $660,000 in face
value which remains outstanding. Such conversions resulted in the authorization
to issue 17, 472,989 shares of the Company's restricted Common Stock based upon
the relevant conversion prices on the dates of the conversion notices, with the
holding period commencing on the date the applicable note was issued. Of the
remaining unconverted notes, all of the noteholders executed Standstill
Agreements.
The net effect of the Standstill Agreements is that the Company is current
in all of its convertible note obligations and interest and penalties thereon
and has the opportunity from the date of the Initial Closing until October 15,
1999 to restructure the financial aspects of the Company, have uniform
conversion prices and have uniform adjustment provisions. More than 66 2/3 % of
the Investors under the Securities Purchase Agreement transactions either
elected to convert or executed the Standstill Agreements. All of the investors
of the other transactions executed the Standstill Agreements.
Initial Closing
On April 23, 1999, the Board met in preparation for the Initial Closing.
Sam Bass, Jr. and Alfred Cotton resigned from the Board of Directors effective
April 23, 1999 and Mr. Beaton was removed since he failed to participate in any
of the actions of the Board from prior to April 1, 1999 through April 23, 1999
and was generally unavailable. It was later discovered that Mr. Beaton had been
ill during this period and unable to be reached. All of the Officers resigned
effective April 30, 1999. The meeting continued with the Board authorizing the
issuance of the shares to the noteholders who elected to convert and issued
warrants in settlement of certain outstanding issues with one of its
consultants, which warrants are exercisable into 414,125 shares of restricted
Common Stock. In addition, the Board (i) authorized James Griffin to execute any
and all documents required at the Initial Closing, including, but not limited
to, execution of the Standstill Agreements and the Letter of Representation of
the Capital Structure of the Company; (ii) approved the calculation of full
dilution prepared on its behalf and (iii) authorized the delivery of the minutes
designated in the Letter of Intent to ERHCIG.
The Initial Closing commenced on April 23, 1999. All of the necessary
settlements had been made, all documents and instruments, with the exception of
certain arrangements with Messrs. Bass and Cotton and Subscription Documents
from ERHCIG, had been finalized by that date and the Company had a full dilution
calculation prepared. However, due to the fact that numerous documents had to be
delivered from locations around the world, final documents and agreements,
including ERHCIG's subscription for fifty-one percent (51%) of the Company's
restricted Common Stock, were not completely executed and delivered until May
14, 1999. On that date, the Company was effectively committed to change of
control, pending only the requirements of the Final Closing, as defined in the
Letter of Intent.
The remaining Board met on April 30, 1999 to elect (i) three (3)
replacement Directors, naming Ernest D. Chu, Stephen J. Warner and Lee
Hendelson; (ii) a new Chairman of the Board, naming Ernest D. Chu; and (iii) new
Officers for the Company, naming Stephen J. Warner as President and Chief
Operating Officer, Ernest D. Chu as Treasurer and Chief Financial Officer and
Lee Hendelson as Secretary. The Chairman, the New Directors and the New Officers
accepted and assumed their position effective the date of the meeting. The four
(4) remaining Board members recused themselves when the New Directors voted upon
the Consulting Agreements, Severance Agreement and Settlement Agreements with
such remaining members and former Officer, Directors, Employees and Consultants
of the Company since such remaining Board members clearly had a vested interest
in the outcome of such vote. Such members also recused themselves while the New
Directors voted upon certain settlements negotiated with various parties
relative to outstanding claims and issues involving the Company, since such
remaining Board members had not participated in these negotiations.
Pursuant to the Consulting Agreements, Severance Agreements and Settlement
Agreements, 11,245,000 shares of restricted Common Stock were authorized to be
issued to former Officers, current and former Directors and current and former
Consultants of which 6,770,000 shares were taken in lieu of back salaries due to
Noreen Wilson and James Griffin. In addition, pursuant to such Consulting
Agreements, Severance Agreements and Settlement Agreements, warrants to purchase
4,725,000 shares of the Company's restricted Common Stock were authorized to be
granted to former Officers, current and former Directors and current and former
Consultants, which warrants contain graduated exercise prices of $.25, $.50,
$.75, $1.00 and $1.25 and require exercise within a period of four (4) years.
Subsequent to the execution of the Letter of Intent, ERHCIG had negotiated
settlement of a number of outstanding matters which it felt were in the best
interest of the Company. Ms. Wilson, a former director of the Company, elected
to take a convertible note in exchange for unpaid expenses. Ms. Wilson is a
member of ERHCIG and has certain shareholdings relative to such participation.
Pursuant to the negotiated settlements, 3,143,665 shares of Common Stock were
authorized, including shares equal to $700,000 at $.20 per share in lieu of
repayment of a loan made to the Company by an outside party. In addition, the
New Directors granted warrants to purchase 1,000,000 shares of the Company's
Common Stock exercisable at $.25, which warrants expire in April, 2009, to a
noteholder in the October 1997 Financing and the September 1998 Financing in
exchange for its assistance in putting together the Letter of Intent
transaction.
The Subscription Agreements
The Company received subscription agreements dated as of April 27, 1999 on
May 21, 1999from ERHCIG. Pursuant to such agreements, ERHC Investor Group LLC,
ERHC Investor Group A and ERHC Investor Group II have committed to purchase a
total of 51% of the Company's restricted Common Stock, on a fully diluted basis,
in exchange for the payment of $3,000,000. In the event that a Final Closing, as
defined in the Letter of Intent, does not occur within ninety (90) days, ERHC
Investor Group LLC will surrender to the Company, for cancellation, such rights
as it has or such certificates as it has received less an amount of shares which
it will retain in consideration of the payments which it has made based upon a
$5,882,352 valuation of the Company after adjustment for the actions of the
Board of Directors relative to the realign of BAPCO and its transfer to a
corporation held for the benefit of Sam Bass or his assigns.
New Directors and Officers
Ernest D. Chu was elected Chairman of the Board, Treasurer and Chief
Financial Officer on April 30, 1999. Mr. Chu has 30 years experience in
financing, management and assisting early-stage and emerging growth companies.
Mr. Chu currently is President and majority shareholder of Corporate Builders
Inc., a management consulting, investor relations and corporate finance advisory
service firm which has offices in New York and Florida. Mr. Chu was the
co-founder and Chairman of NuWave Technologies which went public in 1996. In
addition, from 1979 until 1985, Mr. Chu was the Chief Financial Officer for
Haber, Inc., a New Jersey publicly held process technology company. Mr. Chu
graduated from Amherst College with a B.A. degree in 1968 and attended Columbia
University's Far Eastern Institute in 1969.
Stephen J. Warner was elected a Director, President and Chief Operating
Officer on April 30, 1999. Mr. Warner has 25 years experience on Wall Street as
an investment banker and venture capitalist. Mr. Warner currently serves as
Chairman of CB Corporate Finance Inc., a management company for private equity
funds and as Chairman of Bioform, Inc., a private equity investments and
advisory services firm. Mr. Warner was the co-founder of Merrill Lynch Venture
Capital, Inc. and served as its President and Chief Executive Officer for 10
years. From 1970 until 1990, Mr. Warner was employed by Merrill Lynch & Co and
during that time he participated in over 100 investments in venture capital
situations. Mr. Warner graduated from Massachusetts Institute of Technology in
1962 with a B.S. degree, and from received an M.B.A. degree from the Wharton
Graduate School of Business, University of Pennsylvania in 1966.
Lee Hendelson was elected a Director and Secretary on April 30, 1999. Mr.
Hendelson is a professional account who has operated Palm Beach Accounting &
Investments, Inc. in West Palm Beach, Florida since 1981. He also acts as the
Controller for Corporate Builders, Inc. Mr. Hendelson was granted a B.S in
Accounting from Fort Lauderdale College in 1982. He is a member of the Florida
Society of Accounting and Tax Professionals.
Change of Address
As a result of the change of control, the Company has moved its principal
executive offices from Oyster Bay, New York to 777 South Flagler Drive, Suite
903, West Palm Beach, Florida 33401. Its telephone number is (561) 833-5560 and
its facsimile number is (561) 833- 5525.
Item 2. Acquisition or Disposition of Assets
On February 16, 1999, the Company reported that subsequent to the filing of
the Company's S-1/A3 and Amendment No. 1 to the Form 10K for the Fiscal Year
Ended September 30, 1998 ("10K/A1"), it was discovered that there was a question
of the ownership rights of the Company in the BAPCO tool and other assets
acquired from Sam Bass and his companies which created a cloud upon the title to
such assets (the "February 8-K").
The Board of Directors of the Company was given notice by Durland &
Company, CPAs, P.A. under Section 10A(b)(2) of the Securities and Exchange Act
of 1934 and filed the February 8-K in compliance with the requirements of
Section 10A(b)(3).
The Company and its independent auditors, Durland & Company, CPAs, P.A.,
conducted a full investigation. It was determined that it would cause the
Company undue hardship to try to clarify and correct the cloud on the title to
the assets acquired from Sam Bass, a former Director and Officer, and his
related companies and that the process of such clarification might result in
protracted litigation. The Board determined that the best course for the Company
and its shareholders was to realign certain of its assets between itself and
BAPCO, to rescind the transactions with Mr. Bass and his related companies and
to transfer BAPCO, as realigned, to a new corporation held for the benefit of
Mr. Bass or his assigns for delivery to him upon return of the shares issued in
the related party transactions with Mr. Bass and his companies.
On April 8, 1998, the Company and BAPCO entered into an agreement which
provided the following:
1. BAPCO assigned all rights, title and interest, if any, which it had to ERHC
in the leases in the Uintah property, the Wichita Falls property, the
Nueces property and the MIII property, consented to the use of the
agreement as evidence of such assignment and authorized ERHC to perfect the
assignment of interest and to execute any and all documents necessary to
perfect such assignment on its behalf and in its name.
2. BAPCO consented to its removal as the operator on the leases assigned to
ERHC in accordance with paragraph 1 above, consented to the use of the
agreement as evidence of such consent and authorized ERHC to perfect such
removal and to execute any and all documents necessary to perfect such
removal on its behalf and in its name.
3. ERHC assigned all rights, title and interest, if any, which it had in the
Schellstede-Lee, LLC license to BAPCO, which license is paid through
October 16, 1998.
4. ERHC assumed the liability for the accounts payable previously in BAPCO's
name incurred prior to the date of the Agreement, but only to they extent
they appeared in Schedule A to the Agreement.
5. ERHC assumed the liability for the accounts payable on the Wichita Falls
property incurred prior to the date of the Agreement, subject to
authentication and reconciliation.
6. ERHC assigned all rights, title and interest which it had in the
environmental remediation equipment to BAPCO.
7. ERHC assigned all rights, title and interest which it had in the Chevron
Master Service Agreement to BAPCO.
8. ERHC consented to the assignment of all rights, title and interest in the
remaining non- divested assets, the environmental remediation equipment,
the Chevron Agreement and all shares of BAPCO to a new corporation whose
shares were to be held for the benefit of Sam Bass, Jr. or his assigns
("NEWBASSCORP") and to the attachment of the Agreement to such assignment
agreement subject to the promise of NEWBASSCORP to (1) the return to ERHC
of the four million (4,000,000) shares issued to Sam Bass at the
acquisition of BAPCO in April 1997 at such time as such shares are tendered
to NEWBASSCORP, (2) the return to ERHC of the seven hundred forty four
thousand (744,000) shares issued to Sam Bass, Jr. and/or Bass World Wide
Services for the environmental remediation equipment at such time as such
shares are tendered to NEWBASSCORP, (3) the return to ERHC of the three
million (3,000,000) shares issued to Sam Bass, Jr. and/or Bass
Environmental Services Worldwide Inc. for the Chevron Agreement at such
time as such shares are tendered to NEWBASSCORP and (4) the delivery to
ERHC of a full and general release from Mr. Bass, Bass World Wide Services
and Bass Environmental Services Worldwide Inc. in favor of ERHC.
On April 8, 1999, the Company and White Cloud Development Corporation
("NEWBASSCORP") entered into an agreement which provided for the following:
1. ERHC assigned all rights, title and interest in the shares of BAPCO, all of
its non- divested assets, its environmental remediation equipment and its
Chevron Master Service Agreement as set forth in the agreement between the
Company and BAPCO, subject only to the liabilities specifically assumed as
set forth therein to NEWBASSCORP.
2. In exchange for the assignment contained in paragraph 1, NEWBASSCORP agreed
to hold all such acquired assets for the benefit of Sam Bass or his assigns
until such time as (1) Mr. Bass tendered the four million (4,000,000)
shares issued to him at the acquisition of BAPCO in April 1997, (2) Mr.
Bass and/or Bass World Wide Services tendered the seven hundred forty four
(744,000) shares issued to them for the acquisition of the environmental
remediation equipment, (3) Mr. Bass and/or Bass Environmental Services
Worldwide Inc. tendered the three million (3,000,000) shares issued to them
for the acquisition of the Chevron Agreement, and (4) Mr. Bass, Bass World
Wide Services and Bass Environmental Services Worldwide Inc. executed and
delivered a full and general release in favor of ERHC relinquishing, among
other things, all claims relative to such shares, the original acquisition
of such assets and the transfer of BAPCO as realigned and its assets and
all claims relative to any part of the overriding royalty interest
previously granted to him relative to Sao Tome.
3. At such time as NEWBASSCORP received tender of any of the shares to be
relinquished in accordance with paragraph 2 above and the delivery of the
full and general release, NEWBASSCORP agreed to return such shares and
release to ERHC forthwith and to deliver the pro rata portion of the shares
in NEWBASSCORP held for the benefit of Mr. Bass or his assigns to Mr. Bass
or to his designated assignee.
4. NEWBASSCORP released and discharged ERHC from all claims or actions
relative to the original acquisition of BAPCO, the environmental
remediation equipment, the Chevron Agreement and the issuance of shares for
each such acquisition and accepted the assignment as full consideration for
the transaction subject only to the full obligation of ERHC relative to the
specific liabilities assumed.
By Agreement effective April 23, 1999 between the White Cloud Development,
Inc. ("White Cloud") and Sam Bass, individually and on behalf of Bass
Environmental Worldwide Services Inc., Mr. Bass exchanged and released 7,744,000
shares of the Company's restricted stock for 100% of the authorized and issued
capital stock in White Cloud. Mr. Bass delivered the Company's restricted shares
and the required release to White Cloud.
The Company does not believe that there need be any changes in the legal or
financial disclosure relative to the financial and legal effects of the
rescission of the related party agreements with Mr. Bass and his companies which
would require further amendment to its Form S-1 and Form 10K for the Fiscal Year
Ended September 30, 1998 and all other reports which has been filed since.
In addition, the Company shall file the required Form 10-Q for the Quarter
Ended March 31, 1998 by May 24, 1999. All material agreements discussed herein
will be attached to such Form 10Q. In such Form 10Q, the Company will make note
of the filing of this Form 8K and state that no changes have been made to the
legal and financial disclosure as a result of the completion of the
investigation and the realignment of BAPCO.
All parties may continue to rely upon the previously filed audit opinion
letter, financial statements and the disclosures as to the BAPCO tool contained
in the Company's Form S-1/A3 and the Form 10K/A1. The Company intends to file,
within sixty (60) days of this Form 8K, a pro forma statement for the periods
ending September 30, 1998 and March 31, 1999 showing the effects of the
rescission as if it had occurred prior to the end of the 1998 Fiscal Year. The
actual effects of such rescission will appear in the Company's Form 10Q for the
Quarter Ending June 30, 1999.
Item 5. Other Events
At the meeting of the Board of Directors on April 8, 1999, the Board
reviewed certain prior actions of the Board.
The Board placed a a stop transfer order on the 200,000 shares issued to
Mytec & Associates because the assignment of the Henderson leasehold was never
made to the Company and they were in default on their agreement.
The Board rescinded a distribution of a portion of the five percent (5%)
overriding royalty interest granted to several Board members, employees and
consultants in February 1999 when the Company was not otherwise able to pay
their salaries and fees. The original passage of such resolution was based upon
a mistaken interpretation of the ability of the Board to disburse a substantial
corporate asset on its own action.
The Board rescinded a conditional issuance of 3,000,000 shares to Mr. Bass,
Mr. Callender and Noreen Wilson in June 1997 relative to Sao Tome and certain
production levels.
The Board rescinded a conditional issuance granted under the MIII agreement
in July 1997 because certain obligations of the Seller under such agreement were
not met and there was a default.
The Board rescinded the suspension of James Griffin, effective March 17,
1999, from negotiating for and on behalf of the Company until further notice.
The Board reviewed the extraordinary efforts of certain of its officers and
directors in assuring the formation of STPETRO, having STPETRO's formation
enacted into law and in negotiating the Technical Assistance Agreement between
STPETRO and Mobil. In appreciation of such efforts, the Board approved the
issuance of 2,000,000 shares of the Company's restricted Common Stock to Mr.
Bass, Mr. Callender, Ms. Wilson and Mr. Griffin.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
INDEX TO FINANCIAL STATEMENTS
Page
Proforma Consolidated Balance Sheet
September 30, 1998 ............................................F-2
Proforma Consolidated Statement of Operations
Year ended September 30, 1998 .................................F-3
Proforma Consolidated Balance Sheet
March 31, 1999..................................................F-4
Proforma Consolidated Statement of Operations
Six Months ended March 31, 1999 ................................F-5
Notes to Proforma Consolidated Financial Statements ...........F-6
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Proforma Consolidated Balance Sheet
(Unaudited)
September Septmber
30, 1998 30, 1998
-------------- ----------------
ASSETS Proforma
CURRENT ASSETS
Cash $ 36,359 $ 36,359
Restricted cash 18,826 18,826
Accounts receivable 193,736 193,736
Prepaid expenses and other current assets 256,059 256,059
-------------- ----------------
Total current assets 504,980 504,980
-------------- ----------------
PROPERTY AND EQUIPMENT
Oil and gas properties 1,240,175 A- (206,250) 1,033,925
Equipment 6,435,113 C- (3,720,000) 2,215,113
D- (500,000)
-------------- ----------------
Total property and equipment before depreciation and depletion 7,675,288 3,249,038
Less: accumulated depreciation and depletion (1,020,626) C- (744,000) (201,626)
D- (75,000)
-------------- ----------------
Net property and equipment 6,654,662 3,047,412
-------------- ----------------
OTHER ASSETS
Master service agreement 300 B- (300) 0
Investment in STPetro, S.A. 49,000 49,000
Due from STPetro, S.A. 452,276 452,276
DRSTP concession fee 4,000,000 4,000,000
Deferred offering costs 30,000 30,000
-------------- ----------------
Total other assets 4,531,576 4,531,276
-------------- ----------------
Total Assets $ 11,691,218 $ 8,083,668
============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (DEFICIT))
CURRENT LIABILITIES
Stockholder loans payable $ 731,328 $ 731,328
Current portion of long-term debt 308,636 308,636
Suspended revenue 141,409 141,409
Accounts payable and accrued liabilities :
Accounts payable 1,365,764 1,365,764
Accrued officer salaries 1,673,985 E- (697,029) 976,956
Accrued interest 1,116,196 1,116,196
-------------- ----------------
Total current liabilities 5,337,318 4,640,289
-------------- ----------------
LONG TERM LIABILITIES
Long term loans 41,631 41,631
Convertible debt, net 7,543,178 7,543,178
-------------- ----------------
Total long term liabilities 7,584,809 7,584,809
-------------- ----------------
Total Liabilities 12,922,127 12,225,098
-------------- ----------------
Common stock issued under a repurchase agreement;
issued and outstanding 1,000,000 and 750,000 shares 1,500,000 1,500,000
-------------- ----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.0001 par value; authorized
10,000,000 shares; none issued and outstanding 0 0
Common stock, $0.0001 par value; authorized 950,000,000 2,600 A- (20) 2,576
shares; issued and outstanding 25,999,900 and 28,469,586 B- (300)
C- (74)
D- (400)
E- 475
F- 295
Additional paid-in capital in excess of par 25,020,717 A- (206,230) 23,019,779
C- (2,975,926)
D- (424,600)
E- 1,008,113
F- 597,705
Additional paid-in capital - warrants 207,502 207,502
Deficit (29,224,228) E- (311,559) (30,133,787)
F- (598,000)
Beneficial conversion feature 1,387,500 1,387,500
Deferred compensation, net (125,000) (125,000)
-------------- ----------------
Total Stockholders' Equity (Deficit) (2,730,909) (5,641,430)
-------------- ----------------
Total Liabilities and Stockholders' Equity (Deficit) $ 11,691,218 $ 8,083,668
============== ================
F-2
The accompanying notes are an integral part of the financial statement
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Proforma Consolidated Statement of Operations
(Unaudited)
Year ended September 30, 1998
--------------------------------------------------------
REVENUE Proforma
Environmental remediation services $ 65,404 $ 65,404
Crude oil 0 0
------------------ ----------------
Other income 33,874 33,874
------------------ ----------------
Total revenue 99,278 99,278
------------------ ----------------
COSTS AND EXPENSES
Compensation :
Officers 1,793,000 E-311,559 2,104,559
Directors 446,250 446,250
Consulting fees 920,723 F-598,000 1,518,723
General and administrative expense 5,541,916 5,541,916
Depreciation and depletion 499,626 499,626
Interest expense 2,480,191 2,480,191
------------------ ----------------
Total costs and expenses 11,681,706 12,591,265
------------------ ----------------
Net income (loss) $ (11,582,428) $ (12,491,987)
================== ================
Weighted average number of shares 24,970,815 24,970,815
outstanding
================== ================
Net income (loss) per share - basic $ (0.46) $ (0.50)
================== ================
F-3
The accompanying notes are an integral part of the financial statement
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Proforma Consolidated Balance Sheet
(Unaudited)
March March
31, 1999 31, 1999
---------------- -----------------
ASSETS Proforma
CURRENT ASSETS
Cash $ 0 $ 0
Restricted cash 18,826 18,826
Accounts receivable 159,873 159,873
Prepaid expenses and other current assets 267,887 267,887
---------------- ----------------
Total current assets 446,586 446,586
---------------- ----------------
PROPERTY AND EQUIPMENT
Oil and gas properties 1,240,175 A- (206,250) 1,033,925
Equipment 6,447,113 C- (3,720,000) 2,227,113
D- (500,000)
---------------- ----------------
Total property and equipment before depreciation and depletion 7,687,288 3,261,038
Less: accumulated depreciation and depletion (1,293,409) C- (930,000) (250,909)
D- (112,500)
---------------- ----------------
Net property and equipment 6,393,879 3,010,129
---------------- ----------------
OTHER ASSETS
Master service agreement 300 B- (300) 0
Investment in STPetro, S.A. 49,000 49,000
Due from STPetro, S.A. 912,154 912,154
DRSTP concession fee 4,000,000 4,000,000
Total other assets 4,961,454 4,961,154
---------------- ----------------
Total Assets $ 11,801,919 $ 8,417,869
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (DEFICIT))
CURRENT LIABILITIES
Stockholder loans payable $ 714,968 $ 714,968
Current portion of long-term debt 734,856 734,856
Suspended revenue 156,282 156,282
Accounts payable and accrued liabilities :
Accounts payable 1,962,287 1,962,287
Accrued officer salaries 2,252,575 E- (773,104) 1,479,471
Accrued interest 2,345,323 2,345,323
---------------- ---------------
Total current liabilities 8,166,291 7,393,187
---------------- ---------------
LONG TERM LIABILITIES
Long term loans 38,568 38,568
Convertible debt, net 8,254,621 8,254,321
---------------- ---------------
Total long term liabilities 8,293,189 8,293,189
---------------- ---------------
Total Liabilities 16,459,480 15,686,376
---------------- ---------------
Common stock issued under a repurchase agreement;
issued and outstanding 1,000,000 and 750,000 shares 1,500,000 1,500,000
---------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.0001 par value; authorized
10,000,000 shares; none issued and outstanding 0 0
Common stock, $0.0001 par value; authorized 950,000,000 2,847 A- (20) 2,858
shares; issued and outstanding 25,999,900 and 28,469,586 B- (300)
C- (74)
D- (400)
E- 510
F- 295
Additional paid-in capital in excess of par 26,052,276 A- (206,230) 24,418,297
C- (2,789,926)
D- (387,100)
E- 1,151,572
F- 597,705
Additional paid-in capital - warrants 207,502 207,502
Deficit (33,745,186) E- (378,978) (34,722,164)
F- (598,000)
Beneficial conversion feature 1,387,500 1,387,500
Deferred compensation, net (62,500) (62,500)
---------------- ---------------
Total Stockholders' Equity (Deficit) (6,157,561) (8,768,507)
---------------- ---------------
Total Liabilities and Stockholders' Equity (Deficit) $ 11,801,919 $ 8,417,869
================ ===============
F-4
The accompanying notes are an integral part of the financial statement
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Proforma Consolidated Statement of Operations
(Unaudited)
Six Months ended March 31, 1999
--------------------------------------------------------
REVENUE Proforma
Environmental remediation services $ 0 $ 0
Crude oil 0 0
------------------ ----------------
Other income 0 0
------------------ ----------------
Total revenue 0 0
------------------ ----------------
COSTS AND EXPENSES
Compensation :
Officers 736,500 E-378,979 1,115,479
Directors 0 0
Consulting fees 580,854 F-598,000 1,178,854
General and administrative expense 1,423,656 1,423,656
Depreciation and depletion 272,782 272,782
Interest expense 1,507,166 1,507,166
------------------ ----------------
Total costs and expenses 4,520,958 5,497,937
------------------ ----------------
Net income (loss) $ (4,520,958) $ (5,497,937)
================== ================
Weighted average number of shares 27,747,830 27,747,830
outstanding
================== ================
Net income (loss) per share - basic $ (0.16) $ (0.20)
================== ================
F-5
The accompanying notes are an integral part of the financial statement
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Proforma Notes To Consolidated Financial Statements
(Unaudited)
(1) Proforma changes
A) Record the reversal of the acquisition of the Rusk County, Texas oil
field as the leases was never transferred.
B) Record the reversal of the acquisition of the Chevron Master Service
Agreement.
C) Record the reversal of the environmental equipment. Accumulated
depreciation: at September 30, 1998; $744,000 and March 31, 1999;
$930,000.
D) Record the reversal of the BAPCO acquisition. Accumulated
depreciation: at September 30, 1998; $75,000 and March 31, 1999;
$112,500.
E) Record conversion of accrued salaries payable, and settlement of
disputed amount with one officer. Shares issued: September 30, 1998;
4,747,106 and March 31, 1999; 5,100,000.
F) Record settlement agreements with various consultants. Shares issued:
2,950,000.
F-6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Environmental Remediation Holding
Corporation (Registrant)
Dated: July 20, 1999
- --------------------
By: /s/ James Callender, Sr.
----------------------------
Remaining Director and
Former President
By: /s/ Robert McKnight
-----------------------
Remaining Director and
Former President of BAPCO
By: /s/ James Griffin
---------------------
Remaining Director and
Former Secretary
By: /s/ Kenneth Waters
----------------------
Remaining Director
[Signature Page: Form 8K/A 7.20.99]