================================================================================
    As filed with the Securities and Exchange Commission on April 16, 2007.


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                     ---------------------------------------

                                   FORM 10-KSB


        { X } ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934.


                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2006.



    { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES

       EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM ____ TO _____.




                         Commission file number: 0-32995

                               MEDSOLUTIONS, INC.
                 (Name of small business issuer in its charter)


                Texas                                        75-2531556
   (State or other jurisdiction of                         (I.R.S.Employer
    incorporation or organization)                        Identification No.)



                 12750 Merit Drive, Park Central VII, Suite 770
                               Dallas, Texas 75251
           (Address of principal executive office including zip code)

                                 (972) 931-2374
                         (Registrant's telephone number)


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

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


                     Common Stock, Par Value $.001 Per Share
                                (Title of Class)

Check whether the issuer is not required to file reports  pursuant to Section 13
or 15(d) of the Exchange Act. {}

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.{ } Indicate by check mark whether the  registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes {} No {X}

State Issuer's revenues for most recent fiscal year: $12,799,132

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified date within the past 60 days. $0.

The number of shares  outstanding of registrant's  common stock, $.001 par value
per share, as of March 31, 2007 was 25,983,869 shares.

Transitional Small Business Disclosure Format (check one): Yes { } No {X}

<PAGE>


                               MEDSOLUTIONS, INC.
                        2006 ANNUAL REPORT ON FORM 10-KSB
                                      INDEX

Part I.                                                                     Page
                                                                            ----
    Item 1.         Description of Business                                    1
    Item 2.         Description of Property                                   14
    Item 3.         Legal Proceedings                                         15
    Item 4.         Submission of Matters to a Vote of Security Holders       16
Part II.
    Item 5.         Market for Common Equity,  Related Stockholder
                     Matters and Small Business Issuer Purchases
                     of Equity Securities                                     17
    Item 6.         Management's Discussion and Analysis or Plan
                     of Operation                                             18
    Item 7.         Consolidated Financial Statements                         26
    Item 8.         Changes In and Disagreements with Accountants on
                     Accounting and Financial Disclosures                     26
    Item 8A.        Controls and Procedures                                   26
    Item 8B.        Other Information                                         26
Part III.
    Item 9.         Directors,  Executive  Officers,  Promoters,
                     Control  Persons and  Corporate  Governance;
                     Compliance with Section 16(a) of the Exchange Act        27
    Item 10.        Executive Compensation                                    30
    Item 11.        Security  Ownership of Certain  Beneficial  Owners
                     and Management and Related  Stockholder Matters          35
    Item 12.        Certain Relationships and Related Transactions,
                     and Director Independence                                37
    Item 13.        Exhibits                                                  39
    Item 14.        Principal Accountant Fees and Services                    43
Signatures                                                                    44
Audited Consolidated Financial Statements                                    F-i
Exhibit Index


<PAGE>




                SAFE HARBOR REGARDING FORWARD LOOKING STATEMENTS

     This Form 10-KSB  contains  forward-looking  statements.  These  statements
relate to future events or our future financial performance. You should exercise
extreme caution with respect to all forward-looking statements contained in this
Form 10-KSB. Specifically, the following statements are forward-looking:

o    statements  regarding our overall strategy  including,  without limitation,
     our intended  markets,  service offerings and acquisitions and our expected
     liquidity and capital resources;

o    statements  regarding the plans and objectives of our management for future
     operations, expectations for sales and marketing and the size and nature of
     the costs we expect to incur and the people and services we may employ;

o    statements regarding anticipated trends in our business;

o    statements regarding regulations that may affect us;

o    statements  regarding our competition and our ability to compete with third
     parties;

o    any  statements  using  the  words  "anticipate,"   "believe,"  "estimate,"
     "expect,"  "intend," "may," "should," "would," "expect," "plan," "predict,"
     "potential," "continue" and similar words; and

o    any statements other than historical fact.

     Forward-looking  statements  reflect the current  view of  management  with
respect to future events and are subject to numerous  risks,  uncertainties  and
assumptions.  We can give no assurance that such  expectations  will prove to be
correct.  Should any one or more of such risks or  uncertainties  materialize or
should any underlying assumptions prove incorrect,  actual results are likely to
vary  materially  from  those  described  in this Form  10-KSB.  There can be no
assurance  that the  projected  results  will  occur,  that these  judgments  or
assumptions will prove correct or that unforeseen  developments  will not occur.
We are under no duty to update any of the  forward-looking  statements after the
date of this Form 10-KSB.


<PAGE>


                                     PART I
Item 1. Description of Business

Company Overview

     MedSolutions, Inc. ("we," "us," or the "Company"), a Texas corporation that
was  organized on November  11,  1993,  is a  diversified  holding  company that
provides complete and effective waste management  outsource  solutions  marketed
and serviced through four wholly owned subsidiaries and one substantially  owned
subsidiary.  Through EnviroClean Management Services,  Inc. ("EMSI"), from which
we currently  derive virtually all of our revenue,  we are primarily  engaged in
regulated medical waste ("RMW") management  services,  which include collecting,
transporting,  treating and disposing of regulated  medical waste from a variety
of healthcare customers. Through SharpsSolutions,  Inc. ("SharpsSolutions"),  we
offer a reusable sharps container service program to healthcare  facilities that
we expect will virtually  eliminate the current  method of utilizing  disposable
sharps containers.  Through ShredSolutions,  Inc., we market a fully integrated,
comprehensive  service for the  collection,  transportation  and  destruction of
Protected  Healthcare  Information  (PHI)  and  other  confidential   documents,
primarily those generated by healthcare providers and regulated under the Health
Insurance Portability and Accountability Act ("HIPAA").  Through Positive Impact
Waste  Servicing,  Inc.  doing  business as  EnviroClean  On-Site,  we provide a
patented  mobile  treatment  process that uses  Cold-Ster(R),  a proprietary dry
chemical product approved by the U.S.  Environmental  Protection  Agency ("EPA")
for the treatment of RMW.  Through the acquisition of SteriLogic  Waste Systems,
Inc.,  located in  Syracuse,  New York  ("SteriLogic"),  we operate a  regulated
medical waste management  company that provides  collection,  transportation and
disposal of regulated medical waste services in addition to providing a reusable
sharps  container  program to its  customers  who are  primarily  located in the
States of New York and Pennsylvania.  SteriLogic also designs,  manufactures and
markets  reusable  sharps  containers  to medical  waste  service  providers who
provide a reusable sharps container program to their medical waste customers.

     We are a  fully  integrated  regulated  medical  waste  management  company
providing  medical  waste  and PHI  collection,  transportation,  treatment  and
disposal,  sharps container  management,  and related  consulting,  training and
education services and products. Our three principal groups of customers include
(i)  outpatient  clinics,  medical  and dental  offices,  biomedical  companies,
municipal   entities,   long-term  and  sub-acute  care   facilities  and  other
smaller-quantity  generators  ("SQG") of  regulated  medical  waste,  (ii) blood
banks,  surgery centers,  dialysis centers and other medium quantity  generators
("MQG") of regulated  medical waste and (iii) hospitals,  diagnostic  facilities
and other  larger-quantity  generators  ("LQG") of regulated  medical waste.  We
believe that the services we offer are compelling to our customers  because they
allow our customers to avoid the  significant  capital and operating  costs that
they would have to incur if they were to manage their  regulated  medical waste,
sharps container management,  on-site treatment,  or PHI destruction internally.
Moreover, by outsourcing waste management, sharps container management,  on-site
treatment, PHI destruction,  regulatory compliance and other services to us, our
customers  reduce or  eliminate  their risk of the large fines  associated  with
regulatory non-compliance.

Business Background

     We were originally  incorporated as Advanced EnviroTech  Systems,  Inc. for
the purpose of developing,  designing and  manufacturing  a patented solid waste
treatment technology,  the EnviroClean(R) Thermal Oxidation System, which we may
sometimes  refer  to as the  "EnviroClean(R)  System",  for the  destruction  of
regulated  medical and other specialized waste streams generated by the medical,
commercial  and industrial  business  communities  in an  environmentally  sound
manner. We subsequently changed our name to EnviroClean  International,  Inc. We
have two issued  patents  (No.  5,680,820  and No.  5,730,072)  and a  trademark
regarding  the  EnviroClean(R)  System.  Although  we were  established  for the
purpose of developing,  manufacturing and marketing the  EnviroClean(R)  System,
our  success  in  that  regard  has  been  marginal,  and we have  not  produced
significant  revenue or any profit from such  activities.  Lack of funds for the
development,  modification and marketing of the EnviroClean(R)  System,  coupled
with the general lack of acceptance  and demand,  and the cost of production and
operation  of the product,  contributed  to our  disappointing  results in prior
periods.  There are no plans to reactivate the  development  of the  EnviroClean
System. In 1999, we altered our focus from the development of the EnviroClean(R)
System to the  development  of our regulated  medical waste  management  service
business,  changed our corporate name and modified our business model to emulate
that of the  industry  leader,  Stericycle,  Inc.  ("Stericycle"),  but  with an
emphasis on customer service. In addition, we subsequently began to focus on the
creation and development of subsidiaries to provide our large base of healthcare
provider customers with other healthcare  related waste management  services and
regulatory  compliance  programs.  From the point we elected to implement  these
changes in our business  strategy,  our business has seen a dramatic  turnaround
and a much more receptive market.

                                       1

<PAGE>


Industry Overview

     The regulated  medical waste industry arose with the Medical Waste Tracking
Act of 1988,  or MWTA,  which  Congress  enacted in response to media  attention
after medical waste washed ashore on ocean beaches, particularly in New York and
New Jersey. Since the 1980s, government regulation has increasingly required the
proper  handling and disposal of the medical waste  generated by the  healthcare
industry.  Regulated  medical waste is generally  described as any medical waste
that can cause an infectious  disease,  including  single-use  disposable items,
such as needles,  syringes,  gloves and other  medical  supplies;  cultures  and
stocks of infectious agents; and blood and blood products.

     According to Stericycle's public filings, the size of the regulated medical
waste market in the United States is approximately $3.0 billion and is in excess
of $10.0  billion when  ancillary  services  such as PHI  destruction,  reusable
sharps container  programs,  training,  education,  product sales and regulatory
compliance programs are taken into consideration. Industry growth is driven by a
number of factors. These factors include:

     Pressure  To  Reduce  Hospital  Costs.  The  healthcare  industry  is under
pressure to reduce costs and improve  efficiency.  To accomplish this reduction,
outside contractors are being hired to perform some services,  including medical
waste  management,  PHI destruction and reusable sharps container  programs.  We
believe that our medical waste  management  services help  healthcare  providers
reduce costs by reducing their medical waste  tracking,  handling and compliance
costs,  reducing their potential liability related to employee exposure to blood
borne pathogens and other infectious materials, and reducing the amount of money
invested in on-site treatment of medical waste and/or PHI destruction.

     Shift to  Off-Site  Treatment.  We  believe  that  managed  care and  other
healthcare  cost-containment  pressures  are causing  patient care to shift from
institutional,  higher-cost,  acute-care  settings to less  expensive,  smaller,
off-site  treatment  alternatives.  Many common  diseases and conditions are now
being  treated  in smaller  non-institutional  settings.  We believe  that these
non-institutional, alternate-site, healthcare expenditures will continue to grow
as cost-cutting  pressures  increase.  Typically these type of settings generate
only small amounts of medical waste; thus, the potential risks of non-compliance
with applicable state and federal medical waste regulations is  disproportionate
to the cost of services we can provide.

     Aging of U.S.  Population.  The relative  size of the baby boom  generation
should  continue to result in an increase in the average age of the  population,
while falling mortality rates ensure that the average person should live longer.
As people age, they typically require more medical attention and a wider variety
of tests and  procedures.  In addition,  as  technology  improves more tests and
procedures become available.  All of these factors lead to increased  generation
of medical waste.

     Environmental and Safety  Regulation.  Our industry is subject to extensive
regulation  beyond the MWTA.  For example,  the Clean Air Act Amendments of 1990
(the "Clean Air Act")  regulations  adopted in 1997 limit the discharge into the
atmosphere  of  pollutants  released  by  medical  waste   incineration.   These
regulations have increased the costs of operating medical waste incinerators and
have resulted in the closures of several on-site treatment  facilities,  thereby
increasing  the  demand  for  off-site  treatment  services.  In  addition,  the
Occupational  Safety and Health  Administration  ("OSHA") has issued regulations
concerning  employee  exposure to blood borne  pathogens  and other  potentially
infectious  materials that require,  among other things,  special procedures for
the handling and disposal of medical waste and annual  training of all personnel
who may be exposed to blood and other bodily fluids.  These regulations underlie
the expansion of our service  offerings to include OSHA compliance  services for
healthcare providers.

Services and Operations

     Our   services   and   operations   are   comprised   of  the   collection,
transportation,  treatment,  and disposal of regulated  medical waste,  reusable
sharps  containers and PHI,  together with  regulatory  compliance  training and
education programs and consulting  services.  To service our customers,  we have
one collection/treatment  facility and two transfer sites in the State of Texas,
one  collection/treatment/transfer  facility  in the State of  Oklahoma  and one
transfer site and one  collection/treatment  facility in the state of Kansas. We
offer  programs  to assist our  customers  in the proper  handling,  separating,
packaging  and  disposing  of  medical  waste.  We also  advise  our  healthcare
customers in the proper methods of recording and documenting their medical waste
management to comply with federal, state and local regulations.  In addition, we
offer  consulting  services  to our  healthcare  customers  for OSHA  and  HIPAA
compliance  and to assist  them in  reducing  the amount of  medical  waste they
generate.  We have approximately  10,000 medical waste disposal  agreements with
customers  for  the  collection  of  their  regulated   medical  waste,   sharps
management,  and/or PHI. Our  customers  include the Baylor  Healthcare  System,
Texas Health Resources  Hospital System,  the Greater Ozarka Health Care System,
St.  Joseph  Hospitals,  Carter  Blood  Care,  Tenet  Healthcare  System,  Quest
Diagnostics,  Inc.,  East Texas  Medical  Center,  St. Luke's  Episcopal  Health
System,  The Methodist Health System,  Hospital  Corporation of America and many
others.



                                       2
<PAGE>


     Collection  and  Transportation.  We consider  efficiency of collection and
transportation to be a critical element of our operations  because it represents
approximately  one-half of our cost of revenues.  We have sophisticated  routing
software to optimize our routes.  We try to maximize the number of stops on each
route. We use a global positioning system ("GPS") for our collection vehicles to
improve efficiency.  We attempt to correlate the size of our collection vehicles
to the amount of medical  waste to be  collected  at a  particular  stop or on a
particular route. We collect reusable  containers or corrugated boxes of medical
waste from our  customers at intervals  depending  upon  customer  requirements,
terms of service and volume of medical waste  produced.  The containers or boxes
are  inspected  at each  customer's  site  prior to  pickup.  The  waste is then
transported  directly  to  one  of  our  treatment  facilities  or to one of our
transfer  stations where it is combined with other medical waste and transported
to a treatment facility. In some select circumstances we transport medical waste
to other permitted medical waste treatment facilities.

     As  part  of  our  collection  operations,  we  supply  specially  designed
containers for use by most of our customers. We have reusable plastic containers
that are  leak  and  puncture  resistant.  The  plastic  containers  enable  our
customers to reduce costs by reducing the number of times that medical  waste is
handled,  eliminating the cost (and weight) of corrugated  boxes and potentially
reducing liability  resulting from human contact with medical waste. The plastic
containers  are  designed to  maximize  the loads that will fit within the cargo
compartments  of our standard  trucks and  trailers.  If a customer  generates a
large  volume of waste,  we will place a large  temporary  storage  container or
trailer on the customer's premises.  In order to maximize regulatory  compliance
and minimize potential liability,  we will not accept medical waste unless it is
properly  packaged by customers in  containers  that we have either  supplied or
approved.

     Treatment and Disposal. Upon arrival at a treatment facility, containers or
boxes of medical waste are typically  scanned to verify that they do not contain
any unacceptable substances such as radioactive materials.  Any container or box
that is  discovered to contain  unacceptable  waste is returned to the customer.
After inspection,  the waste is treated using one of our treatment technologies.
Upon  completion of the particular  process,  the resulting waste or incinerator
ash is transported for disposal in a landfill  operated by parties  unaffiliated
with us.  After the  plastic  containers  have been  emptied,  they are  washed,
sanitized and returned to customers for re-use. We also receive medical waste to
process from third party transporters which provides another source of revenue.

     Treatment  Technologies.  We currently use  autoclaving,  incineration  and
chemical mobile technologies for treating regulated medical waste.

     Autoclaving.   Autoclaving   treats   medical  waste  with  steam  at  high
temperature  and pressure to kill pathogens.  Autoclaving  alone does not change
the appearance of waste, and  recognizable  medical waste may not be accepted by
some landfill  operators,  but  autoclaving  may be combined with a shredding or
grinding process to render the medical waste unrecognizable.

     Incineration. Incineration burns medical waste at elevated temperatures and
reduces  it to ash.  Incineration  reduces  the  volume of waste,  and it is the
recommended  treatment and disposal  option for some types of medical waste such
as  anatomical  waste or residues from  chemotherapy  procedures.  However,  air
emissions from incinerators can contain certain byproducts, which are subject to
federal,  state and, in some  cases,  local  regulation.  In  addition,  the ash
byproduct of incineration may be regulated in some instances.

     Chemical Mobile  Treatment.  We employ a chemical mobile treatment  process
which treats medical waste that uses  Cold-Ster(R),  a proprietary  dry chemical
product  approved by the EPA for the treatment of regulated  medical waste.  The
features of this  treatment  come from an  exclusive  long-term,  proven  mobile
technology  that treats RMW,  reduces its volume by 70% and transforms the waste
into a shredded material that is unrecognizable,  HIPPA-compliant  and ready for
the general waste stream.

Our current capacity to treat regulated  medical waste is approximately  divided
between these treatment methods in the following percentages:

                   Autoclaving                    75%
                   Incineration                   15%
                   Chemical Mobile                10%

We vary our treatment of medical waste among  available  treatment  technologies
based on the type of waste  and  capacity  and  pricing  considerations  in each
service area, in order to minimize operating costs and capital investments.



                                       3
<PAGE>

     Disposal  Operations.  We  operate  multiple  permitted  treatment/transfer
facilities. Our treatment/transfer  facility located in Garland, Texas (a suburb
of Dallas) services North Texas, Oklahoma,  Arkansas and Louisiana (the "Garland
Facility").  Our treatment  facility in Emporia,  Kansas currently  services the
Kansas,  Oklahoma,  Missouri and Northern Arkansas  markets.  We have a transfer
facility  located in Houston,  Texas which services  customers  located in South
Texas and Southern  Louisiana  with an emphasis on the Greater  Houston,  Corpus
Christi and San Antonio/Austin  service areas. We also operate transfer sites in
Oklahoma City, Oklahoma; and Wichita, Kansas.

     On June 8, 2006,  the  operating  agreement  between  the  Company  and the
University of Texas Medical Branch  ("UTMB")  expired.  The operating  agreement
allowed the Company to manage the UTMB  incineration  facility and process their
waste for a fee as well as  provided a facility  for the  Company to treat waste
generated from EMSI South Texas and Louisiana customers in return for a fee paid
to UTMB.  Currently,  the Company is taking waste generated from South Texas and
Louisiana  customers to other third party facilities in South Texas and Northern
Louisiana and to its Garland facility.

     Positive  Impact  Waste  Servicing,  Inc.  doing  business  as  EnviroClean
On-Site,  Inc. - Chemical  Mobile  Treatment  Technology.  Positive Impact Waste
Servicing,  Inc. doing business as EnviroClean On-Site, Inc., which was acquired
by the Company from  Positive  Impact Waste  Solutions,  LLC in 2005,  employs a
patented  mobile  treatment  process  that uses  Cold-Ster,  a  proprietary  dry
chemical product approved by the U.S. EPA for the treatment of RMW.  EnviroClean
On-Site features an exclusive  long-term,  proven mobile  technology that treats
RMW,  reduces  its  volume by 70%,  and  transforms  the waste  into a  shredded
material that is unrecognizable, HIPPA-compliant and ready for the general waste
stream.  The mobile treatment  technology affords our Company the opportunity of
reduced  permitting  constraints  and  allows for the rapid  establishment  of a
customer  base and  recurring  revenue  stream in new markets.  This approach is
superior to the conventional  method of permitting a fixed facility to allow for
geographical  market  expansion  that  requires  significant  time  and  capital
expenditures  prior to the  establishment of a revenue stream.  In addition,  it
allows us to compete for those LQG customers that prefer  on-site  treatment for
liability reasons.

     Consulting  Services.  Before medical waste is picked up by our trucks, our
integrated waste management  approach  attempts to "build in" efficiencies  that
will yield advantages for our customers.  For example,  our consulting  services
can assist  our  customers  in  reducing  the volume of medical  waste that they
generate or assist them with regulatory  compliance  training.  In addition,  we
provide  customers with the  documentation  necessary for compliance  with laws,
which, if they complete the documentation properly, will reduce interruptions to
their businesses to verify compliance.

     Documentation.  We provide complete  documentation to our customers for all
medical waste and PHI that we collect, including the name of the generator, date
of pick-up and date of delivery to a  treatment  facility.  We believe  that our
documentation  system meets all applicable federal,  state and local regulations
regarding  the packaging and labeling of medical  waste,  including  regulations
issued by the U.S.  Department  of  Transportation  ("DOT"),  OSHA and state and
local  authorities.  This  documentation  is sometimes  used by our customers to
prove that they are in compliance with these regulations.

     SharpsSolutions,  Inc.--Reusable  Sharps  Container  Program.  Our reusable
sharps container program is perhaps one of the most significant  investments and
opportunities that we are currently undertaking. Sharps management is defined as
the  management  and  treatment of  sharp-edged  medical waste such as syringes,
needles,  razors,  scissors  and  scalpels  that may have come into contact with
blood  born  pathogens,  such  as HIV  or  hepatitis.  The  most  common  sharps
management  is where  the  hospital  employees  dispose  of  sharps  in  various
containers  that are then  collected by other  hospital  employees  and disposed
(container and sharps content together) within the hospitals' waste that is then
treated  in-house or outsourced to a medical waste service  provider such as the
Company. The SharpsSolutions Reusable Sharps Container Program is intended to be
a fully outsourced  service offering where hospital  employees do not handle the
sharps once they are  disposed  of at the point of use.  This is  paramount  for
hospitals in that hospital personnel are less subject to needle stick injuries.

     Statistically, there are 600,000 to 800,000 needle stick injuries annually,
with a third of them  occurring  during the disposal  process.  With each needle
stick costing between $5,000 and $10,000,  these incidents alone are costing the
industry over one billion dollars  annually.  In addition to the  cost/liability
savings  associated with reduced needle stick  incidents,  the cost of recycling
the containers  rather than purchasing  them is significant,  often saving 15 to
20% for the  generator.  The combined  savings  between  direct costs plus costs
associated with reduced needle sticks can reach up to 30% per year.



                                       4
<PAGE>

     Currently,  the  reusable  sharps  container  recycling  market is  rapidly
developing.  It is very  popular on the east coast of the  United  States  where
approximately 80% of the market utilizes reusable sharps programs.  We estimate,
based on  research  conducted  by  industry  analysts  and our own  conservative
estimates, that there is a total market opportunity in the markets we service of
approximately $20 million annually. As of December 31, 2006, we provide reusable
sharps container programs to 14 hospitals in the markets we service.

     ShredSolutions, Inc. - Document Destruction Program ShredSolutions benefits
from HIPPA,  a law that became  effective  in April 2003 which  stipulates  that
healthcare providers guarantee the security and privacy of health information by
requiring that every identifiable  patient record for individuals be transferred
to an electronic medium or destroyed.

     EnviroSafe  Complete  Compliance  Program.  The  EnviroSafe  program  is  a
competitive program to Stericycle's  extremely lucrative SteriSafe program.  Our
EnviroSafe  program is priced at more  competitive  rates than those  offered by
Stericycle's SteriSafe program and offer's better customer service initiatives.

Business Strategy

     Our  goals  are to  strengthen  our  position  as a  regional  provider  of
integrated  services in the regulated medical waste industry and to continuously
improve our financial  performance.  Components of our strategy to achieve these
goals include:

     Improve  Margins.  We will continue to actively work to improve our margins
by  increasing  our  base of  small  quantity  generators  and  focusing  on our
ancillary service strategies,  including reusable sharps container programs, PHI
destruction and regulatory compliance programs. These services fulfill the needs
of our large,  medium and small quantity generators and we believe that with the
rapid organic and  acquisition  growth of our customer base, the opportunity for
sales of ancillary services and regulatory  compliance products to our customers
will continue to grow and the  incremental  cost of offering these services will
continue to decrease, thereby improving margins.

     Expand  Range  of  Services  and  Products.  We  believe  that we have  the
opportunity  to expand our  business by  increasing  the range of  products  and
services  that we offer to our existing  customers.  For  example,  we now offer
on-site treatment,  reusable sharps container management,  PHI destruction and a
broad range of OSHA compliance and consulting services to our customers. Because
our drivers  call on numerous  medical  facilities  on a routine  basis,  we are
considering offering single-use disposable medical supplies to our customers.

     Seek  Strategic  and/or  Complementary   Acquisitions.   We  actively  seek
strategic  opportunities  to  acquire  businesses  that  expand  our  network of
treatment  centers and  increase our customer  base.  We believe that  strategic
acquisitions  can enable us to gain  operating  efficiencies  through  increased
capacity  utilization  and  increased  route  density  as well as to expand  the
geographic service areas in which we operate.

     Capitalize on Outsourcing Due to Clean Air  Regulations.  The Clean Air Act
regulations  have  increased  both the  capital  costs  required  to bring  many
existing  incinerators  into  compliance  and the  operating  costs of continued
compliance.  We  plan  to  continue  to try and  capitalize  on the  anticipated
movement by hospitals to outsource medical waste treatment rather than incur the
cost of installing the air pollution  control  systems  necessary to comply with
these EPA regulations.

     Our business strategy and expansion plans will place significant  strain on
our management,  working capital,  financial and management  control systems and
staff.  Our failure to properly respond to these needs by failing to maintain or
upgrade financial and management control systems,  failing to recruit additional
staff or failing to  respond  effectively  to  difficulties  encountered  during
expansion could adversely affect our business,  financial  condition and results
of operations.  Although,  based on our  experience in the industry,  we believe
that our management  and financial  systems and controls are adequate to address
current needs, we are attempting to recruit and train  additional  staff.  There
can be no  assurance,  however,  that our  systems,  controls  or staff  will be
adequate to sustain future growth.

Acquisitions and Corporate Background

     BMI   Services,   Inc  ("BMI").   BMI,  a  regulated   medical   waste  and
transportation  management company,  was acquired by EMSI in April 1996. BMI was
based in Houston,  Texas and was one of the largest independent  transporters of
medical waste in Texas. We acquired our primary waste  transportation  business,
our transfer station in Tyler,  Texas and the UTMB  arrangement  through the BMI
acquisition.

     EnviroClean  Management Services,  Inc ("EMSI"). We formed EMSI in February



                                       5
<PAGE>

1996, as a consolidation  vehicle for the merger or acquisition of BMI and other
proposed  entities.  In January 1998,  we exchanged  shares of our common stock,
$.001 par value per share  ("Common  Stock") to acquire  667,375  shares of EMSI
from other  stockholders.  This  transaction  gave us a controlling  interest of
approximately  51.3% of EMSI. In December 1998, we offered to exchange one share
of Common  Stock  for each  share of EMSI  still  outstanding.  As a result,  we
acquired shares  representing an aggregate of 96.1% of EMSI's stock.  Since then
we have continued the exchange offer and have acquired additional shares and now
own 99.3% of EMSI.

     AmeriTech  Environmental,  Inc.  ("ATE").  On November 7, 2003, we acquired
certain of the assets of ATE,  including the assignment by ATE to the Company of
all of its regulated  medical waste disposal  customer  contracts (which covered
approximately 800 customers).  The other assets acquired consisted  primarily of
equipment  associated with ATE's regulated medical waste disposal business and a
parcel of real property permitted as a transfer site located in Houston,  Texas.
The purchase price for the acquired  assets was $650,000 cash, a promissory note
in the  original  principal  amount of $750,000  bearing  interest at a rate per
annum of 7%, interest  payable  monthly,  and all principal and accrued interest
due on  November  7, 2004,  and  705,072  shares of our Common  Stock.  The cash
portion of the  purchase  price was funded from the  proceeds of sales of Common
Stock in private  placements and $400,000 which was loaned to the Company by two
of its  directors/stockholders  in exchange for promissory  notes.  The purchase
price was determined largely based upon the amount of revenues ATE had generated
from its  regulated  medical  waste  disposal  business  during the first  three
quarters of 2003.

     During 2004 and in accordance with the acquisition  agreement,  the Company
calculated  a  purchase  price  adjustment  with  respect to the  customer  list
acquired from ATE. The  calculation  resulted in a purchase  price  reduction of
$254,433,  which lowered the assigned  value of the customer list  acquired.  In
addition,  the Company further determined there was an impairment of $139,330 in
2004 to the customer list acquired from ATE. Accordingly, the Company recorded a
charge of $139,330 during 2004, to reflect the decrease in net carrying value of
the  customer  list.  As part of the  acquisition,  the  Company  also  recorded
goodwill of approximately $1,000,000.

     A settlement  was reached  between ATE and the Company on February 11, 2005
due to  numerous  disputes  and  disagreements  that  arose  in  relation  ATE's
representations in the asset purchase  agreement.  The settlement called for the
modification of the promissory note to ATE from the Company to reduce the amount
owed from  $750,000 to  $150,000,  payable in two  installments  of $75,000 each
beginning  at the time that ATE delivers  audited  financial  statements  of its
books and records for the nine-month period ended September 30, 2003 allowing us
to  comply  with our Form 8-K  reporting  requirements  with the  United  States
Securities and Exchange Commission ("SEC"). We recorded a reduction (included in
other income) of debt of  approximately  $650,000  during the three months ended
March 31, 2005 for compensatory damages that resulted from breaches committed by
ATE. Since the February 11, 2005  settlement was reached,  ATE could not deliver
audited financial  statements as required;  therefore,  the settlement agreement
was amended so that the remaining  balance of $150,000 owed to ATE was converted
into 150,000  shares of the Company's  Common Stock and all  remaining  disputes
with ATE were settled.


     Med-Con  Waste  Solutions,  Inc.  ("Med-Con")  On September  30,  2004,  we
acquired certain assets, including a customer list, of Med-Con in an acquisition
accounted  for as a  purchase  for a total  purchase  price of  $1,149,000.  The
purchase price for the acquired  assets was (i) $250,000 cash, (ii) a promissory
note in the original principal amount of $500,000 bearing interest at a rate per
annum of 7%, payable in 30 equal monthly  installments of principal and interest
with the first such  installment due on January 1, 2005, (iii) a promissory note
in the original  principal  amount of $250,000,  with no interest,  and with the
principal  amount and the due date subject to adjustment based upon the delivery
by  Med-Con  to the  Company  of  consents  to the  assignment  of the  customer
contracts   acquired  from  Med-Con  within  75  days  of  the  closing  of  the
transaction,  (iv) and 149,000 shares of Common Stock.  The principal  amount of
the $500,000 promissory note was subject to adjustment depending upon the amount
of revenues  realized by the Company from the customer  contracts  acquired from
Med-Con for the ensuing 90 days  following  the closing of the  transaction.  We
assigned  $497,610,  based on an  independent  appraisal,  to the customer  list
acquired and  established a useful life of five years over which to amortize the
assigned  cost.  Amortization  expense of the  customer  list for each year will
approximate $99,522.

     During  the  year  ended  December  31,  2004  and in  accordance  with the
acquisition  agreement,  we calculated a purchase price  adjustment of $153,780,
which lowered the assigned value of the assets acquired.  This reduction reduced
the note payable to Med-Con by $153,780.

     As part of the  acquisition,  we also  recorded  goodwill of  approximately
$499,610, net of the purchase price reduction.



                                       6
<PAGE>

     On May 18, 2005, the Company and Med-Con restructured the two notes payable
that were in default.  The  agreement  calls for the $346,220  note  (originally
$500,000)  plus  accrued  interest  of  $10,000  to be paid in 48 equal  monthly
payments of $8,896,  and an increase of the  original  interest  rate from seven
percent  (7%) to  eight  (8%).  With  regard  to the  second  note  of  $145,000
(originally $250,000),  the agreement calls for 24 equal monthly installments of
$6,691 with the note bearing  interest at ten percent (10%).  In accordance with
EITF  96-19,  Debtor's  Accounting  for  a  Modification  or  Exchange  of  Debt
Instruments,  the  modification to the debt agreement was not determined to be a
substantial modification.

     Bray Medical  Waste  Service  ("Bray") On January 1, 2004,  we acquired the
customer contracts and took over the regulated medical waste operations of Bray.
The purchase price for the acquired  assets was (i) $11,200 cash and (ii) 29,867
shares of Common Stock valued at $22,400 for a total  purchase price of $33,600.
The  purchase  price  allocation  was  $30,000  to  customer  list and $3,600 to
goodwill.

     On Call Medical  Waste  Service ("On Call") On August 29, 2005, we acquired
certain assets  including  customer  contracts from On Call for a total purchase
price of $1,155,500. The purchase price for the acquired assets was (i) $375,000
cash,  (ii) a  promissory  note in the  original  principal  amount of  $250,000
bearing  interest  at a rate  per  annum  of 8%,  payable  in 24  equal  monthly
installments  of principal and interest with the first such  installment  due on
December 27, 2005,  (iii) a promissory note in the original  principal amount of
$375,000 with no interest,  (iv) 166,667 shares of Common Stock, and (v) $30,500
of transaction  costs incurred by the Company.  The cash portion of the purchase
price was funded from the proceeds of a sale of the Company's  Common Stock in a
private  placement to, and a loan to the Company  pursuant to a promissory  note
from, one of its shareholders.

     Cooper Biomed,  Ltd.  ("Cooper") On September 30, 2005, we acquired certain
assets,  principally customer contracts,  from Cooper for a total purchase price
of $120,000.  The purchase  price for the acquired  assets was (i) $40,000 cash,
(ii) a  promissory  note in the  original  principal  amount of $40,000  with no
interest,  (iii) a promissory note in the original  principal amount of $25,000,
without  interest,  payable in one  installment  of  principal  in the amount of
$25,000 due on the 120th day after the Closing Date subject to adjustment,  (iv)
10,000 shares of Common Stock,  and (v) $5,000 of transaction  costs incurred by
the Company. The purchase price was allocated to customer list ($114,505) and to
accounts receivable ($5,495).  The cash portion of the purchase price was funded
from the proceeds of a sale of the Company's Common Stock in a private placement
to, and a loan to the Company  pursuant to a  promissory  note from,  one of its
shareholders.  As provided for in the agreement the Company  calculated a $8,500
purchase  price  adjustment  and  reduced  the  principal  due under the $25,000
promissory note and the amount assigned to customer list, accordingly.

     Positive  Impact Waste  Solutions,  LLC  ("PIWS") On November 30, 2005,  we
acquired certain assets,  including customer contracts of approximately 250 PIWS
customers plus six mobile treatment  units, and took over the regulated  medical
waste operations of PIWS for a purchase price of $1,820,000.  The purchase price
for the acquired  assets was (i) $700,000  cash,  (ii) a promissory  note in the
original  principal  amount of $300,000 bearing no interest and payable in three
equal  installments  of principal in the amount of $100,000 each, with the first
such  installment due on March 30, 2006, the second such installment due on July
28, 2006,  and the third such  installment  due on November  30,  2006,  (iii) a
promissory note in the original  principal amount of $550,000,  bearing interest
at the annual rate of 8%, and payable in six equal installments of interest only
in the amount of $3,666.66 each due monthly  beginning on December 30, 2005, and
54 monthly  installments  of principal  and interest in the amount of $12,161.83
each  thereafter;  (iv) and 360,000 shares of Common Stock.  The cash portion of
the  purchase  price was funded  from the  proceeds  of a sale of the  Company's
Common Stock in a private  placement to, and a loan to the Company pursuant to a
promissory  note from,  one of its  shareholders,  and loans from two additional
shareholders. The purchase price was determined largely based upon the amount of
revenues PIWS has generated from its regulated  medical waste disposal  business
and  the  value  of the  equipment  acquired.  Pursuant  to the  asset  purchase
agreement  and the  transaction  documents  related  thereto,  PIWS  granted the
Company the exclusive  right to service  customers  located within the States of
Texas and Kansas with PIWS' mobile treatment units, and also granted the Company
certain  rights  of  first  refusal  with  respect  to such  exclusive  right in
additional states.

     Subsequent to the Company's  acquisition of PIWS' assets, it was determined
that PIWS had not complied  with certain terms of the asset  purchase  agreement
(the "PIWS Agreement").  On June 30, 2006, a settlement was reached and executed
between the Company and PIWS relating to such noncompliance. As a result of this
noncompliance  and in  accordance  with  the  terms  of the  PIWS  Agreement,  a
reduction of the total purchase price by $169,000 was agreed to by both parties.
The purchase price  adjustment  reduced the amount  assigned to customer list by
$169,000.



                                       7
<PAGE>


     SteriLogic  Waste Systems,  Inc. On August 16, 2006,  the Company  acquired
SteriLogic  Waste  Systems,  Inc.,  a  Pennsylvania  corporation  ("SteriLogic")
located  in  Syracuse,  New  York.  SteriLogic  is  a  regulated  medical  waste
management  company that  provides  collection,  transportation  and disposal of
regulated  medical  waste  services in addition to  providing a reusable  sharps
container  program to its customers  who are primarily  located in the states of
New York and  Pennsylvania.  SteriLogic also designs,  manufactures  and markets
reusable  sharps  containers to medical  waste  service  providers who provide a
reusable  sharps  container  program  to  their  medical  waste  customers.  The
acquisition   was  effected   pursuant  to  a  Merger   Agreement  and  Plan  of
Reorganization  dated  as of  August  16,  2006,  by and  between  the  Company,
SteriLogic  Acquisition  Subsidiary,  Inc., a Texas corporation and wholly-owned
subsidiary  of the  Company  ("Subsidiary"),  and  SteriLogic,  by the merger of
SteriLogic with and into Subsidiary, with Subsidiary continuing as the surviving
corporation.  At the  effective  time of the  merger,  each share of  SteriLogic
common  stock,  par value $0.01 per share,  issued and  outstanding  immediately
prior to such time and not held by a dissenting  shareholder  was converted into
the right to receive 200 shares of the Company's  common stock, par value $0.001
per share ("Merger  Shares"),  for an aggregate of 1,000,000  Merger Shares.  In
addition,  the  Company  paid  Abele-Kerr  Investments,   LLC  (the  "SteriLogic
Shareholder"),  (i) $50,000 in readily  available  funds, and (ii) a convertible
promissory note in the principal  amount of $250,000 with simple interest at the
annual  rate of 8%  accruing  from the  effective  time and  payable in 12 equal
installments  of  interest  only in the  amount of  $1,666.67  each due  monthly
beginning on the 30th day after the effective time, and 24 equal installments of
principal and interest in the amount of $11,306.82 each due monthly  thereafter.
The noteholder  may convert the unpaid  principal and interest at any time on or
prior to August  16,  2007  into  shares of the  Company's  Common  Stock at the
conversion $1.50 per share (subject to certain anti-dilution  adjustments).  The
merger consideration may be adjusted downward depending upon the amount of sales
or earnings realized by the Company from the customer contracts acquired through
the acquisition of SteriLogic for the twelve months following the closing of the
transaction.  Any such adjustment to the merger  consideration  will be deducted
25% from the principal amount of the $250,000  promissory note, and 75% from the
Merger  Shares,  pro rata against each former holder of SteriLogic  common stock
that received Merger Shares in proportion to the percentage of the Merger Shares
received by each such holder, at the rate of $1.50 per share; provided, that the
Company  may not deduct more than  400,000  Merger  Shares  with  respect to the
adjustment. The cash portion of the merger consideration was funded from working
capital.  The merger  consideration was determined largely based upon the amount
of revenues  SteriLogic has generated from its regulated  medical waste disposal
business and the value of the net assets acquired.

     On January 15, 2007, the former owners of SteriLogic and the Company agreed
by mutual  consent to amend the  original  Merger  Agreement  whereby the former
owners of SteriLogic  agreed to reduce the number of Merger Shares issued by the
Company from 1,000,000 to 700,000 shares and to terminate the conversion feature
of the  $250,000  promissory  note issued by the Company as part of the purchase
price. As a result of these amendments,  the Company recorded a reduction in the
purchase price with regard to the SteriLogic  acquisition by $264,000 reflecting
the  return of the  300,000  shares  issued by the  Company.  The  corresponding
reduction reduced the value assigned to SteriLogic's customer list by $264,000.

Expansion Plans and Acquisition Targets

     We have been  issued a  treatment  permit  by the  Oklahoma  Department  of
Environmental  Quality  ("ODEQ")  for our  transfer  site in Oklahoma  City.  We
sublease a facility and have a first right of refusal on a site in Odessa, Texas
that has been issued a permit by the TCEQ for the treatment of medical waste. We
have also  submitted  applications  to treat  regulated  medical waste in Kansas
City,  Kansas and  Syracuse,  New York.  These  permits  should allow us to more
effectively service the upper New York, Northern Pennsylvania, Oklahoma, Kansas,
Missouri and West Texas markets.  We continue to be in various  discussions with
potential  acquisition  and/or merger  candidates  to densify  and/or expand the
markets we service.

     Evaluation  and  Integration.  We  believe  that  our  management  team can
evaluate  potential  acquisition  candidates and determine  whether a particular
medical  waste  management  business  can be  successfully  integrated  into our
business. In determining whether to proceed with a business acquisition, we will
evaluate a number of factors including:

     o    the financial impact of the proposed acquisition, including the effect
          on our cash flow and earnings per share;

     o    the historical and projected financial results of the target company;

     o    the  purchase  price  negotiated  with  the  seller  and our  expected
          internal rate of return;

     o    the  structure  of the  purchase  with regard to  offering  one or the
          combination of the following: cash, notes and stock;



                                       8
<PAGE>


     o    the composition and size of the target company's customer base and the
          opportunity  value of integrating our service,  ancillary  service and
          regulatory compliance programs into the target company's market;

     o    the efficiencies that we can achieve by integrating the target company
          with our existing operations;

     o    the potential for enhancing or expanding our  geographic  service area
          and allowing us to make other acquisitions in the same service area;

     o    the  experience,  reputation and  personality of the target  company's
          management;

     o    the target company's reputation for customer service and relationships
          with the communities that it serves; and

     o    whether the  acquisition  gives us any strategic  advantages  over our
          competition.

Once a business is  acquired,  we will  implement  programs  designed to improve
customer service, sales,  marketing,  routing,  equipment utilization,  employee
productivity, operating efficiencies and cash flow.

Marketing and Sales

     Marketing  Strategy.  We use both telemarketing and direct sales efforts to
obtain new  customers.  In addition,  we have a large  database of potential new
large and small  quantity  generators,  which we believe  gives us a competitive
advantage in identifying and reaching these higher-margin  accounts. Our drivers
participate  in our  marketing and sales  efforts by actively  soliciting  small
quantity generators while they service their routes.

     Small Quantity Generators ("SQG"). We have targeted SQG's as a growth area.
We believe that these  customers offer high profit  potential  compared to other
potential  customers.  Typical small quantity generators are individual or small
groups of  doctors,  dentists  and other  healthcare  providers  who are  widely
dispersed and generate only small amounts of medical waste.  These customers are
very  concerned  about  having the medical  waste  picked up and  disposed of in
compliance with applicable state and federal regulations.  We believe that these
customers view the potential risks of  non-compliance  with applicable state and
federal  medical  waste  regulations  as  disproportionate  to the  cost  of the
services that we provide. We believe that this factor has been the basis for the
significantly  higher  gross  margins  that we have  achieved  with our SQG's as
opposed  to our  LQG's.  In  addition,  our  EnviroSafe  program  offers a total
compliance  solution that  combines  medical  waste  management,  OSHA and HIPPA
compliance  and  training in one simple  program.  EnviroSafe  guarantees  small
account  customers who abide by its training,  counsel and advice that they will
have protection from regulatory compliance issues.

     Medium Quantity Generators ("MQG").  The medium quantity generators segment
of our  business  currently  provides us with the  opportunity  for  substantial
growth and better profit margins than LQG's. These customers are typically blood
banks,  dialysis  centers,  surgery  centers  and other  high  volume  specialty
facilities.

     Large Quantity  Generators ("LQG"). We believe that we have been successful
in servicing LQG's and plan to continue to serve those customers as long as they
establish route anchors that open the door for  opportunities  for our ancillary
services and/or maintain  satisfactory levels of profitability.  In addition, we
believe  that the  implementation  of more  stringent  Clean  Air Act and  other
federal regulations  directly and indirectly affecting medical waste will enable
us to improve our marketing  efforts to large  quantity  generators  because the
additional costs that they will incur to comply with these regulations will make
the costs of our services more attractive, particularly relative to their use of
their own  incinerators.  Our  marketing  and sales  efforts  to large  quantity
generators are conducted by full-time account executives whose  responsibilities
include  identifying  and  attracting  new  customers  and serving our  existing
account  base  of  large  quantity  generators.  In  addition  to  securing  new
contracts,  our marketing and sales personnel provide consulting services to our
healthcare  customers,  assisting  them in reducing the amount of medical  waste
that they generate,  training their employees on safety issues and  implementing
programs to audit, classify and segregate medical waste in a proper manner.

     Contract  and  Service   Agreements.   We  have  long-term  contracts  with
substantially all of our customers.  We negotiate  individual service agreements
with each  large  quantity  and small  quantity  generator.  Although  we have a
standard form of agreement,  particularly for small quantity  generators,  terms
may vary depending upon the customer's  service  requirements  and the volume of
medical waste  generated  and, in some  jurisdictions,  requirements  imposed by
statute or regulation.  Service agreements typically include provisions relating
to the types of  containers,  frequency of  collection,  pricing,  treatment and
documentation  for  tracking   purposes.   Each  agreement  also  specifies  the
customer's  obligation  to  pack  its  medical  waste  in  approved  containers.
Substantially all of our agreements with customers contain automatic renewal and



                                       9
<PAGE>

price increase provisions.

     Service  agreements  are  generally  for a  period  of one to  five  years,
although  customers  may  terminate on written  notice and, in most cases,  upon
payment  of a  penalty.  We may set our  prices  on the  basis of the  number of
containers that we collect,  the weight of the medical waste that we collect and
treat, the number of collection stops that we make on the customer's  route, the
number of collection  stops that we make for a particular  multi-site  customer,
and other factors.

     Competition. There are several regulated medical waste management companies
operating in our service areas and the  surrounding  regions,  and the market is
highly  competitive.   Our  primary  competitor  is  a  large,  publicly  traded
corporation with regional and national  businesses.  This competitor  provides a
variety  of  services  other  than  collection,  transportation,  treatment  and
disposal. As such, this competitor has a larger scope of business  opportunities
and substantially greater financial resources than we possess.

     According  to public  filings,  Stericycle  is the  largest  medical  waste
management  company in the United  States.  Stericycle  initially  developed and
utilized  a  proprietary  electro-thermal  deactivation  ("ETD")  process  in  a
national strategy.  However,  Stericycle,  like us, primarily utilizes autoclave
technologies  to process a majority of its waste  stream and to a lesser  degree
incineration technologies.

     Based  on  our  experience  in  the  industry,   we  believe  that  we  can
successfully  compete with Stericycle and other competitors by concentrating our
operations in the Southern and Northeastern portions of the U.S. We believe that
we gain a competitive  advantage by offering  better  customer  service than our
competitors,  attractive  ancillary services and regulatory  compliance programs
and, if necessary, the ability to reduce the price of waste disposal services to
customers  to an amount  below that of our  competitors.  We believe this can be
accomplished as a result of having our facilities in closer geographic proximity
to the generators of medical waste, our cost reduction  efforts,  our ability to
offer  ancillary  services  and programs  and the  expansion  of our  operations
through acquisitions.

     In  addition,  we face  potential  competition  from  businesses  that  are
attempting  to  commercialize   alternate  treatment  technologies  or  products
designed  to reduce or  eliminate  the  generation  of  medical  waste,  such as
reusable or degradable medical products.

     We   compete   for   service   agreements   primarily   on  the   basis  of
cost-effectiveness,  quality of service and geographic location. We also attempt
to compete by demonstrating to customers that we can do a better job in reducing
their potential  liability.  Our ability to obtain new service agreements may be
limited  by the fact that a  potential  customer's  current  vendor  may have an
excellent service history or a long-term service contract or may offer prices to
the potential customer that are lower than ours.

Competitive Strengths

We believe that we benefit from the following competitive strengths:

     Broad Range of Services.  We offer our  customers a broad range of services
to help them develop internal systems and processes,  which allow them to manage
their medical waste,  sharps  containers  and PHI  destruction  efficiently  and
safely from the point of generation through treatment and disposal. We have also
developed regulatory  compliance programs to help train our customers' employees
on the proper  methods of handling  medical  waste in order to reduce  potential
employee exposure.  Other regulatory  compliance programs such as our EnviroSafe
Program  include those designed to help clients  ensure and maintain  compliance
with OSHA, HIPAA and other relevant regulations.

     Strong Sales Network and Proprietary  Database.  We use both  telemarketing
and direct sales efforts to obtain new customers.  In addition,  we have a large
database of potential new small and large quantity generators,  which we believe
gives us a competitive advantage in identifying and reaching these higher-margin
and route anchor accounts.

     Experienced Senior Management Team. Our senior executives collectively have
over 50 years of management  experience in the waste  management  and healthcare
industries.

Governmental Regulation

     We are subject to extensive  and  frequently  changing  federal,  state and
local laws and  regulations.  This  statutory and regulatory  framework  imposes
compliance  burdens  and  risks on us,  including  requirements  to  obtain  and
maintain government permits.  These permits grant us the authority,  among other
things:



                                       10
<PAGE>

     o    to construct and operate treatment and transfer facilities;

     o    to transport medical waste within and between relevant  jurisdictions;
          and

     o    to handle particular regulated substances.

Our permits  must be  periodically  renewed and are subject to  modification  or
revocation by the  regulatory  authorities.  We are also subject to  regulations
that  govern  the  definition,  generation,  segregation,  handling,  packaging,
transportation,  treatment,  storage and disposal of medical waste.  We are also
subject to  extensive  regulations  designed  to minimize  employee  exposure to
medical waste.

     Federal  Regulation.  There are at least four  federal  agencies  that have
authority over medical waste.  These agencies are the EPA, OSHA, the DOT and the
U.S. Postal Service.  These agencies  regulate  medical waste under a variety of
statutes and regulations.

     Medical Waste  Tracking Act of 1988. In the late 1980s,  the EPA outlined a
two-year demonstration program pursuant to MWTA, which was added to the Resource
Conservation  and  Recovery  Act of 1976.  The MWTA was  adopted in  response to
health and  environmental  concerns over infectious  medical waste after medical
waste washed ashore on beaches,  particularly in New York and New Jersey, during
the summer of 1988.  Public  safety  concerns  grew  following  media reports of
careless management of medical waste. The MWTA was intended to be the first step
in addressing  these problems.  The primary  objective of the MWTA was to ensure
that  medical  wastes which were  generated  in a covered  state and which posed
environmental  problems,  including an unsightly  appearance,  were delivered to
disposal or  treatment  facilities  with  minimum  exposure to waste  management
workers and the public. The MWTA's tracking requirements included accounting for
all waste transported and imposed civil and criminal sanctions for violations.

     In regulations  implementing  the MWTA,  the EPA defined  medical waste and
established guidelines for its segregation,  handling, containment, labeling and
transport.  The  MWTA  demonstration  program  expired  in  1991,  but the  MWTA
established a model followed by many states in developing their specific medical
waste regulatory frameworks.

     Occupational  Safety and Health Act of 1970.  The  Occupational  Safety and
Health  Act of 1970  authorizes  OSHA to issue  occupational  safety  and health
standards.  OSHA  regulations are designed to minimize the exposure of employees
to hazardous work  environments.  Various  standards apply to certain aspects of
our operations. These regulations govern, among other things:

     o    exposure to blood borne  pathogens  and other  potentially  infectious
          materials;

     o    lock out/tag out procedures;

     o    medical surveillance requirements;

     o    use of respirators and personal protective equipment;

     o    emergency planning;

     o    hazard communication;

     o    noise;

     o    ergonomics; and

     o    forklift safety.

Our  employees  are  required  by our policy to receive new  employee  training,
annual  refresher  training and training in their specific tasks. As part of our
medical  surveillance  program,   employees  receive  pre-employment  physicals,
including  drug  testing,   annually  required  medical  surveillance  and  exit
physicals.  We also subscribe to a drug-free  workplace policy. In addition,  we
are subject to unannounced OSHA Safety inspections at any time.

     Resource  Conservation  and Recovery Act of 1976. In 1976,  Congress passed
the Resource  Conservation  and Recovery Act of 1976,  or RCRA, as a response to
growing public concern about problems  associated with the handling and disposal



                                       11
<PAGE>

of solid and hazardous  waste.  RCRA required the EPA to promulgate  regulations
identifying  hazardous  wastes.  RCRA also created standards for the generation,
transportation,  treatment,  storage and disposal of solid and hazardous wastes.
These  standards  included a  documentation  program for the  transportation  of
hazardous  wastes and a permit  system for solid and  hazardous  waste  disposal
facilities.  Medical wastes are currently considered  non-hazardous solid wastes
under RCRA. However, some substances collected by us from some of our customers,
including photographic fixer developer solutions, lead foils and dental amalgam,
are considered hazardous wastes.

     We use  landfills  operated by parties  unrelated to us for the disposal of
incinerator ash, autoclaved and chemically treated waste.

     Waste is not regulated as hazardous under RCRA unless it contains hazardous
substances exceeding certain quantities or concentration levels, meets specified
descriptions,   or  exhibits  specific  hazardous   characteristics.   Following
autoclave  treatment,  waste  is  disposed  of  as  non-hazardous  waste.  After
incineration  treatment,  we test ash from the incineration process to determine
whether it must be disposed of as hazardous waste.

     We employ  quality  control  measures to check  incoming  medical waste for
specific types of hazardous substances. Our customer agreements also require our
customers to exclude  different  kinds of hazardous  substances  or  radioactive
materials from the medical waste they provide us.

     DOT  Regulations.  The  DOT has  put  regulations  into  effect  under  the
Hazardous Materials Transportation Authorization Act of 1994 which require us to
package and label medical waste in compliance  with  designated  standards,  and
which  incorporate  blood borne pathogens  standards issued by OSHA. Under these
standards,   we  must,  among  other  things,  identify  our  packaging  with  a
"biohazard" marking on the outer packaging, and our medical waste container must
be  sufficiently  rigid and strong to prevent  tearing or  bursting  and must be
puncture-resistant, leak-resistant, properly sealed and impervious to moisture.

     DOT regulations also require that a transporter be capable of responding on
a  24-hour-a-day  basis in the event of an  accident,  spill,  or release to the
environment of a hazardous  material.  We have entered into an agreement with an
organization  that provides  24-hour  emergency  spill  response to provide this
service.

     Our  drivers are  trained on topics  such as safety,  hazardous  materials,
medical  waste,  hazardous  chemicals and infectious  substances.  Employees are
trained to deal with emergency spills and releases of hazardous  materials,  and
we have a written  contingency plan for these events. Our vehicles are outfitted
with spill control equipment and the drivers are trained in its use.

     Comprehensive  Environmental  Response,  Compensation  and Liability Act of
1980. The Comprehensive  Environmental Response,  Compensation and Liability Act
of 1980, or CERCLA, established a regulatory and remedial program to provide for
the  investigation  and cleanup of facilities  that have released or threaten to
release hazardous substances into the environment. CERCLA and state laws similar
to it may impose strict,  joint and several  liability on the current and former
owners and operators of facilities  from which releases of hazardous  substances
have occurred and on the generators and transporters of the hazardous substances
that come to be located at these facilities.  Responsible  parties may be liable
for  substantial  site  investigation  and cleanup  costs and  natural  resource
damages,  regardless  of  whether  they  exercised  due care and  complied  with
applicable laws and regulations.  If we were found to be a responsible party for
a  particular  site,  we could be  required  to pay the entire  cost of the site
investigation  and cleanup,  even though other parties also may be liable.  This
result  would  be the  case if we were  unable  to  identify  other  responsible
parties,  or if those parties were financially unable to contribute money to the
cleanup.

State and Local  Regulation.  We currently conduct all of our business in Texas,
Oklahoma,  Louisiana,  Arkansas, Kansas, Missouri, New York and Pennsylvania. At
some point in the future, we may conduct business in other states.  Other states
have different  regulations regarding medical waste, medical waste transport and
medical  waste  incineration.  If at any time, we expand our business into other
states, we believe,  because of the stringent standards applicable in the states
we currently  operate,  that the costs of bringing our business into  compliance
with the regulations of other states will be minimal.

Regulated  Medical Waste.  The Texas  Department of Health retains  authority to
define  what waste will be  regulated  and how it may be treated.  These  rules,
which  were  updated  in  December   1994,  can  be  found  in  Title  25  Texas
Administrative  Code  ("TAC")  Sections  1.131-1.137.  Under Texas law, the term
"special  waste  from  health-care  facilities"  ("SWFHCRF")  is used to  define
medical waste  regulated by state  agencies.  Only five  categories of waste are
regulated:

     o    animal waste from animals intentionally exposed to pathogens;



                                       12
<PAGE>


     o    bulk human blood and blood products;

     o    pathological waste;

     o    microbiological waste; and

     o    sharps.

The  criteria  for  selection  of  these  categories  were  based  primarily  on
environmental  concerns rather than occupational  concerns. A chain of events is
necessary to produce disease from contact with medical waste. The items selected
for regulation were deemed to have the highest potential for disease  production
provided all of the required  events took place.  Sharps,  due to their inherent
ability to provide a portal of entry,  must be managed  properly  regardless  of
their contamination status.

Transportation   of  Regulated   Medical   Waste.   Subchapter  Y,  30  TAC  ss.
330.1001-1010   defines   rules  for   medical   waste   management,   disposal,
transportation,  collection  and  storage.  These rules were updated in December
2006. The  responsibility  for these  regulations rests with the Office of Waste
Management of the TCEQ.  Under  Subchapter  Y, the TCEQ  regulates and registers
transporters  of  medical  waste by,  among  other  things,  requiring  specific
documentation of transportation of all medical waste. Currently,  the Company is
a registered  medical waste  transporter.  The registration is subject to annual
renewal, and though we believe, based on our experience in the industry, that we
are in compliance  with all of the statutory  guidelines,  there is no guarantee
that the TCEQ will  continually  grant renewal  registration  to us. We are also
registered as a medical waste transporter in the states of Louisiana,  Oklahoma,
Kansas Missouri, Arkansas, New York and Pennsylvania.

Treatment of Regulated  Medical Waste.  Approved methods of treatment of SWFHCRF
can be found in Title 25 TAC Section  1.133.  There are  currently  six approved
treatment methods:

     o    steam disinfection;

     o    chlorine disinfection/maceration;

     o    chemical disinfection;

     o    moist disinfection;

     o    thermal inactivation; and

     o    incineration.

We employ the steam disinfection  (i.e.  autoclave),  chemical  disinfection and
incineration  methods for the treating of medical waste. We have been successful
in obtaining  permits for our current  medical  waste  transfer,  treatment  and
processing  facilities  and for our  transportation  operations.  Currently,  we
operate two autoclaves at our Garland facility.

     We are responsible for complying with the maintenance  obligations pursuant
to  numerous  governmental  permits and  licenses  owned by us or under which we
conduct  our  business.  We are also  responsible  for  complying  with  permits
maintained by others. These permits include:

     o    transport  permits  for  solid  waste,  medical  waste  and  hazardous
          substances;

     o    permits to construct and operate treatment facilities;

     o    permits to construct and operate transfer stations;

     o    permits  governing  discharge of sanitary  water and  registration  of
          equipment under air regulations;

     o    approvals for the use of ETD and other  technologies  to treat medical
          waste; and

     o    various business operator's licenses.

     We believe that we are  currently in  compliance  in all material  respects
with our permits and applicable laws and regulations.  If we expand our services
to other states,  we will have to comply with such state's  specific  permitting



                                       13
<PAGE>

process to obtain the necessary permits to operate in such state, including, but
not  limited  to  obtaining  zoning  approval  and  local  and  state  operating
authority. Most communities rely on state authorities to provide operating rules
and safeguards for their community.  Usually the state provides public notice of
the project and, if enough  public  interest is shown,  a public  hearing may be
held. If we are successful in meeting all regulatory requirements, the state may
issue a permit to construct the new treatment facility or transfer station. Once
the  facility is  constructed,  the state may again issue  public  notice of its
intent to issue an operating  permit and may provide an  opportunity  for public
opposition  or other  action that may impede our ability to construct or operate
the  planned  facility.  Permitting  for  transportation  operations  frequently
involves  registration  of vehicles,  inspection  of equipment,  and  background
investigations on our officers and directors.

Patents and Proprietary Rights

     We rely on unpatented and unregistered trade secrets,  proprietary know-how
and continuing technological innovation. We try to protect this information,  in
part, by confidentiality agreements with our employees, vendors and consultants.
There can be no assurance that these  agreements  will not be breached,  that we
would  have  adequate  remedies  for any  breach  or that our trade  secrets  or
know-how will not otherwise  become known or  independently  discovered by other
parties.

     Our commercial success may also depend on our not infringing patents issued
to other  parties.  There can be no assurance  that  patents  belonging to other
parties will not require us to alter our processes,  pay licensing fees or cease
using any current or future  processes.  In addition,  there can be no assurance
that we would be able to license the technology  rights that we may require at a
reasonable  cost or at all.  If we could not obtain a license to any  infringing
technology that we currently use, it could have a material adverse effect on our
business.

Potential Liability and Insurance

     The  medical  waste  industry  involves  potentially  significant  risks of
statutory,   contractual,  tort  and  common  law  liability  claims.  Potential
liability claims could involve, for example:

     o    cleanup costs;

     o    personal injury;

     o    damage to the environment;

     o    employee matters;

     o    property damage; or

     o    alleged negligence or professional errors or omissions in the planning
          or performance of work.

We could also be subject to fines or penalties in connection  with violations of
regulatory requirements.

     We carry $10 million of liability insurance  (including umbrella coverage),
and $5 million of aggregate  pollution and legal liability insurance ($1 million
per  incident),  which we consider  sufficient to meet  regulatory  and customer
requirements and to protect our employees,  assets and operations. Our pollution
liability insurance excludes liabilities under CERCLA. There can be no assurance
that we will not face claims  under  CERCLA or similar  state laws  resulting in
substantial liability for which we are uninsured and which could have a material
adverse effect on our business.

Employees

     As of February  21, 2007,  the Company,  primarily  through  EMSI,  had 135
employees.  Five of the  employees  are  employed in executive  capacities;  the
remaining employees are in transportation and plant operations,  sales positions
and administrative and clerical capacities.  None of the Company's employees are
subject to collective bargaining agreements.



                                       14
<PAGE>

Item 2. Description of Property

     We lease approximately 6,800 square feet of administrative  office space at
12750 Merit Drive-Park  Central VII, Suite 770,  Dallas,  Texas 75251. The lease
expires May 31, 2012, and the monthly rent ranges from $8,100 to $10,000 through
2012.

     We own the Garland Facility, which consists of real property,  building and
improvements,  furniture and equipment.  The Garland  Facility  includes  17,450
square feet of space (2,450  square feet of office space and 15,000  square feet
of warehouse  space),  and is located on approximately  three acres of land. The
building is approximately 30 years old, and was extensively remodeled in 1996 at
a cost of more  than  $500,000  to  upgrade  the  facility  to  accommodate  the
EnviroClean(R)  System and to showcase  its  operation  for sales and  marketing
purposes.  The EnviroClean(R) System was removed during 2004 in order to use the
space in the Garland Facility more efficiently for our autoclave process.  Prior
to the  installation  of the  autoclave in 2002,  the Garland  Facility was used
solely as a  transfer  station.  Our bank debt is secured by a first lien on the
Garland Facility which is personally guaranteed by our President/Chief Executive
Officer,  and two loans from  stockholders  of the Company are secured by second
liens on the Garland Facility. The net carrying value of the Garland facility is
approximately $263,000.

     We own the Houston facility, which consists of real property,  building and
improvements,   furniture  and   equipment.   The  Houston   facility   includes
approximately 7,500 square feet of administrative  office and warehouse space in
Houston, Texas. The Company,  through its subsidiary EMSI, purchased the Houston
facility on August 3, 2005.  The  facility was  previously  being leased and was
contiguous to vacant land that was already owned by EMSI and was being used as a
transfer station.  The total purchase price,  including  transaction  costs, was
approximately  $350,000  and is financed by a  promissory  note to a bank in the
amount of $325,000,  payable in 60 monthly  installments  of $3,656 based upon a
straight line amortization of 240 payments and accrues interest per annum at the
prime rate as  published  in the Wall Street  Journal from time to time plus 2%.
The  promissory  note has a maturity  date of August 3, 2010 and is secured by a
first lien deed of trust on the building and the adjacent  land already owned by
EMSI.  The  promissory  note is  personally  guaranteed  by our  President/Chief
Executive Officer.

     On August 9, 2006,  the  Company,  through  its  subsidiary  EMSI,  secured
additional financing from a bank to expand its Houston facility. The facility is
currently being used as a transfer facility for the South Texas operations.  The
expansion  will  allow  EMSI to treat  medical  waste at the  facility  once the
permitting  process is  completed  from the state of Texas.  The total  costs of
expansion  will be  approximately  $275,000  with $200,000 of those funds coming
from bank financing and the remainder from working capital.  The promissory note
to the bank is payable  in 60 monthly  installments  of $822 in  principal  plus
interest accruing at the Prime Rate as published in the Wall Street Journal from
time to time plus 1%,  with the  balance of the  principal  and all  accrued and
unpaid  interest  due upon  maturity of the loan on July 19,  2011.  The note is
secured by a second lien on the Houston facility and is personally guaranteed by
both our President/Chief  Executive Officer and our Chairman of the Board. As of
December 31, 2006, the Company has drawn $55,634 against the promissory note and
the  funds  were  used for the  commencement  phase  of  expansion.  The  amount
outstanding  at December 31, 2006 is $52,347 and the net  carrying  value of our
Houston facility is approximately $370,000.

     In the opinion of our management,  our properties are adequately covered by
insurance.

Item 3. Legal Proceedings

     We operate in a highly  regulated  industry  and are exposed to  regulatory
inquiries  or  investigations  from  time to time.  Government  authorities  can
initiate  investigations  for a variety of  reasons.  We have been  involved  in
certain legal and administrative proceedings that have been settled or otherwise
resolved on terms  acceptable to us, without having a material adverse effect on
our business.

     The Company,  EMSI and one of the Company's  employees have been named in a
civil action filed in the Dallas County Court, Dallas County,  Texas as a result
of a traffic accident  involving one of EMSI's trucks.  The complaint,  Case No.
cc-05-04255-E,  was filed on April 8, 2005 and is a civil action titled Kathleen
Bohne and David Ross,  Independent  Executor of the Estate of Robert E. Bohne v.
MedSolutions,  Inc.,  EnviroClean  Management  Services,  Inc.  and Turner Bruce
Yarbrough.  The complaint  seeks damages from the Company for losses suffered by
the  plaintiffs  as  a  result  of  an  accidental  death.  The  Company  denies
responsibility  for the  claims  alleged  by the  plaintiffs  and is  vigorously
defending the action through its insurance  carrier.  The Company  believes that
this lawsuit is adequately covered by insurance; however, to the extent that the
amount of any award  exceeds  the  Company's  insurance  coverage,  such  excess
amounts  could have a material  impact on the Company's  financial  condition or
results of operations.  The  plaintiffs are litigating for damages,  which could
exceed $4.4 million plus punitive  damages.  The Company maintains $6 million of
insurance  coverage  to cover  potential  claims.  If the suit is settled for an
amount exceeding $6 million the Company will be responsible for this excess.


                                       15
<PAGE>



     We are also a party to various  legal  proceedings  arising in the ordinary
course  of  business.  However,except  as  described  above,  there are no legal
proceedings  pending  or, to our  knowledge,  threatened  against  us that could
adversely  affect  our  financial  condition  or our  ability  to  carry  on the
business.

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

     At our  annual  meeting  of  shareholders  held on October  19,  2006,  the
following items were voted on by the shareholders of the Company:

1.   To approve the Election of Directors:

                                  Votes For             Votes Withheld
                                 ------------         -------------------
Steven R. Block                   15,626,102               33,745
Ajit S. Brar                      15,628,602               31,245
Matthew H. Fleeger                15,640,677               19,170
David Mack                        15,628,602               31,245
Winship B. Moody, Sr.             15,626,102               33,745

2.   To ratify  the  appointment  of  Marcum &  Kliegman,  LLP as the  Company's
     independent public accountants for 2006:

            Votes For             Votes Against          Abstentions
           ------------         -----------------      ---------------
            15,642,672               17,175                  0


3.   The approval of the amendment to the Company's  2002 Stock Plan  increasing
     the number of shares  authorized  for issuance under such plan from 850,000
     to 3,000,000:

            Votes For             Votes Against          Abstentions
           ------------         -----------------      ---------------
            13,567,255             1,974,292              118,297




















                                       16
<PAGE>

                                     PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities

     There is currently no public trading market for our Common Stock.

     At March 31, 2007, we had 25,983,869 shares of Common Stock outstanding and
had approximately 750 stockholders of record.

     We have no fixed  dividend  policy with  respect to our Common  Stock.  The
Board of Directors  is  authorized  to consider  dividend  distributions  on the
Common Stock from time to time,  upon its  assessment of our operating  results,
capital  requirements and general financial condition and requirements.  We have
not paid a dividend  on the Common  Stock since our  inception.  Pursuant to the
Investment  Agreement (the "Investment  Agreement")  entered into by the Company
and Tate  Investments,  LLC (the  "Investor")  on July 15, 2005,  the Company is
prohibited from paying any dividends or making any  distributions  in cash or in
kind on shares of its Common  Stock  until the later of the date the Company has
satisfied all of its  obligations  under that certain  promissory note issued by
the  Company in  connection  therewith  or all of the  Common  Stock hold by the
Investor is registered  with the SEC. The  outstanding  principal  amount of the
convertible debt issued by the Company pursuant to the Investment  Agreement was
subsequently  converted by the Investor into shares of Common Stock on March 30,
2007,  and the  Company has no further  obligations  to the  Investor  under the
promissory note issued in connection with the Investment Agreement.

     Our Series A 10% Convertible Preferred Stock, par value $0.001 (the "Series
A  Preferred  Stock"),  ranks  senior to the Common  Stock  with  respect to the
payment of  dividends,  redemption,  and payment  and rights  upon  liquidation,
dissolution  or winding-up of the affairs of the Company.  At March 31, 2007, we
had 0 shares of  Series A  Preferred  Stock  outstanding.  All of the  Company's
previously  issued  and  outstanding  shares of Series A  Preferred  Stock  were
converted into shares of the Company's Common Stock on a one-for-one basis on or
prior to March 31, 2007.

Recent Sales of Unregistered Securities

     During the twelve  months ended  December 31, 2006,  the Company (i) issued
429,500 shares of its Common Stock for a total  consideration of $809,000,  less
$106,132 in transaction  costs, at prices ranging from $1.00 to $2.00 per share,
(ii) issued  1,000,000  shares of Common Stock in connection with the closing of
the SteriLogic acquisition, and (iii) cancelled the issuance of 52,000 shares of
Common Stock as part of the PIWS settlement.

     All transactions described above were deemed to be exempt from registration
under the Securities Act of 1933, as amended (the "Securities  Act") in reliance
on  Section  4(2)  of  the  Securities  Act  and/or  Rule  506 of  Regulation  D
promulgated  under the Securities Act. The recipients of securities in each such
transaction   represented   their  intentions  to  acquire  the  securities  for
investment  only  and not  with a view to or for  sale in  connection  with  any
distribution   thereof  and  appropriate  legends  were  affixed  to  the  share
certificates  issued in such  transactions.  All recipients had adequate access,
through their relationships with us, to information about us.

     In 2001,  we filed a  Registration  Statement  on Form 10-SB on a voluntary
basis with the SEC, which  registration  statement became effective on September
14, 2001. Although we were not required to register under the applicable federal
securities  laws,  we believed that  commencing  voluntary  reporting  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act"), would enhance
our ability to access the capital markets. We also were hopeful that one or more
market  makers would  provide the basis for our Common  Stock to attain  trading
status and allow for a public  market in our Common  Stock.  We believe that the
establishment  of a public market for our shares will allow us to be in a better
position to obtain future financing and also provide increased  liquidity to our
stockholders.  While we have had  preliminary  discussions  with  broker-dealers
concerning  a  range  of  financial  advisory  services,   we  do  not  have  an
understanding  with, or a commitment  from,  anyone to act as a market maker for
our  securities,  and there can be no assurance that we will find a market maker
for our securities, or otherwise establish a public market for our Common Stock.

     We  are  currently   considering  one  or  more   extraordinary   corporate
transactions  that  could  occur  during  the  second or third  quarter of 2007,
including without limitation a going-private transaction, the acquisition of the
Company  by way  of  merger,  or the  sale  of all or  substantially  all of the
Company's assets.



                                       17
<PAGE>


Item 6. Management's Discussion and Analysis or Plan of Operation.

     The  following  discussion  of  the  financial  condition  and  results  of
operations  of the  Company  should be read in  conjunction  with the  Company's
Consolidated Financial Statements and related footnotes.

Background

     We were  incorporated in November 1993. We provide regulated medical waste,
reusable  sharps  containers and PHI  collection,  transportation  and treatment
services to our  customers  and related  training  and  education  programs  and
consulting services.

     Our revenues  increased to $12,799,132 in 2006 from  $9,415,558 in 2005. We
derive our revenues from services to three  principal  groups of customers:  (i)
outpatient clinics, medical and dental offices, biomedical companies,  municipal
entities,  long-term and sub-acute care  facilities  and other  smaller-quantity
generators  of  regulated  medical  waste  ("SQG"),  (ii) blood  banks,  surgery
centers,  dialysis  centers and other medium  quantity  generators  of regulated
medical  waste  ("MQG") and (iii)  hospitals,  diagnostic  facilities  and other
larger-quantity generators of regulated medical waste ("LQG"). Substantially all
of our services are provided  pursuant to customer  contracts  specifying either
scheduled or on-call  regulated  medical  waste  management  services,  or both.
Contracts  with small  quantity  generators  generally  provide for annual price
increases and have an automatic  renewal  provision unless the customer notifies
us  prior  to  completion  of  the  contract.  Contracts  with  medium  quantity
generators and large quantity generators,  which may run for more than one year,
typically  include price escalator  provisions,  which allow for price increases
generally tied to an inflation  index or implemented at a fixed  percentage.  At
December 31, 2006, we served approximately 10,000 customers.

Critical Accounting Policies and Procedures

     Our  discussion  and  analysis of our  financial  condition  and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States.  The preparation of these financial  statements  requires that we
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities,  revenues and  expenses,  and the related  disclosure of contingent
assets and liabilities (see Note 3 to the consolidated financial statements). We
believe  that  of  our  significant  accounting  policies  (see  Note  3 to  the
consolidated financial statements), the following may involve a higher degree of
judgment on our part and complexity of reporting:

     Accounts  Receivable.  Accounts receivable consist primarily of amounts due
to us from our normal business activities. We maintain an allowance for doubtful
accounts which reflects  management's  best estimate of probable losses inherent
in the account receivable balance.  Management determines the allowance based on
known troubled accounts,  historical  experience,  and other currently available
evidence.  With respect to trade  receivables,  ongoing  credit  evaluations  of
customers'  financial  condition are performed and  generally,  no collateral is
required.  The Company  maintains a reserve for potential credit losses and such
losses, in the aggregate, have not exceeded management's expectations.

     Revenue  Recognition  and Processing  Costs.  We recognize  revenue for our
medical  waste  services at the time the  medical  waste is  collected  from our
customers.  Revenue is only recognized for arrangements  with customers in which
(1),  there is persuasive  evidence of a contract or agreement  which sets forth
the terms of the arrangement;  (2), services have been rendered; (3), our prices
are fixed,  determinable and agreed upon; and, (4), collectibility is reasonably
assured.

     Goodwill and Intangible  Assets.  To determine the adequacy of the carrying
amounts on an ongoing basis, the Company performs its annual  impairment test at
the end of the year each December 31, unless  triggering events indicate that an
event has  occurred  which would  require the test to be performed  sooner.  The
Company  monitors the  performance of its  intangibles by analyzing the expected
future  cash flows  generated  from such  related  intangibles  to ensure  their
continued performance. If necessary, the Company may hire an outside independent
consultant to appraise the fair value of such assets.

     Convertible  Notes and  Convertible  Preferred.  The Company  accounts  for
conversion options embedded in convertible notes and convertible preferred stock
in accordance with Statement of Financial  Accounting  Standard  ("SFAS) No. 133
"Accounting for Derivative  Instruments and Hedging Activities" ("SFAS 133") and
EITF 00-19  "Accounting  for Derivative  Financial  Instruments  Indexed to, and
Potentially  Settled  in,  a  Company's  Own  Stock"  ("EITF  00-19").  SFAS 133



                                       18
<PAGE>

generally  requires  Companies  to  bifurcate  conversion  options  embedded  in
convertible  notes and  preferred  shares  from  their host  instruments  and to
account for them as free standing derivative financial instruments in accordance
with  EITF  00-19.  SFAS  133  provides  for an  exception  to  this  rule  when
convertible  notes  and  mandatorily   redeemable   preferred  shares,  as  host
instruments,  are deemed to be  conventional  as that term is  described  in the
implementation  guidance  provided in paragraph 61 (k) of Appendix A to SFAS 133
and further  clarified  in EITF 05-2 "The Meaning of  "Conventional  Convertible
Debt  Instrument"  in Issue  No.  00-19.  SFAS 133  provides  for an  additional
exception  to this  rule  when the  economic  characteristics  and  risks of the
embedded  derivative  instrument are clearly and closely related to the economic
characteristics and risks of the host instrument.

     The Company  accounts  for  convertible  notes  (deemed  conventional)  and
non-conventional  convertible debt  instruments  classified as equity under EITF
00-19  "Accounting  for  Derivative   Financial   Instruments  Indexed  to,  and
Potentially  Settled in, a Company's Own Stock" ("EITF 00-19") and in accordance
with  the  provisions  of  Emerging   Issues  Task  Force  Issue  ("EITF")  98-5
"Accounting for Convertible  Securities  with Beneficial  Conversion  Features,"
("EITF  98-5"),  EITF 00-27  "Application  of EITF 98-5 to  Certain  Convertible
Instruments."  Accordingly,  the Company  records,  as a discount to convertible
notes, the intrinsic value of such conversion options based upon the differences
between the fair value of the underlying  common stock at the commitment date of
the note  transaction and the effective  conversion  price embedded in the note.
Debt  discounts  under these  arrangements  are  amortized  over the term of the
related debt to their earliest date of redemption.

Results of Operations - Year 2006 Compared to 2005.

     Revenues. Our revenues increased $3,383,574 or 35.9%, to $12,799,132 during
the year ended December 31, 2006, from $9,415,558 during the year ended December
31, 2005. The increase in revenue from 2005 was mostly attributable to the three
acquisitions  in 2005 and the SteriLogic  acquisition in 2006 which  contributed
approximately  $2,600,000  of the  2006  revenue  increase.  Other  contributing
factors that caused the revenue  increase in 2006 were an annual price  increase
in  January  2006 to the  majority  of our SQG  customers  and a fuel  surcharge
increase in March 2006.  All price  increases  and fee charges are  provided for
under our customer  contracts.  The  increases in revenues for the twelve months
ended December 31, 2006 were  partially  offset by a loss of revenue from an LQG
customer in our South Texas market and from the loss of our operating  agreement
with UTMB as discussed in Note 12.

     Cost of revenues.  Our cost of revenues  increased  $2,244,707 or 39.5%, to
$7,925,086  during 2006, from  $5,680,379 in 2005.  Gross margin for the Company
decreased to 38.1% in 2006 from 39.7% in 2005.  The increase in cost of revenues
was caused by increases  in container  costs  resulting  from higher  prices for
paper products, fuel and other transportation costs relating to additions to our
transportation fleet as our markets and customer base expand. As a result of the
PIWS  acquisition on November 30, 2005, the Company  entered new markets located
in West Texas,  Kansas and  Missouri and incurred  costs  associated  with added
personnel,  facilities,  transportation,  and  treatment  costs in each of those
markets. Other costs associated with the increase are attributable to repair and
maintenance  costs of operating our mobile  treatment units acquired in the PIWS
acquisition.

     Selling,  general and  administrative  expenses.  Our selling,  general and
administrative  expenses  increased  $1,380,029,  or 56.3%, to $3,829,489 during
2006, from $2,449,460 in 2005. The increase was caused by costs  associated with
an increased  sales force  including  our new markets in West Texas,  Kansas and
Missouri  in 2006 as  compared  to 2005,  increases  in  director  compensation,
increased  administrative personnel and a non-cash charge of $240,000 related to
stock compensation  granted to executive  employees in 2005. Other increases are
associated with higher travel costs from our executive staff seeking acquisition
and market  opportunities to expand the Company's  business and market share and
administrative costs associated with the SteriLogic acquisition.

     Depreciation and amortization.  Depreciation and amortization  increased by
$622,061 or 82.8%,  to  $1,373,318  during 2006 from $751,257  during 2005.  The
primary cause for the increase was from depreciation  expense resulting from the
purchases  of  fixed  assets  from  the  PIWS   acquisition   and  increases  in
amortization  expense from higher  carrying  values of customer lists  purchased
from the three acquisitions in 2005 and SteriLogic in 2006.

     Interest  expense.  Our interest  expense  increased  $108,225 or 28.9%, to
$482,485 in 2006 from $374,260 during 2005. Interest expense increased primarily
due to the  capitalization  and  amortization of certain debt  conversion  costs
related to the Investment  Agreement  that was modified  during the three months
ended June 30, 2006 (see Note 7) and the  addition of $500,000 of new debt under
the  Investment  Agreement  closed  in  March  2006.  In  connection  with  such
transactions  related to the debt conversion  costs,  the Company paid financing
fees that were  deferred and are being  amortized on a straight line method over
the remaining life of the convertible debt. The outstanding  principal amount of
the convertible debt issued by the Company pursuant to the Investment  Agreement
was subsequently  converted by the Investor into shares of Common Stock on March
30, 2007. Interest expense for the year ended December 31, 2006 was reduced from
the conversion of approximately  $1.2 million in stockholder  loans and advances
into the Company's equity on June 30, 2005.



                                       19
<PAGE>

     Gain on ATE  settlement.  During  the year ended  December  31,  2005,  the
Company  recorded a one time gain of $650,468  resulting  from a settlement  and
extinguishment of debt with AmeriTech Environmental, Inc. on February 11, 2005.

     Other  Income.  Other  income of $40,135  was  recorded  in 2006 due to the
extinguishment of Convertible Debentures discussed in Note 10.

     Net income  (loss).  Our net loss was  ($771,111)  in 2006  compared to net
income  of  $810,670  in  2005.  The net  loss in  2006  was due to the  factors
described above.

Liquidity and Capital Resources

     Source of Funds for Operations and Capital Expenditures.

     Our principal  source of liquidity is  collections  on accounts  receivable
from waste management service revenue, from sales of our Common Stock and Series
A Preferred Stock through private  offerings to certain  individuals,  primarily
existing  stockholders,  and from  loans  and  advances  received  from  certain
stockholders. Revenues during 2006 were approximately $280,000 per month higher,
stemming primarily from the acquisitions in 2005 and 2006 discussed  previously.
The  principal  uses of liquidity  are payments  for labor,  fuel,  material and
expenses,  and debt and lease  obligations  to carry out our  regulated  medical
waste management services.

     Historically,  we have met our cash requirements  based on a combination of
revenues from operations,  stockholder loans and advances, and proceeds from the
sale of debt and equity securities.  Based on the projected operations for 2006,
management  believes cash to be generated from  operations and funds raised from
other alternative sources if needed, will be sufficient to satisfy the Company's
historical and current cash obligations.

Discussion of Liquidity - Year 2006 Compared to 2005

     At December  31,  2006,  our  working  capital  deficit  was  $(1,899,921),
compared to a working capital deficit of $(2,397,992) at December 31, 2005.

     Net cash  provided  (used)  in  operating  activities  for the  year  ended
December 31, 2006 was $597,729  during 2006,  compared to  $(311,414)  for 2005.
This  increase  was caused  primarily  from an increase in accounts  payable and
accrued  liabilities  resulting  from the accrual of  director  fees not paid at
December  31,  2006;  the  accrual of year-end  payroll  costs and taxes paid in
January 2007; and the assumption of liabilities from the SteriLogic acquisition.

     Net cash used in investing  activities for the year ended December 31, 2006
was $(621,043)  compared to  ($1,340,713)  for the year ended December 31, 2005.
The lesser  amount in 2006 was caused by the  decrease in the cash  portion used
for an acquisition in 2006 of $24,283 compared to $1,115,000 used in 2005. Also,
we invested  $596,760 in fixed asset  additions in 2006  compared to $225,713 in
2005.

     Net cash provided by financing activities was $23,314 during the year ended
December 31, 2006,  compared to $1,652,127 for the year ended December 31, 2005.
Cash  proceeds  from the sale of Common Stock and Series A Preferred  Stock were
$809,000  compared to $1,338,968 in 2005.  Proceeds from stockholder  loans were
$1,150,000 in 2006 compared to $1,375,000 in 2005.  Offsetting the proceeds from
the  sale  of  Company  stock  and  new  stockholder   loans  were  payments  to
stockholders and others on existing debt totaling $1,787,054 in 2006 compared to
$974,148 in 2005.

Other Liquidity Matters

     At December 31, 2006, our long-term obligations were $4,737,821,  including
bank  debt  and  equipment   financing  of  $1,375,726   and  notes  payable  to
stockholders and seller promissory notes from acquisitions  totaling $3,464,659,
less the remaining amount of $102,564 of a beneficial  conversion charge related
to the Investment  Agreement (see below) which is amortizing  over the remaining
life of the notes payable owed to the Investor.

     At December 31, 2006, $155,785 of our bank debt was secured by a first lien
on the Garland  Facility,  and bears  interest  at a variable  rate based on the
national prime rate as published in the Wall Street Journal, plus 0.5% (8.75% at
December  31,  2006).  The note is payable in minimum  monthly  installments  of
principal and interest totaling $3,459,  matures in July 2011, and is guaranteed
by our President/Chief  Executive Officer. The net carrying value of the Garland
facility is approximately $263,000.



                                       20
<PAGE>


     At December 31, 2006, $303,333 of our bank debt was secured by a first lien
on the Houston  Facility,  and bears  interest  at a variable  rate based on the
national prime rate as published in the Wall Street  Journal,  plus 2.0% (10.25%
at  December  31,  2006).  The  promissory  note is payable in 60 equal  monthly
installments  of  principal  and  interest  in the  amount of $1,354  each.  The
promissory  note  matures on August 3, 2010 with a balloon  payment of $243,750,
and is guaranteed by our President/Chief Executive Officer.

     On August 9, 2006,  the  Company,  through  its  subsidiary  EMSI,  secured
additional financing from a bank to expand its Houston facility. The facility is
currently being used as a transfer facility for the South Texas operations.  The
expansion  will  allow  EMSI to treat  medical  waste at the  facility  once the
permitting  process is  completed  from the state of Texas.  The total  costs of
expansion  will be  approximately  $275,000  with $197,187 of those funds coming
from bank financing and the remainder from working capital.  The promissory note
is payable in 60 equal monthly  installments  of $822 in principal plus interest
accruing at the Prime Rate as published in the Wall Street  Journal from time to
time plus 1%,  with the  balance of the  principal  and all  accrued  and unpaid
interest due upon maturity of the loan on July 19, 2011.  The note is secured by
a second lien on the Houston  facility and is personally  guaranteed by both our
President/Chief  Executive Officer and our Chairman of the Board. As of December
31, 2006,  the Company has drawn  $55,634  against the  promissory  note and the
funds were used for the commencement phase of expansion.  The amount outstanding
at  December  31,  2006 is $52,347  and the net  carrying  value of our  Houston
facility is approximately $370,000.

Tate Investments, LLC

     On  July  15,  2005,  the  Company  entered  into a  definitive  Investment
Agreement with the Investor.  Pursuant to the terms of the Investment Agreement,
the Investor  committed to lend up to $1,000,000 to the Company according to the
terms of a 10% Senior Secured  Promissory Note (the "Note") dated as of July 15,
2005.  The Note was  secured by the  Company's  and its  subsidiaries'  accounts
receivable and by a second-lien deed of trust mortgage on the Company's Garland,
Texas facility  pursuant to the terms of a General Business  Security  Agreement
and a Deed  of  Trust,  respectively,  each  dated  as of  July  15,  2005.  All
outstanding  amounts  under the Note bore  interest at the rate of 10% per year,
unless  the  Company  was in  default  pursuant  to the terms of the  Investment
Agreement,  in which  event  all  outstanding  amounts  under the Note will bear
interest  at a rate  equal to the prime  rate as  published  in the Wall  Street
Journal from time to time plus 8%. The outstanding  principal amount of the Note
and any accrued but unpaid  interest  thereon were  convertible at the option of
the  Investor  into shares of Common  Stock at the initial  conversion  price of
$0.65 per  share,  as  subject to  certain  adjustments  from time to time.  The
Company was permitted to prepay any or all of the outstanding  principal  amount
of the Note and any accrued but unpaid interest  thereon on or after January 15,
2007  without the prior  consent of the  Investor  and  without  any  prepayment
premium or penalty;  provided,  however, that the Company must first provide the
Investor with 30 days' prior  written  notice of its intent to prepay any or all
of such  outstanding  principal  amount  accompanied  by either  an  irrevocable
written financing  commitment or other evidence of the Company's ability to make
the proposed prepayment.  The Investor was permitted to, after receipt of such a
prepayment  notice,  elect to convert any or all of such  outstanding  principal
amount  proposed to be prepaid into shares of Common  Stock as discussed  above.
Also pursuant to the terms of the Investment  Agreement,  the Investor committed
to purchase,  and the Company  committed to sell, up to $1,000,000 of its Common
Stock to the  Investor  at the  initial  purchase  price of $0.65  per share (as
subject to certain  adjustments  from time to time)  pursuant  to the terms of a
Subscription Agreement (the "Subscription Agreement") dated as of July 15, 2005.

     Pursuant  to the  terms  of the  Investment  Agreement,  the  Company,  the
Investor and certain  shareholders  of the Company  entered  into an  Investor's
Rights  Agreement  (the  "Rights  Agreement")  pursuant to which the Company has
granted certain demand  registration  rights to the Investor with respect to any
shares  of  Common  Stock  obtained  pursuant  to the  Note or the  Subscription
Agreement.  The Rights  Agreement  grants the Investor  one demand  registration
exercisable  after December 31, 2006, and in the event such demand  registration
is exercised  the Company  must use its best efforts to register the  Investor's
shares of Common  Stock until  either the shares are either  registered  or sold
pursuant to Rule 144 or another applicable  registration  exemption.  The Rights
Agreement contains no penalty  provisions or settlement  alternatives that would
result in the issuance of additional shares of Common Stock or a cash payment to
the Investor in the event that the Company is unable to register the  Investor's
shares.  The Rights  Agreement also provides  unlimited  piggyback  registration
rights to the Investor.  The Rights Agreement also grants the Investor the right
to designate  one nominee for election to the Company's  Board of Directors,  or
two nominees in the event that Mr.  Joseph  Tate,  the  beneficial  owner of the
Investor, is designated as a nominee by the Investor. On September 15, 2005, the
Company's Board of Directors  selected David Mack to fill a vacancy on the Board
of Directors based upon the nomination by Mr. Tate. Pursuant to the terms of the
Rights  Agreement,  the Company may not, prior to the registration of the Common
Stock owned by the Investor with the  Securities  and Exchange  Commission  (the
"SEC"),  increase  the size of its Board of  Directors to more than five members
unless the Investor also designates Mr. Joseph Tate as a nominee, in which event



                                       21
<PAGE>

the Board of Directors may have no more than seven members. Certain shareholders
of the Company who are party to the Rights  Agreement have also granted  certain
rights of co-sale  to the  Investor  and  agreed to vote their  shares of Common
Stock in favor of the  election of the  Investor's  nominee(s).  The  Investor's
right to designate nominees to the Company's Board of Directors  continues until
such time as: (i) the Investor effectuates,  in one or a series of transactions,
a  transfer  of shares of Common  Stock  whereby  the number of shares of Common
Stock owned by the Investor  after such  transfer is less than 75% of the number
of shares of Common Stock owned by the Investor  before the  transfer,  at which
such time the Investor's  right to designate  nominees to the Company's Board of
Directors will be reduced to the right to designate one nominee to the Company's
Board  of  Directors;  (ii) the  Investor  effectuates,  in one or a  series  of
transactions,  a transfer of shares of Common Stock whereby the number of shares
of Common Stock owned by the Investor after the transfer is less than 50% of the
number of shares of Common Stock owned by the Investor prior to the transfer, at
which such time the  Investor's  right to  designate  nominees to the  Company's
Board of  Directors  will  terminate;  or (iii) the  Common  Stock  owned by the
Investor has been registered with the SEC.

     On March 15, 2006, the Company issued another  convertible  promissory note
in the amount of $500,000 to the Investor. The promissory note was payable in 35
monthly  installments  of interest  only with all  principal and interest due on
March 31, 2009.  The note accrued  interest at 10% for the first 12 months,  11%
for months 13 through 24 and 12% for months 25 through  maturity.  The effect of
the  increasing  interest  rate  under  EITF  86-15  "Increasing-Rate  Debt" was
determined  to be de minimus.  The Company was  permitted to prepay a portion or
all of the amount  outstanding under the terms of the note after March 31, 2007,
provided that the Company notify the Investor of the Company's  intent to prepay
after which,  the  Investor  was  permitted 30 days to convert the note into the
Company's  Common  Stock.  The  Investor  had the right to  convert  the  amount
outstanding  plus  accrued but unpaid  interest at the time of  conversion.  The
conversion  price for the $500,000 note agreed to was $0.85 per share during the
period  beginning March 15, 2006 through March 31, 2007,  $1.00 per share during
the period  beginning  April 1, 2007 through March 31, 2008, and $1.15 per share
during  the period  April 1, 2008  through  maturity.  The  promissory  note was
secured by two PIWS mobile units and was  cross-collateralized by the Investor's
liens on the Company's accounts  receivable and its Garland facility pursuant to
the Investment Agreement. The proceeds from the promissory note were used by the
Company to purchase equipment.

     On May 22,  2006,  the  Company  and  the  Investor  agreed  to  amend  the
Investment Agreement to lower the conversion price for the $1,000,000 Promissory
Note to $0.55  per share  from  $0.65 per  share in  exchange  for the  Investor
retroactively  (as of July  15,  2005,  the date the  Investment  Agreement  was
executed)  eliminating  the  requirements  for the  Company to  achieve  certain
earnings targets thereunder. In connection with the conversion price adjustment,
the Company was required to record a beneficial  conversion  charge of $153,846.
The beneficial  conversion  charge  represents the incremental fair value of the
impact  from  lowering  the  conversion  rate  and  will be  amortized  over the
remaining life of the note. As of December 31, 2006, the remaining amount of the
beneficial conversion charge to amortize was $102,564.

     As of December 31, 2006, the total principal  amount owed by the Company to
the  Investor  was  $1,397,436,  net of discount of  $102,564,  all of which was
subsequently  converted by the Investor into shares of Common Stock on March 30,
2007.

     The Company is obligated  under various  installment  notes payable for the
purchase of equipment with an aggregate cost of $864,261.  The notes, which bear
interest at rates  ranging from 8.0% to 16.1%,  are due at various dates through
2011 and are  payable in monthly  installments  totaling  approximately  $30,549
consisting of principal and interest. The equipment acquired  collateralizes the
notes.

Extinguishment of Convertible Debentures

     The Company issued an aggregate of $1,100,000 of 15% Convertible Redeemable
Subordinated  Debentures  (the  "Series I  Debentures")  in 1994 and 1995 with a
final maturity date of March 31, 1999, and containing a provision for conversion
of the Series I Debentures, at the option of the holders thereof, into shares of
Common  Stock.  The  Company  also  issued  an  aggregate  of  $256,125  of  10%
Convertible Redeemable Debentures ("Series II Debentures," and together with the
Series I Debentures,  the "Debentures") in 1998 with a maturity date of November
1, 1999,  and containing a provision for conversion of the Series II Debentures,
at the option of the holders thereof, into shares of Common Stock.

     Due to cash constraints,  the Company was not able to redeem the Debentures
in 1999 pursuant to their respective terms. The Company offered (the "Conversion
Offering") the holders of the Debentures the opportunity to convert their Series
I  Debentures  and  Series  II  Debentures  into  shares  of  Common  Stock at a
conversion rate of $1.50 and $1.75, respectively.



                                       22
<PAGE>

     Certain holders of Debentures did not respond to the Conversion Offering in
1999,  and the offer to convert the Debentures  into the Company's  Common Stock
has  since  expired  and any  contractual  claims  for  rights  pursuant  to the
Debentures  have been  time-barred  by the  applicable  statute of  limitations.
Accordingly,  the Company  extinguished  the Debentures on November 15, 2006 and
any  obligation  owed under their terms.  The Company  recorded  other income of
$40,135 and reversed all accrued interest as a result of extinguishment.

Material Commitments for Capital Expenditures

     We currently have no significant commitments for capital expenditures.

Events Subsequent to December 31, 2006

     On January 1, 2007,  the Company issued  promissory  notes to its directors
for payment of their 2006 board compensation.  Additional  promissory notes were
issued to the Chairman of the Board and the President/Chief Executive Officer of
the Company for payment of  compensation  for giving their  personal  guaranties
related to certain  indebtedness  by the Company to various third  parties.  The
total  amount of the  promissory  notes  issued is $292,005 and the notes accrue
interest at 12% with final payment of all principal and accrued  interest due on
July 1, 2007.

     On  January  2,  2007,  the  Company  issued  a  promissory  note  to  Tate
Investments,  LLC, which loaned $175,000 to the Company for equipment  expansion
purposes.  The promissory  note bears interest at 12% and is payable in 24 equal
monthly  installments  of  principal  and interest in the amount of $5,813 each,
with the balance of the principal  and any accrued and unpaid  interest due upon
maturity of the note on December 28, 2008.

     On January 31,  2007,  the Company  renewed and  extended  for six months a
$175,000 promissory note to On Call Medical Waste Services, Ltd ("On Call"). The
note accrues interest at 12% and is payable in monthly  installments of interest
only with the principal and any accrued and unpaid interest due upon maturity of
the note on July 31, 2007.  As  consideration  for this  extension,  the Company
agreed  to enter  into an  agreement  with  Medical  Waste of North  Texas,  LLC
("MWNT"),  an entity  owned by the former  owner of On Call,  for the Company to
treat and  dispose of  regulated  medical  waste that is brought to its  Garland
Facility  by  MWNT,  effective  September  1,  2007.  The  initial  term of this
agreement  is  for  24  months,  and  the  agreement  automatically  renews  for
additional  one-year  extensions unless either party notifies the other party in
writing  at least 30 days but not more  than 90 days  prior to any such  renewal
date of its desire not to renew the agreement.

     On March 27, 2007,  EMSI entered into a $1,500,000  secured,  one-year loan
and security  agreement (the "Loan  Agreement")  with Park Cities Bank,  Dallas,
Texas (the "Bank"),  and Mr. Matthew H. Fleeger,  our President and CEO, and Mr.
Winship  B.  Moody,   Sr.,  our  Chairman  of  the  Board   (collectively,   the
"Guarantors").  The terms of the Loan  Agreement  provide EMSI with a $1,500,000
revolving line of credit,  subject to certain downward  adjustments from time to
time based upon the value of the  collateral  securing  the line of credit.  The
performance  by EMSI of its  obligations  under the Loan Agreement is secured by
all of EMSI's  personal  property,  including  without  limitation  its  account
receivables,  and a first-lien mortgage deed of trust on EMSI's facility located
in Garland,  Texas,  and is  unconditionally  guaranteed by the Guarantors.  The
proceeds of the borrowings under the Loan Agreement may only be used for general
corporate  purposes,  including without limitation  providing working capital to
EMSI for the purposes of financing its operations,  production and marketing and
sales efforts, costs related to the expansion of EMSI's business operations, and
the  acquisition of the assets of businesses  engaged in businesses the same as,
similar to, or complementary to EMSI's business operations. Borrowings under the
Loan  Agreement  will bear interest at the lesser of (1) a  fluctuating  rate of
interest  equal to 1.0% in excess of the prime rate as  designated  in the Money
Rates  Section of the Wall Street  Journal  from time to time or (2) the maximum
rate  permissible by applicable law.  Accrued and unpaid interest under the Loan
Agreement is payable on the first day of each month commencing on April 1, 2007.
In addition,  EMSI paid an origination fee to the Bank in the amount of $15,000.
The Loan  Agreement  contains,  among other  provisions,  conditions  precedent,
covenants,  representations  and warranties and events of default  customary for
facilities of this size, type and purpose.  Negative  covenants  include certain
restrictions  or  limitations  on, among other  provisions,  the  incurrence  of
indebtedness;  liens;  investments,  loans and  advances;  restricted  payments,
including  dividends;  consolidations  and mergers;  sales of assets (subject to
customary  exceptions for sales of inventory in the ordinary course and sales of
equipment in connection  with the replacement  thereof in the ordinary  course);
and  changes of  ownership  or control of EMSI.  Affirmative  covenants  include
covenants  regarding,  among other  provisions,  financial  reporting.  The Loan
Agreement will mature and expire on April 1, 2008, at which time all outstanding
amounts  under  the Loan  Agreement  will be due and  payable.  The  outstanding
amounts  under the Loan  Agreement  may be prepaid  by EMSI at any time  without
penalty,  and any  principal  amounts  borrowed  and  repaid  thereunder  may be
reborrowed by EMSI prior to the maturity date so long as the aggregate principal
amount  outstanding  at any time does not exceed  the  $1,500,000  maximum  loan
commitment  (as  subject  to  downward  adjustment  based  on the  value  of the
collateral as described  above).  Under certain  conditions the loan  commitment
under the Loan  Agreement may be terminated by the Bank and amounts  outstanding



                                       23
<PAGE>

under the Loan Agreement may be  accelerated.  Bankruptcy and insolvency  events
with  respect to EMSI or either of the  Guarantors  will result in an  automatic
termination of lending  commitments and acceleration of the  indebtedness  under
the Loan Agreement.  Subject to notice and cure periods in certain cases,  other
events of default under the Loan Agreement will result in termination of lending
commitments and  acceleration  of  indebtedness  under the Loan Agreement at the
option of the Bank.  Such  other  events of default  include  failure to pay any
principal and/or interest when due, failure to comply with covenants,  breach of
representations  or warranties in any respect,  non-payment or  acceleration  of
other material debt of EMSI or the Guarantors,  the death of either Guarantor of
the termination of either of their guaranties, certain judgments against EMSI or
a Guarantor, a material adverse change in the business or financial condition of
EMSI or either Guarantor, or if the Bank in good faith deems itself insecure. In
connection with providing his personal  guarantee and previous  guarantees,  the
Company paid Mr. Moody  $15,506 in the form of a promissory  note which  accrues
interest  at 12% and  matures  on July 1, 2007 when all  principal  and  accrued
interest is due and payable.  Also, the Company  accrued $17,506 for the benefit
of Mr.  Fleeger in payment for his personal  guarantee for this loan in 2007 and
other company indebtedness  guaranteed in 2006 but for which Mr. Fleeger had not
yet been compensated.

     On March 1, 2007, the Company provided written notice to the Investor, that
the  Company  intended  to  prepay  in full on  April 2,  2007  all  outstanding
principal and interest owed by the Company to the Investor  pursuant to (1) that
certain 10% Senior  Convertible  Note  issued by the Company to the  Investor on
July 15, 2005 in the principal  amount of $1,000,000 (the "2005 Note"),  and (2)
that certain  Convertible  Secured  Promissory Note issued by the Company to the
Investor on March 15, 2006 in the principal amount of $500,000 (the "2006 Note,"
and together with the 2005 Note,  the "Notes").  The 2005 Note was issued by the
Company in connection with the Investment Agreement. The Company intended to use
the proceeds of the Loan Agreement described above to prepay the Notes.

     On March 31, 2007,  96,667 shares of the Company's Series A Preferred Stock
were  converted  into 96,667 shares of the Company's  Common Stock in accordance
with the  Certificate  of  Designation  for the  Series A  Preferred  Stock (the
"Certificate  of  Designation").  The terms of the  Certificate  of  Designation
required  the holders of the Series A Preferred  Stock to convert  their  shares
into  the  Company's  Common  Stock on a share  for  share  basis on the  second
anniversary  from the date of  issuance  of the Series A  Preferred  Stock.  All
dividends  declared with regard to the issuance of the Preferred Stock have been
paid.  As of March 31,  2007,  there were no shares of Series A Preferred  Stock
outstanding.

Recently Issued Accounting Standards

     The following  pronouncements have been issued by the Financial  Accounting
Standards Board ("FASB").

     In February 2006, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standard 155  "Accounting for Certain Hybrid
Financial  Instruments"  ("SFAS  155"),  which  eliminates  the  exemption  from
applying SFAS 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS  133") to  interests  in  securitized  financial  assets so that  similar
instruments  are  accounted  for  similarly   regardless  of  the  form  of  the
instruments.  SFAS 155 also  allows the  election of fair value  measurement  at
acquisition,  at issuance,  or when a previously recognized financial instrument
is subject to a  remeasurement  event.  Adoption is effective  for all financial
instruments acquired or issued after the beginning of the first fiscal year that
begins after  September 15, 2006.  Early adoption is permitted.  The adoption of
SFAS 155 is not expected to have a material effect on the Company's consolidated
financial position, results of operations or cash flows.

     In March 2006, the FASB issued Statement of Financial  Accounting  Standard
156 "Accounting for Servicing of Financial Assets" ("SFAS 156"),  which requires
all  separately   recognized  servicing  assets  and  servicing  liabilities  be
initially  measured at fair value. SFAS 156 permits,  but does not require,  the
subsequent  measurement  of servicing  assets and servicing  liabilities at fair
value.  Adoption is required as of the  beginning  of the first fiscal year that
begins after  September 15, 2006.  Early adoption is permitted.  The adoption of
SFAS 156 is not expected to have a material effect on the Company's consolidated
financial position, results of operations or cash flows.

     In July 2006,  the FASB  released  FASB  Interpretation  No. 48 ("FIN 48"),
"Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109." FIN 48 clarifies the  accounting  and reporting for  uncertainties  in
income  tax law.  FIN 48  prescribes  a  comprehensive  model for the  financial
statement recognition, measurement, presentation and disclosure of uncertain tax
positions  taken or  expected  to be  taken in  income  tax  returns.  FIN 48 is
effective for fiscal years beginning after December 15, 2006.  Earlier  adoption
is permitted as of the beginning of an  enterprise's  fiscal year,  provided the
enterprise  has  not  yet  issued  financial  statements,   including  financial
statements for any interim period for that fiscal year. The cumulative  effects,
if any,  of  applying  FIN 48 will be  recorded  as an  adjustment  to  retained
earnings as of the  beginning of the period of adoption.  The adoption of FIN 48
is not  expected  to  have a  material  effect  on  the  Company's  consolidated
financial position, results of operations or cash flows.



                                       24
<PAGE>


     In September 2006, the FASB issued SFAS No. 157, "Accounting for Fair Value
Measurements"  ("SFAS  157").  SFAS 157 defines fair value,  and  establishes  a
framework for measuring fair value in generally accepted  accounting  principles
and expands disclosure about fair value measurements.  SFAS 157 is effective for
financial  statements  issued by the Company for fiscal  years  beginning  after
November  15,  2007.  The  Company  does not expect the new  standard  to have a
material impact on the Company's  financial  position,  results of operations or
cash flows.

     In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other  Postretirement  Plans" ("SFAS 158"). SFAS 158
requires an employer to recognize  the  overfunded  or  underfunded  status of a
defined  benefit  postretirement  plan (other than a  multiemployer  plan) as an
asset or  liability  in its  statement  of  financial  position and to recognize
changes in that  funded  status in the year in which the changes  occur  through
comprehensive  income of a business entity or changes in unrestricted net assets
of a not-for-profit organization.  SFAS 158 also requires an employer to measure
the  funded  status  of a plan  as of the  date  of its  year-end  statement  of
financial  position,  with limited  exceptions.  SFAS 158 is  effective  for the
Company for the year ended December 31, 2006. The adoption of this pronouncement
did not have a material effect on the Company's financial statements.

     In September  2006,  the staff of the  Securities  and Exchange  Commission
issued  Staff   Accounting   Bulletin  No.  108  ("SAB  108"),   which  provides
interpretive  guidance on how the effects of the  carryover or reversal of prior
year   misstatements   should  be  considered  in  quantifying  a  current  year
misstatement.  SAB 108 becomes  effective for the first fiscal year ending after
November  15,  2006.  The adoption of SAB 108 is not expected to have a material
impact on the Company's consolidated  financial position,  results of operations
or cash flows.

     In December  2006,  the FASB  approved FASB Staff  Position  (FSP) No. EITF
00-19-2,   "Accounting  for  Registration   Payment   Arrangements"  ("FSP  EITF
00-19-2"),  which  specifies  that  the  contingent  obligation  to make  future
payments  or  otherwise  transfer  consideration  under a  registration  payment
arrangement,  whether issued as a separate  agreement or included as a provision
of a financial  instrument or other agreement,  should be separately  recognized
and measured in accordance with SFAS No. 5, "Accounting for Contingencies".  FSP
EITF 00-19-2 also  requires  additional  disclosure  regarding the nature of any
registration payment arrangements,  alternative  settlement methods, the maximum
potential  amount  of  consideration  and the  current  carrying  amount  of the
liability,  if any. The guidance in FSP EITF 00-19-2 amends FASB  Statements No.
133,  "Accounting for Derivative  Instruments and Hedging  Activities",  and No.
150, "Accounting for Certain Financial  Instruments with Characteristics of both
Liabilities and Equity", and FASB Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness of Others," to include scope  exceptions for  registration  payment
arrangements.

     FSP  EITF  00-19-2  is  effective   immediately  for  registration  payment
arrangements and the financial  instruments  subject to those  arrangements that
are entered into or modified subsequent to the issuance date of this FSP, or for
financial  statements issued for fiscal years beginning after December 15, 2006,
and  interim  periods  within  those  fiscal  years,  for  registration  payment
arrangements  entered into prior to the issuance  date of this FSP. The adoption
of  this  pronouncement  is not  expected  to have an  impact  on the  Company's
consolidated financial position, results of operations or cash flows.

     In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial  Assets and Financial  Liabilities"  ("SFAS  159").  SFAS 159 provides
companies with an option to report selected  financial assets and liabilities at
fair value. The objective of SFAS 159 is to reduce both complexity in accounting
for financial  instruments  and the  volatility in earnings  caused by measuring
related  assets  and  liabilities  differently.  Generally  accepted  accounting
principles have required different  measurement  attributes for different assets
and liabilities that can create artificial volatility in earnings.  The FASB has
indicated   it  believes   that  SFAS  159  helps  to  mitigate   this  type  of
accounting-induced volatility by enabling companies to report related assets and
liabilities  at fair value,  which would likely reduce the need for companies to
comply  with  detailed  rules for hedge  accounting.  SFAS 159 also  establishes
presentation  and  disclosure  requirements  designed to facilitate  comparisons
between companies that choose different measurement attributes for similar types
of assets and liabilities.  SFAS 159 does not eliminate disclosure  requirements
included in other accounting standards,  including  requirements for disclosures
about  fair  value  measurements   included  in  SFAS  157  and  SFAS  No.  107,
"Disclosures  about Fair Value of Financial  Instruments." SFAS 159 is effective
for the Company as of the beginning of fiscal year 2009. The Company has not yet
determined the impact SFAS 159 may have on its consolidated  financial position,
results of operations, or cash flows.



                                       25
<PAGE>


Off-Balance Sheet Arrangements

     During the year ended  December 31, 2006, the Company had off balance sheet
arrangements  related to its lease  obligations.  The Company is obligated under
such lease  arrangements for $1,095,753 through 2012. The amount obligated under
the lease  arrangements is one operating lease totaling $548,229 payable through
2010 to a  leasing  firm  that  specializes  in heavy  transportation  equipment
financing  and has  financed  the majority of our  transportation  equipment.  A
second  obligation is an operating lease with a remaining balance of $547,524 as
of December  31, 2006 and is payable  through 2012 to our landlord who holds the
office lease for our corporate headquarters. Both leases are routine and typical
in nature and yet critical to our operations in that they provide financing that
is necessary for us to provide services to our customers and house the corporate
functions and  operations of our Company.  The operating  leases are  beneficial
from a financial  perspective in that they do not add to the  liabilities of the
Company as shown on our  balance  sheet;  however,  the costs of such leases are
included in the Company's  statement of  operations  and statement of cash flows
for each period reported.

Item 7. Consolidated Financial Statements.

     The Company's  Consolidated  Financial Statements and Notes to Consolidated
Financial  Statements are attached to this Form 10-KSB beginning at page F-i and
are incorporated herein by reference.

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

     None.

Item 8A. Controls and Procedures.

     Under  the  supervision  and  with  the   participation  of  the  Company's
management,  including its principal  executive officer and principal  financial
officer,  the Company conducted an evaluation of the effectiveness of the design
and operation of its  disclosure  controls and  procedures,  as defined in Rules
13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of 1934, as amended,
as of the end of the period  covered by this  report  (the  "Evaluation  Date").
Based  on  this  evaluation,  the  Company's  principal  executive  officer  and
principal  financial  officer  concluded  as of the  Evaluation  Date  that  the
Company's  disclosure  controls  and  procedures  were  effective  such that the
information  relating to the Company,  including its consolidated  subsidiaries,
required  to be  disclosed  in  its  SEC  reports  (i) is  recorded,  processed,
summarized  and  reported  within the time  periods  specified  in SEC rules and
forms,  and (ii) is accumulated and  communicated  to the Company's  management,
including its principal  executive officer and principal  financial officer,  or
persons performing  similar functions,  as appropriate to allow timely decisions
regarding required disclosure.

     During  2006,  the Company  detected a  misappropriation  of  approximately
$42,000 in cash by an  employee  of the  Company.  The  Company  terminated  the
employee and is pursuing  civil and criminal  action.  The Company  modified its
internal  control  procedures in 2007 to  appropriately  safeguard assets and to
prevent any future occurrences of this nature.

     During the fourth  quarter of 2006,  there were no changes in its  internal
controls  (other  than  discussed  in the  previous  paragraph)  over  financial
reporting that have materially affected,  or are reasonably likely to materially
affect, the Company's internal control over financial reporting.


Item 8B. Other Information.

     None.



                                       26
<PAGE>

                                    PART III

Item 9. Directors,  Executive Officers, Promoters, Control Persons and Corporate
Governance; Compliance with Section 16(a) of the Exchange Act.

     Members of our Board of  Directors  serve until the next annual  meeting of
our stockholders or until their successors have been duly elected and qualified.
Our officers are elected at the Board of Directors meeting following each annual
stockholders' meeting, and serve at the pleasure of our Board of Directors.  Our
last annual  meeting was held on October 19,  2006.  There have been no material
changes to the  procedures  by which  shareholders  of the Company may recommend
nominees to the  Company's  Board of  Directors  since the date of filing of the
Company's proxy statement for its 2006 annual shareholders' meeting.

     Winship B. Moody, Sr. currently serves as the audit  committee's  financial
expert. Mr. Moody is an independent member of the Board of Directors.

     The following persons comprise the directors and executive  officers of the
Company as of March 31, 2007:

                      Director/Officer
Name and Age               Since     Position(s) Held
------------               -----     ----------------
Matthew H. Fleeger (43)    1993      President, Chief Executive Officer
                                     and Director
Winship B. Moody, Sr. (72) 2002      Chairman of the Board of Directors
                                     of the Company
Ajit S. Brar (74)          2004      Director
David L. Mack (54)         2005      Director
Steven R. Block (51)       2006      Director
Lonnie P. Cole, Sr. (44)   2004      Senior Vice President, Sales
J. Steven Evans (47)       2003      Vice President, Finance
Alan E. Larosee (53)       2004      Vice President, Operations
James M. Treat (49)        2005      Vice President, Business Development


Matthew H. Fleeger - President, and Chief Executive Officer and Director

     Our Founder,  President, Chief Executive Officer and a director, Matthew H.
Fleeger, has been with the Company for 13 years, during our growth from an early
stage venture  capital  concept to the present.  Mr. Fleeger has a comprehensive
background in finance,  marketing and sales with several years experience in the
oil  and  gas  industry,  where  he  was  instrumental  in  leading  Kinlaw  Oil
Corporation  to  over  $60  million  in  revenue.  He was  also a  director  and
significant  shareholder in Palm Beach Tan, Inc. ("PBT"), where he initiated the
expansion of PBT from a six-store  chain of tanning  salons to the largest chain
of indoor tanning  salons in the nation with over $50 million in revenue.  While
at PBT,  he  funded  the  development  of  Mystic  Tan,  Inc.,  now the  largest
manufacturer  and distributor of UV Free Spray-On  tanning systems in the world.
He has extensive experience in corporate structuring,  mergers and acquisitions,
joint ventures and a variety of equity and debt private placement  vehicles used
to fund the working  and  expansion  capital  needs of small  developmental  and
growth companies.  Mr. Fleeger graduated from Southern Methodist University with
a BA in Business with an emphasis in Finance and Marketing. He has been selected
as a member of the International Who's Who of Business Professionals.

Winship B. Moody, Sr. - Chairman of the Board

     Mr. Moody has a background in finance and  accounting.  His previous career
included 28 years of  experience  in the pulp and paper  industry.  From 1962 to
1990,  he worked at Rice  Barton  Corporation  where he rose to the  position of
President,  Chief Executive Officer and Chief Financial  Officer.  Mr. Moody has
also  served  as  President  and a Board  Member  of the  American  Pulp & Paper
Manufacturers Association. Mr. Moody retired in 1990 and currently serves on the
Board of Profile Senior Golf  Association.  He received his Bachelors  degree in
chemical engineering from the University of Maine. Ajit S. Brar - Director

     Mr. Brar joined the board in 2004 and has a  background  in real estate and
oil  and gas  investments.  He  retired  with a 27 year  career  with  the U. S.
Government  and is the  Managing  Partner  and  Treasurer  of  four  (4) 220 SMR



                                       27
<PAGE>

Partnerships  in  Arizona,  Colorado,  New York,  and Ohio and a partner  in SMR
Partnerships in Illinois, Nevada, California, Alabama and Florida.

David L. Mack - Director

     Mr.  Mack was  appointed  to the Board of  Directors  in August 2005 as the
designated  representative  of  Tate  Investments,  LLC,  a  shareholder  of the
Company. Mr. Mack is Vice President of Sales with Spangler Computer, the largest
ISP and wireless  broadband  company in the state of  Wisconsin.  Mr. Mack was a
co-founder and President of Wisconsin  wi-fi,  subsequently  merging that entity
into Spangler Computer. Before joining Wisconsin wi-fi, Mr. Mack was involved in
several start-up ventures.  Mr. Mack has extensive waste management  experience.
In 1989, Mr. Mack  co-founded and was President of Valley Flower,  an industrial
waste services firm, and Sharps Incinerator,  a medical waste transportation and
treatment  firm.  In 1994,  Mr.  Mack  merged the two  companies  into  Superior
Services,  Inc. ("Superior"),  where he was the General Manager of their medical
waste operations.  Superior was an acquisition-oriented,  fully-integrated solid
waste services company providing solid waste collection, transfer, recycling and
disposal  services to more than 750,000  residential,  commercial and industrial
customers in 12 states.  Superior had a successful  public  offering in 1995 and
was later sold to Vivendi in 1999 for approximately $1 billion in cash.

Steven R. Block - Director

     Mr.  Block was elected to the Board of  Directors in October 2006 and is an
equity  principal with the law firm of Fish & Richardson P.C., legal counsel for
the Company.  Mr.  Block has been with Fish &  Richardson  since 2000 and is the
former chair of the firm's  corporate  practice  group.  Prior to joining Fish &
Richardson,  Mr. Block was a partner with Block & Balestri, P.C. (1992-2000) and
a partner  with Akin,  Gump,  Strauss,  Hauer & Feld,  L.L.P.  (1986-1992).  Mr.
Block's  practice  focuses on  general  corporate  law,  including  mergers  and
acquisitions,  securities  and banking  law. Mr.  Block  received his B.A.  from
Indiana  University where he was elected to Phi Beta Kappa. He received his J.D.
from Emory  University  School of Law where he served as the Research  Editor of
the Emory Law Journal.

Lonnie P. Cole, Sr. - Senior Vice President, Sales

     Mr.  Cole  joined  the  Company  on  October  1,  2004  and has 17 years of
experience in the medical waste industry.  From 1989 to 1995, he was Director of
Sales for American 3CI, a Stericycle  subsidiary.  From 1996 through 1998 he was
the General Manager of Sales & Operations for EnviroWaste Management of Houston.
In 1999  he  joined  Air  and  Sea  Environmental,  a  subsidiary  of  AmeriTech
Environmental,  Inc.  (which was  acquired by the  Company in November  2003) as
General Manager and Vice President of their Sales Department in Houston,  Texas.
Mr. Cole later joined Med-Con Waste Solutions, Inc. as President/CEO.  He served
in that position until we acquired  Med-Con in September  2004, at which time he
joined the Company.

J. Steven Evans - Vice President, Finance

     Mr.  Evans,  CPA,  joined the  Company as  Controller  in July 2003 and was
promoted  to Vice  President  of Finance  in  February,  2005.  Prior to joining
MedSolutions,   he  served  as  the  Corporate   Accounting  Manager  for  Aurum
Technology, Inc., a $200 million revenue information technology company that was
spun off from  Electronic Data Systems ("EDS") and outsources and sells software
to the financial services  industry.  Prior to that, Mr. Evans was with KPMG, an
international  accounting  firm and was CFO of  Preferred  Bank of Houston.  Mr.
Evans graduated from Abilene Christian University with a B.B.A. in Accounting.

Alan E. Larosee -Vice President, Operations

     Mr.  Larosee joined the Company in August 2004 serving as Vice President of
Operations.  Mr.  Larosee came to us with over 20 years of experience in medical
waste management and project development. Mr. Larosee is a seasoned professional
with  a  strong  record  of  achievement  in  strategic  planning,   permitting,
regulatory  affairs,  financing,   budgeting,  marketing,  sales  and  hazardous
materials  management.  His prior experience  includes Health and Safety manager
with Clean Harbors, Inc. of Braintree,  MA, General Manager for Medigen, Inc. (a
division  of  Clean  Harbors)  based  in  New  York,  NY,  Project  Manager  for
Bio-Container  International  of  Montville,  NJ,  Director  of  Operations  for
ECOAIRE, Inc. of Hollywood,  FL, and most recently Vice  President/Partner  with
Healthy Home  Environmental,  Inc.,  Nanuet,  NY. Mr. Larosee received his BS in
Business Management from Bryant College in Smithfield, Rhode Island.

James M. Treat - Vice President, Business Development



                                       28
<PAGE>


     Mr.  Treat  joined the  Company in May 2005 as Vice  President  of Business
Development.  Mr.  Treat has over 24 years in  leadership  positions in start-up
ventures,  turn-around  businesses  and  growth  organizations.  His  experience
includes cross-functional leadership roles in strategic planning,  marketing and
business development, finance, accounting and budgeting, strategic alliances and
partnerships,  acquisitions  and due  diligence.  He comes to our  Company  from
Stericycle Inc. where he served as a senior  executive in their largest district
which included Texas, Oklahoma, Louisiana, Mississippi, Alabama and Florida with
district annual sales of $24 million.  While at Stericycle,  Mr. Treat was fully
responsible for the district gross margin, contract negotiations,  legal issues,
management  staffing,  business  development,   strategic  market  planning  and
budgeting.  Mr. Treat  received his BBA in Finance and  Marketing  with graduate
level  studies in Business  Administration  & Law from Texas Tech  University in
Lubbock, Texas.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the Exchange Act requires  the  Company's  directors  and
executive  officers,  and persons who own more than 10% of a registered class of
our equity securities,  to file with the SEC reports of ownership and changes in
ownership of Common Stock and other equity securities of the Company.  Executive
officers,  directors  and  greater  than 10%  stockholders  are  required by SEC
regulation  to furnish the Company  with copies of all Section  16(a) forms they
file.

     Based on the review of copies of such  forms  furnished  to us and  written
representations  that no other forms were required,  during the 2006 fiscal year
and prior fiscal years the following executive  officers,  directors and greater
than 10% beneficial owners failed to file on a timely basis, as disclosed in the
such forms, reports required by Section 16(a) of the Exchange Act:

     o    Mr.  Altenau did not report five  transactions  on a timely basis on a
          Form 4. These  transactions  were reported on Mr. Altenau's Form 5 for
          the 2006 fiscal year.

     o    Mr. Block did not report his initial  ownership on a timely basis on a
          Form 3 upon his election as a director of the Company.  This ownership
          was  reported  on Form 3 during the 2007  fiscal year . o Mr. Brar did
          not  report  two  transactions  on a timely  basis on a Form 4.  These
          transactions were  subsequently  reported on Mr. Brar's Form 5 for the
          2006 fiscal year.

     o    Mr. Evans did not report one  transaction  on a timely basis on a Form
          4. This  transaction  was  reported on Mr.  Evans' Form 5 for the 2006
          fiscal year.

     o    Mr.  Fleeger did not report two  transactions  on a timely  basis on a
          Form 4. These  transactions  were reported on Mr. Fleeger's Form 5 for
          the 2006 fiscal year . o Mr. Larosee did not report one transaction on
          a timely  basis on a Form 4.  This  transaction  was  reported  on Mr.
          Larosee's Form 5 for the 2006 fiscal year.

     o    Mr. Mack did not report one transaction on a timely basis on a Form 4.
          This transaction was reported on Mr. Mack's Form 5 for the 2006 fiscal
          year.

     o    Mr. Moody did not report two  transactions on a timely basis on a Form
          4. These transactions were reported on Mr. Moody's Form 5 for the 2006
          fiscal year.

     o    Mr. Treat did not report one  transaction  on a timely basis on a Form
          4. This  transaction  was reported on Mr.  Treat's Form 5 for the 2006
          fiscal year.

     o    Tate  Investments,  LLC did not  report two  transactions  on a timely
          basis on a Form 4. These  transactions were  subsequently  reported on
          Form 4 during the 2006 fiscal year.

Code of Ethics

     The  Company  has not yet  adopted a code of  ethics  that  applies  to its
principal executive officer,  principal financial officer,  principal accounting
officer or controller,  or persons  performing  similar  functions.  The Company
currently  has no  plans  to adopt a  revised  code of  ethics  that  meets  the
definition of a "code of ethics" under applicable SEC regulations.




                                       29
<PAGE>
<TABLE>
<CAPTION>

Item 10. Executive Compensation.

     The following table sets forth the aggregate cash  compensation paid by the
Company in the fiscal year ended  December 31, 2006,  to each of its most highly
compensated officers of the Company.

                                                      SUMMARY COMPENSATION TABLE


                                                                                 Non-Equity
Name and Principal                                                              Incentive Plan       All Other
   Position                    Year      Salary      Bonus      Option Awards   Compensation        Compensation      Total
   --------                    ----      ------      -----      -------------   ------------        ------------      -----
<S>                            <C>       <C>         <C>        <C>             <C>                 <C>               <C>

Matthew H. Fleeger           2006   $210,000            --                       $66,453(2)           $6,000(3)      $322,044
   President, Chief                                                                                 $ 39,591(4)
   Executive Officer,
   Director

Lonnie P. Cole, Sr.          2006   $100,000            --                       $38,000(2)         $ 10,000(4)      $148,000
   Senior Vice President,
Sales

J. Steven Evans              2006   $ 95,000            --       $ 92,868(1)     $ 5,000(2)               --         $192,868
   Vice President, Finance
   and Chief Accounting
   Officer

Alan Larosee                 2006   $ 98,958            --       $106,800(1)                        $ 4,800(3)       $210,558
     Vice President,
     Operations
James M. Treat               2006   $101,383            --       $ 40,332(1)                        $ 6,000(3)       $147,715
      Vice President, Business
      Development

</TABLE>


--------------------------------------------------------------------------------

          (1) Options were granted in 2006 to certain  executives as performance
          compensation in accordance with their  employment  agreements with the
          Company.

          (2) Cash bonuses were awarded to Mr.  Fleeger,  Mr. Cole and Mr. Evans
          in accordance with their employment agreements with the Company.

          (3)  Represents  gasoline  for  automobile  and  disability  insurance
          premiums.

          (4) All other  compensation  to Mr. Fleeger  includes a fee of $26,435
          accrued  in 2006 to  compensate  Mr.  Fleeger  for  granting  personal
          guarantees  on Company  debt.  The  $26,435 fee was paid on January 1,
          2007 in the form of a promissory note issued to Mr. Fleeger.  The note
          accrues interest at 12% and matures on July 1, 2007 when all principal
          and accrued interest will be due. The remaining  accrued  compensation
          of $13,156 to Mr. Fleeger is from $4,600 of wages accrued but not paid
          to Mr.  Fleeger  in 2006 and  $8,556  of wages  accrued  in 2005.  All
          accrued and unpaid wages and the guarantee fee to Mr.  Fleeger will be
          paid to Mr.  Fleeger  in 2007 and in  accordance  with his  Employment
          Agreement.  All other  compensation  to Mr.  Cole  includes  a $10,000
          accrued bonus that was paid in 2007.

     With respect to all stock options granted to employees and directors of the
Company  effective  as of  December  31,  2005,  the Board of  Directors  of the
Company, who administers the Company's 2002 Stock Plan, intended for the options
to be granted at fair market value as of the effective date of such grants.  Out
of an abundance of caution to ensure that the exercise  price was not lower than
the fair  market  value of the Common  Stock at the date of grant,  the Board of
Directors set the exercise price at $1.00 per share.  Concurrently  with setting



                                       30
<PAGE>

the exercise  price,  the Company was in  discussions  with the  Securities  and
Exchange  Commission (the "SEC") regarding,  among other issues, the fair market
value of the Common Stock as of year-end 2005, and in this regard,  the Board of
Directors reserved the right to correct the exercise price at a later date if it
was  ultimately  determined  that the fair market  value of the Common Stock was
different than $1.00 per share as of December 31, 2005.  The Company  ultimately
determined  that the fair market  value of the Common  Stock as of December  31,
2005 was $0.75 per share.  Based on  correspondence  from the SEC to the Company
dated  April 4, 2006 and  April 24,  2006,  the SEC did not  disagree  with this
determination.  Accordingly,  the Board of Directors  subsequently corrected the
exercise price for the stock options  granted  effective as of December 31, 2005
to $0.75 per share.

Employment Agreements

     Matthew H. Fleeger  serves as the Company's  President and Chief  Executive
Officer and entered into a three-year  employment  agreement  dated December 30,
2004 to be effective as of January 1, 2005.  Mr.  Fleeger is entitled to receive
an annual base salary of $200,000,  increased 5% annually,  and is also entitled
to be paid a cash bonus of $25,000 on April 15, 2005.  Pursuant to the Executive
Target Bonus Program,  Mr. Fleeger is also eligible for an annual bonus based on
the Company  achieving  certain goals related to EBITDA.  Any such bonus will be
paid to Mr. Fleeger in the form of a stock option to purchase a number of shares
of Common Stock equal to the amount of such bonus at an exercise price per share
of Common  Stock equal to the fair market  value (as such term is defined in the
Company's  2002 Stock Option Plan or any successor  plan thereto) of such Common
Stock as of the effective date that such option is granted;  provided,  however,
that in the event that Mr. Fleeger becomes the owner of equity securities of the
Company  representing  more than 10% of the total  combined  voting power of all
classes of equity  securities  of the Company,  the exercise  price per share of
Common  Stock  shall be equal to 110% of the fair  market  value of such  Common
Stock as of the effective  date that such option is granted;  provided  further,
however,  that Mr.  Fleeger shall have the option,  in his sole  discretion,  to
receive up to 50% of the amount of any such bonus in the form of cash in lieu of
such stock option.  Pursuant to the Executive Target Bonus Program,  Mr. Fleeger
may be eligible for the following bonuses:

--------------------------------------------------------------------------------
             EBITDA Target Range                  Bonus Amount
--------------------------------------------------------------------------------
   At least:          But less than:

----------------- --------------------- ----------------------------
   $1,000,000          $1,100,000                   $25,000
----------------- --------------------- ----------------------------
   $1,100,000          $1,200,000                   $30,000
----------------- --------------------- ----------------------------
   $1,200,000          $1,300,000                   $35,000
----------------- --------------------- ----------------------------
   $1,300,000          $1,400,000                   $40,000
----------------- --------------------- ----------------------------
   $1,400,000          $1,500,000                   $45,000
----------------- --------------------- ----------------------------
   $1,500,000          $1,600,000                   $50,000
----------------- --------------------- ----------------------------
   $1,600,000          $1,700,000                   $55,000
----------------- --------------------- ----------------------------
   $1,700,000          $1,800,000                   $60,000
----------------- --------------------- ----------------------------
   $1,800,000          $1,900,000                   $65,000
----------------- --------------------- ----------------------------
   $1,900,000          $2,000,000                   $70,000
----------------- --------------------- ----------------------------
   $2,000,000          $2,100,000                   $75,000
----------------- --------------------- ----------------------------------------
   $2,100,000              NA           Mr. Fleeger and the Board of Directors,
                                        or a duly authorized committee  thereof,
                                        shall  negotiate the  amount  of  Mr.
                                        Fleeger's bonus in good faith; provided,
                                        however, that such amount  shall in no
                                        event  be less  than the sum of  $75,000
                                        plus an  additional  $5,000 for each
                                        $100,000 of EBITDA over $2,100,000.
--------------------------------------------------------------------------------

Pursuant to the terms of his employment  agreement,  if Mr. Fleeger's employment
with the Company is  terminated  by the Company for  "cause," or by Mr.  Fleeger
without "good  reason," then Mr. Fleeger is only entitled to receive the portion
of his base salary that is accrued and unpaid at the time of the  termination of
his employment.  If Mr.  Fleeger's  employment with the Company is terminated by
the Company without "cause," or by Mr. Fleeger for "good reason," Mr. Fleeger is
currently  entitled to continue being paid under his employment  agreement until
December  31, 2007.  "Good  reason"  under Mr.  Fleeger's  employment  agreement
includes an assignment of substantially  different duties or responsibilities to
Mr.  Fleeger  without Mr.  Fleeger's  consent.  If Mr.  Fleeger  dies or becomes
disabled during his employment,  Mr. Fleeger or his designated  beneficiary,  as
the case may be, will currently continue to receive his base salary and benefits
until December 31, 2007, less any insurance  proceeds paid to Mr. Fleeger or his
designated  beneficiary from any insurance policy for which the Company has paid
premiums.  If Mr.  Fleeger is  terminated  without  cause  within 12 months of a
change in control of the Company (e.g.,  a merger) or the  disposition of all or
substantially all of the Company's assets, Mr. Fleeger is entitled to a lump sum
payment,  the amount of which shall be determined by the compensation  committee
of the Board of Directors of the  Company,  with the minimum  amount of the lump



                                       31
<PAGE>

sum payment being Mr. Fleeger's  aggregate  compensation from the Company during
the 24-month period immediately preceding the change of control or disposition.

     Mr. Lonnie P. Cole,  Sr. serves as a Senior Vice President in charge of our
Sales Department.  Mr. Cole entered into a three-year employment agreement dated
September 30, 2004 to be effective as of October 1, 2004. Mr. Cole is to receive
a base salary of $100,000 annually and is eligible for bonus incentives based on
the Company achieving  certain goals related to revenue growth.  Pursuant to the
terms of his employment agreement,  if Mr. Cole's employment with the Company is
terminated  by the Company for  "cause," or by Mr.  Cole,  then Mr. Cole is only
entitled to receive the portion of his base salary that is accrued and unpaid at
the time of the termination of his employment. If Mr. Cole's employment with the
Company is  terminated by the Company  without  "cause," Mr. Cole is entitled to
receive  his base salary for a period of one year after the  termination  of his
employment. If Mr. Cole dies or becomes disabled during his employment, Mr. Cole
or his designated beneficiary,  as the case may be, will continue to receive his
base salary and benefits  until the earlier to occur of September  30, 2007,  or
the 30th day following his death or disability.

     Mr. J. Steven  Evans  serves as Vice  President of Finance in charge of our
Finance  and  Accounting  Department.   Mr.  Evans  entered  into  a  three-year
employment  agreement  dated  February 1, 2005.  Mr.  Evans is to receive a base
salary  of  $95,000  annually  and is  eligible  for bonus  incentives  based on
personal performance and the Company achieving certain financial goals. Pursuant
to the terms of his  employment  agreement,  if Mr. Evans'  employment  with the
Company is  terminated by the Company for "cause," or by Mr. Evans without "good
reason,"  then Mr.  Evans is only  entitled  to receive  the portion of his base
salary  that  is  accrued  and  unpaid  at the  time of the  termination  of his
employment.  If Mr.  Evans'  employment  with the Company is  terminated  by the
Company  without  "cause,"  or by Mr.  Evans for  "good  reason,"  Mr.  Evans is
entitled to continue being paid under his  employment  agreement for a period of
one year after the termination of his employment. "Good reason" under Mr. Evans'
employment agreement includes an assignment of substantially different duties or
responsibilities  to Mr. Evans without Mr. Evans' consent.  If Mr. Evans dies or
becomes disabled during his employment, Mr. Evans or his designated beneficiary,
as the case may be, will continue to receive his base salary and benefits  until
January  31,  2008,  less  any  insurance  proceeds  paid  to Mr.  Evans  or his
designated  beneficiary from any insurance policy for which the Company has paid
premiums.

     Mr. Alan  Larosee  serves as Vice  President  of  Operations.  Mr.  Larosee
entered into a three-year  employment agreement dated March 1, 2005. Mr. Larosee
is to  receive a base  salary of  $95,000  annually  and is  eligible  for bonus
incentives  based on  personal  performance  and the Company  achieving  certain
financial  goals.  Pursuant  to the terms of his  employment  agreement,  if Mr.
Larosee's  employment with the Company is terminated by the Company for "cause,"
or by Mr.  Larosee  without "good  reason," then Mr. Larosee is only entitled to
receive the portion of his base salary that is accrued and unpaid at the time of
the termination of his employment.  If Mr. Larosee's employment with the Company
is  terminated  by the  Company  without  "cause,"  or by Mr.  Larosee for "good
reason,"  Mr.  Larosee is entitled to continue  being paid under his  employment
agreement  for a period of one year  after the  termination  of his  employment.
"Good reason" under Mr. Larosee's employment agreement includes an assignment of
substantially  different duties or  responsibilities  to Mr. Larosee without Mr.
Larosee's  consent.   If  Mr.  Larosee  dies  or  becomes  disabled  during  his
employment, Mr. Larosee or his designated beneficiary,  as the case may be, will
continue to receive his base salary and benefits until  February 28, 2008,  less
any insurance  proceeds paid to Mr. Larosee or his designated  beneficiary  from
any insurance policy for which the Company has paid premiums.

     Mr. James M. Treat serves as Vice  President of Business  Development.  Mr.
Treat entered into a three-year employment agreement dated December 1, 2005. Mr.
Treat is to receive a base salary of $100,000 annually and is eligible for bonus
incentives  based on  personal  performance  and the Company  achieving  certain
financial  goals.  Pursuant  to the terms of his  employment  agreement,  if Mr.
Treat's employment with the Company is terminated by the Company for "cause," or
by Mr. Treat without  "good  reason," then Mr. Treat is only entitled to receive
the  portion of his base  salary  that is accrued  and unpaid at the time of the
termination of his  employment.  If Mr. Treat's  employment  with the Company is
terminated by the Company  without  "cause," or by Mr. Treat for "good  reason,"
Mr. Treat is entitled to continue being paid under his employment  agreement for
a period of one year after the  termination  of his  employment.  "Good  reason"
under Mr. Treat's  employment  agreement includes an assignment of substantially
different duties or  responsibilities  to Mr. Treat without Mr. Treat's consent.
If Mr. Treat dies or becomes  disabled during his  employment,  Mr. Treat or his
designated  beneficiary,  as the case may be, will  continue to receive his base
salary and benefits until November 30, 2008, less any insurance proceeds paid to
Mr. Treat or his designated  beneficiary from any insurance policy for which the
Company has paid premiums.







                                       32
<PAGE>
<TABLE>
<CAPTION>



                  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

------------------------------------------------------------------------------------------------------------------------
                                                                    Option Awards
------------------------------------------------------------------------------------------------------------------------



                                                                    Equity
                             Number of          Number of           Incentive Plan
                             Securities         Securities          Awards: Number
                             Underlying         Underlying          of Securities
                             Unexercised        Unexercised         Underlying
                             Options            Options             Unexercised        Option Exercise   Option
Name                         (Exercisable)(1)   (Unexercisable)     Unearned Options      Price          Expiration Date
---------------------------- ------------------ ------------------- ----------------- ----------------- -----------------
<S>                          <C>                <C>                 <C>               <C>               <C>

Matthew H. Fleeger.........    15,974            -                  -                 $1.00             1/1/2014
   President, Chief            52,473                                                 $1.00             6/30/2015
   Executive Officer,          46,667                                                 $0.75             12/31/2015
   Director                   143,333                                                 $0.75             12/31/2015
---------------------------- ------------------ ------------------- ----------------- ----------------- -----------------
Lonnie P. Cole, Sr.........  -                  -                   -                 -                 -
   Senior Vice President,
    Sales
---------------------------- ------------------ ------------------- ----------------- ----------------- -----------------
J. Steven Evans............     2,332           -                   -                 $1.00             1/1/2014
   Vice President, Finance     10,000                                                 $1.00             12/31/2014
   and Chief Accounting       133,333                                                 $0.75             10/19/2016
   Officer
---------------------------- ------------------ ------------------- ----------------- ----------------- -----------------
Alan Larosee........           15,000           -                   -                 $1.00             7/1/2015
     Vice President,           53,333                                                 $0.75             7/15/2015
     Operations              153,333                                                  $0.75             10/19/2016
---------------------------- ------------------ ------------------- ----------------- ----------------- -----------------
James M. Treat               115,427            -                    -                $0.75             12/31/2015
      Vice President,         57,906                                                  $0.75             10/19/2016
      Business
      Development
---------------------------- ------------------ ------------------- ----------------- ----------------- -----------------
</TABLE>

(1) All options vested fully immediately upon grant.




















                                       33
<PAGE>
<TABLE>
<CAPTION>

Compensation of Directors

                              DIRECTOR COMPENSATION

----------------- ------------ ------------ ------------ ----------------- ---------------- ----------------- -----------
                     Fees                                                   Nonqualified
                   Earned or                                Non-Equity        Deferred
                    Paid in       Stock       Option      Incentive Plan    Compensation       All Other
      Name           Cash        Awards       Awards       Compensation       Earnings        Compensation      Total
----------------- ------------ ------------ ------------ ----------------- ---------------- ----------------- -----------
<S>               <C>          <C>          <C>          <C>               <C>              <C>               <C>

Matthew H.        -            -            -            -                 -                -                 -
Fleeger
----------------- ------------ ------------ ------------ ----------------- ---------------- ----------------- -----------

Winship B.        $95,000      -            $41,000      -                 -                $4,321(1)         $140,321
Moody, Sr.
----------------- ------------ ------------ ------------ ----------------- ---------------- ----------------- -----------

Ajit S. Brar      $55,000      -            $31,000      -                 -                -                 $86,000
----------------- ------------ ------------ ------------ ----------------- ---------------- ----------------- -----------

David L. Mack     $57,500      -            $6,667       -                 -                -                 $64,167
----------------- ------------ ------------ ------------ ----------------- ---------------- ----------------- -----------

Steven R. Block   $20,750      -              -          -                 -                -                 $20,750
----------------- ------------ ------------ ------------ ----------------- ---------------- ----------------- -----------

Mark Altenau      $33,000      -            $22,000      -                 -                -                 $55,000
----------------- ------------ ------------ ------------ ----------------- ---------------- ----------------- -----------
</TABLE>

(1) All other compensation to Mr. Moody includes a fee of $4,321 accrued in 2006
to compensate  Mr. Moody for granting  personal  guarantees on Company debt. The
fee was paid to Mr.  Moody on January 1, 2007 in the form of a  promissory  note
that accrues  interest at 12% and matures on July 1, 2007 when all principal and
accrued interest is due.

In  November  2005 the Board of  Directors  adopted a  compensation  program for
outside directors. The principal components of the plan call for specific Common
Stock  awards  for  service  on the board  (30,000  shares  per  person  plus an
additional  20,000 for the  Chairman),  for service on  committees of the board,
including the audit committee,  the compensation  committee and the stock option
committee  (10,000,  5,000 and 5,000  shares,  respectively),  and an additional
10,000 shares for service as chairman of the audit  committee,  5,000 additional
shares  for  service  as  chairman  of  the  compensation  committee  and  5,000
additional  shares  for  service  as  chairman  of the stock  option  committee.
Further,  the Board of  Directors  adopted  to keep the  compensation  for board
meeting  attendance  of  $1,000  or $500 per  meeting  attended  in person or by
telephone,  respectively.  The Company recognized an expense in 2006 of $261,250
and  in  2005  of  $100,667  for  outside  director   compensation.   The  board
compensation  for 2006 was paid on  January  1,  2007 in the form of  promissory
notes to the individual directors (See Subsequent Events comment).  In addition,
the Board of Directors  authorized  the payment of interest to board members and
officers  who have  advanced  funds to the Company from time to time or who have
unpaid accrued salaries unpaid by the Company.  Accordingly, the Company charged
$0 and  $48,800  to  interest  expense in 2006 and 2005,  respectively  for such
interest accruals.

The amount of unexercised stock options outstanding as of December 31, 2006 held
by each director is as follows:

............................Matthew H. Fleeger                 258,447
............................Winship Moody, Sr.                 105,667
............................Ajit S. Brar                        93,208
............................David L. Mack                       62,222
............................Steven R. Block                          -
............................Mark Altenau                        69,833








                                       34
<PAGE>
<TABLE>
<CAPTION>


Item 11..  Security  Ownership of Certain  Beneficial  Owners and Management and
Related Stockholder Matters.

     The  following  table sets forth each certain  information  concerning  the
number of shares of Common Stock owned beneficially as of March 31, 2007 by: (i)
persons  known to us to own more than five  percent  of any class of our  voting
securities;  (ii) each of our directors and the executive officers named in Item
10 above; and (iii) all our directors and executive officers as a group.  Unless
otherwise indicated,  the stockholders listed possess sole voting and investment
power with respect to the shares shown.

                                                                     Number of Shares
           Name and Address of Beneficial Owner                      Beneficially Owned(1)          Percent of Class(2)
           ------------------------------------                      ---------------------          -------------------

<S>        <C>                                                       <C>                            <C>
Matthew H. Fleeger, President, CEO and Director                        1,275,889(3)                        4.9%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas 75251
Winship B. Moody, Sr., Chairman of the Board of Directors                901,396(4)                        3.4%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas 75251
Ajit S. Brar, Director                                                  909,875(5)                         3.5%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas 75251
David L. Mack, Director                                                  62,222(6)                         0.2%
    12750 Merit Drive - Park Central VII, Suite 770
    Dallas, Texas 75251
Steven R. Block, Director                                                 50,000                           0.2%
     12750 Merit Drive - Park Central VII, Suite 770
     Dallas, Texas 75251
Lonnie P. Cole, Sr., Senior Vice President, Sales                        149,000(7)                        0.6%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas  75251
Steve Evans, Vice President, Finance
     12750 Merit Drive -Park Central VII, Suite 770
     Dallas, Texas  75251                                                145,665(8)                        0.6%
Alan Larosee, Vice President, Operations
     12750 Merit Drive -Park Central VII, Suite 770
     Dallas, Texas  75251                                                221,666(9)                        0.9%
James M. Treat, Vice President, Business Development
     12750 Merit Drive - Park Central VII, Suite 770
     Dallas, Texas 75251                                                 173,333(10)                       0.7%
All Directors and Executive
Officers as a Group (9 persons)
                                                                       3,889,046(11)                       14.3%(12)
Tate Investments, LLC                                                  3,944,880(13)                       15.2%
     12750 Merit Drive - Park Central VII, Suite 770
     Dallas, Texas 75251
Mark Altenau, M.D., Director                                           2,153,292(14)                       10.2%
     12750 Merit Drive -Park Central VII, Suite 770
     Dallas, Texas 75251
</TABLE>

(1)  Pursuant  to Rule 13d-3  under the  Exchange  Act, a person has  beneficial
ownership of any  securities  as to which such person,  directly or  indirectly,
through any contract, arrangement,  undertaking,  relationship or otherwise, has
or shares voting power and/or  investment  power as to which such person has the
right to acquire such voting and/or investment power within 60 days.  Percentage
of beneficial  ownership as to any person as of a particular  date is calculated
by dividing the number of shares beneficially owned by such person by the sum of
the  number of shares  outstanding  as of such date and the  number of  unissued
shares as to which such person has the right to acquire voting and/or investment
control within 60 days. The number of shares shown includes  outstanding  shares
owned as of March  31  2007,  by the  person  indicated  and  shares  underlying
warrants,  options and/or convertible debt and accrued interest thereon owned by
such  person on March 31,  2007,  that were  exercisable  within 60 days of that
date.



                                       35
<PAGE>
<TABLE>
<CAPTION>


(2)  Applicable  percentage  ownership is based on  25,983,869  voting shares of
Common Stock outstanding on March 31, 2007.

(3) Includes  670,790  shares owned by Preston Harris  Interests,  Inc., a Texas
corporation,  of which Mr.  Fleeger is the  president  and  options  for 258,447
shares of common  stock at December 31, 2006.  (See  Certain  Relationships  and
Related Transactions.)

(4) Includes  100,000  shares of Common Stock  underlying  convertible  debt and
accrued  interest  thereon and options for 105,667 shares of common stock.  (See
Certain Relationships and Related Transactions.)

(5) Includes  100,000  shares of Common Stock  underlying  convertible  debt and
accrued  interest  thereon and options for 93,208 shares of Common  Stock.  (See
Certain Relationships and Related Transactions.)

(6)  Includes   options  for  62,222  shares  of  Common  Stock.   (See  Certain
Relationships and Related Transactions.)

(7) Includes  149,000  shares owned by Med-Con  Waste  Solutions,  Inc., a Texas
corporation, of which Mr. Cole was the President and Chief Executive Officer.

(8) Includes options for 145,665 shares of Common Stock.

(9) Includes options for 221,666 shares of Common Stock.

(10) Includes options for 173,333 shares of Common Stock.

(11) Includes  1,260,208 shares of Common Stock underlying  convertible debt and
accrued interest  thereon,  and stock options at December 31, 2006. (See Certain
Relationships and Related Transactions.)

(12)  Applicable  percentage  ownership is based on 25,983,869  voting shares of
Common Stock  outstanding  on March 31, 2007, and on shares  issuable  within 60
days of March 31, 2007.

(13) Includes  2,406,417 shares of Common Stock underlying  convertible debt and
accrued interest thereon. (See Certain Relationships and Related Transactions.)

(14)  Includes  options  for  69,833  shares  of  Common  Stock.   (See  Certain
Relationships and Related Transactions.)


                      Equity Compensation Plan Information
                            (as of December 31, 2006)

------------------------------------------------------ --------------------- --------------------- ---------------------
                                                                               Number of
                                                                               securities
                                                                               remaining available
                                          Number of                            for future issuance
                                       securities to be                          under equity
                                         issued upon      Weighted-average     compensation plans
                                         exercise of     exercise price of       (excluding
                                         outstanding        outstanding          securities
                                      options, warrants  options, warrants    reflected in column
                                        and rights (a)     and rights (b)         (a)) (c)
---------------------------------------- ------------        ----------        ---------------
<S>                                      <C>                 <C>               <C>

Equity compensation plans approved
       by Security holders ...........     1,328,796           $0.80                1,671,204
---------------------------------------- ------------        ----------        ---------------
Equity compensation plans not approved
       by Security  holders...........         --                --                     --

---------------------------------------- ------------        ----------        ---------------
      Total...........................     1,328,796           $0.80                1,671,204
---------------------------------------- ------------        ----------        ---------------

</TABLE>





                                       36
<PAGE>



Item  12..Certain   Relationships   and  Related   Transactions,   and  Director
Independence.


     We  have  certain  notes  and  obligations  owed  to our  stockholders  and
officers. At December 31, 2006 and 2005, such amounts are as follows:

                                                              December 31,
                                                        2006              2005
                                                        ----              ----
                  Estate of Vivian Eriksen         $  100,721         $  239,805
                  Winship Moody, Sr.                  320,554             87,159
                  Matthew Fleeger                      39,591              8,556
                  Ajit Brar                           292,592            455,058
                  Tate Investments, LLC             1,500,000            975,000
                                                    ---------         ----------
                    Total                          $2,253,458         $1,765,578
                                                   ==========         ==========

Loans from Directors and Stockholders

     On March 15, 2006, the Company issued a convertible  promissory note in the
amount of $500,000 to Tate Investments LLC ("the Investor"). The promissory note
is payable in 35 monthly  installments  of interest  only with all principal and
interest due on March 31, 2009.  The note accrues  interest at 10% for the first
12 months,  11% for months 13 through 24 and 12% for months 25 through maturity.
The effect of the  increasing  interest  rate under EITF 86-15  "Increasing-Rate
Debt" was  determined to be de minimus.  The Company may prepay a portion or all
of the  amount  outstanding  under the terms of the note after  March 31,  2007,
provided that the Company notify the Investor of the Company's  intent to prepay
after  which,  the  Investor  will  have 30 days to  convert  the note  into the
Company's  Common  Stock.  The  Investor  has the right to  convert  the  amount
outstanding  plus  accrued but unpaid  interest at the time of  conversion.  The
conversion  price for the $500,000  note agreed to is $0.85 per share during the
period  beginning March 15, 2006 through March 31, 2007,  $1.00 per share during
the period  beginning  April 1, 2007 through March 31, 2008, and $1.15 per share
during the period April 1, 2008 through maturity. The promissory note is secured
by two PIWS mobile units and is  cross-collateralized by the Investor's liens on
the  Company's  accounts  receivable  and its Garland  facility  pursuant to the
Investment Agreement between the Company and the Investor. The proceeds from the
promissory note were used by the Company to purchase equipment.

     On May 22,  2006,  the  Company  and  the  Investor  agreed  to  amend  the
Investment Agreement to lower the conversion price for the $1,000,000 Promissory
Note to $0.55  per share  from  $0.65 per  share in  exchange  for the  Investor
retroactively  (as of July  15,  2005,  the date the  Investment  Agreement  was
executed)  eliminating  the  requirements  for the  Company to  achieve  certain
earnings targets thereunder. In connection with the conversion price adjustment,
the Company was required to record a beneficial  conversion  charge of $153,846.
The beneficial  conversion  charge  represents the incremental fair value of the
impact  from  lowering  the  conversion  rate  and  will be  amortized  over the
remaining life of the note. As of December 31, 2006, the remaining amount of the
beneficial conversion charge to amortize was $102,564.

     As of December 31, 2006, the total principal  amount owed by the Company to
the  Investor  was  $1,397,436,  net of discount of  $102,564,  all of which was
subsequently  converted by the Investor into shares of Common Stock on March 30,
2007. The largest aggregate principal amount outstanding from the Company to the
Investor during the year ended December 31, 2006 was  $1,500,000;  the aggregate
amount of principal  repaid by the Company to the Investor  during such year was
$250,000;  and the  aggregate  amount of  interest  paid by the  Company  to the
Investor during such year was $136,014.

     On October 3, 2006,  the Company  issued a convertible  promissory  note to
Winship B. Moody,  Sr., our Chairman of the Board,  who loaned  $100,000 for the
purpose of providing  working  capital to the Company.  The  promissory  note is
payable in interest only monthly  installments  for three months and afterwards,
it begins paying 24 equal monthly  installments of principal and interest in the
amount of $4,707 each. The note accrues interest at 12% and at the option of the
holder,  any unpaid  principal and accrued interest may be converted into Common
Stock at the conversion price of $1.00 per share. The note matures on January 3,
2009. The largest  principal  amount  outstanding  from the Company to Mr. Moody
pursuant to the note during the year ended  December 31, 2006 was $100,000;  the
aggregate amount of principal repaid by the Company to Mr. Moody pursuant to the
note  during  such year was $0; the  aggregate  amount of  interest  paid by the
Company to Mr. Moody  pursuant to the note during such year was $2,000;  and the
principal amount outstanding under the note as of March 31, 2007 was $92,548.



                                       37
<PAGE>


     On December 28, 2006,  the Company  issued a promissory  note to Winship B.
Moody,  Sr., our Chairman of the Board,  who loaned  $175,000 for the purpose of
providing equipment financing to the Company.  The promissory note is payable in
36 equal monthly  installments of principal and interest in the amount of $5,813
each.  The note accrues  interest at 12% and matures on December  28, 2008.  The
largest  principal amount  outstanding from the Company to Mr. Moody pursuant to
the note during the year ended  December 31, 2006 was  $175,000;  the  aggregate
amount of  principal  repaid by the  Company to Mr.  Moody  pursuant to the note
during such year was $0; the aggregate amount of interest paid by the Company to
Mr. Moody pursuant to the note during such year was $0; and the principal amount
outstanding under the note as of March 31, 2007 was $162,690.

     On October 3, 2006,  the Company  issued a convertible  promissory  note to
Ajit Brar, one of our directors/shareholders who loaned $100,000 for the purpose
of providing  working capital to the Company.  The promissory note is payable in
interest only monthly installments for 24 months at $1,000 per installment.  The
note  accrues  interest  at 12% and at the  option  of the  holder,  any  unpaid
principal  and  accrued  interest  may be  converted  into  Common  Stock at the
conversion of $1.00 per share. The note matures on October 3, 2008 at which time
all principal and accrued interest thereon is due. The largest  principal amount
outstanding  from the Company to Mr.  Brar  pursuant to the note during the year
ended December 31, 2006 was $100,000;  the aggregate  amount of principal repaid
by the  Company to Mr.  Brar  pursuant  to the note during such year was $0; the
aggregate  amount of interest  paid by the  Company to Mr. Brar  pursuant to the
note during such year was $2,000; and the principal amount outstanding under the
note as of March 31, 2007 was $175,000.

     The Company  issued a  promissory  note in the amount of $26,435 to Matthew
Fleeger,  our  President  and Chief  Executive  Officer,  on January 1, 2007 for
payment of  compensation  for giving his  personal  guaranty  related to certain
indebtedness  of the Company to various third parties.  The note matures on July
1, 2007 at which time all principal and accrued interest thereon will be due and
payable. The note accrues interest at 12%.

     The Company issued a Promissory Note in the amount of $4,321 to Mr. Winship
Moody,  Sr.,  our  Chairman  of the Board,  on  January  1, 2007 for  payment of
compensation for giving his personal guaranty related to certain indebtedness of
the Company to various third parties.  The note matures on July 1, 2007 at which
time all principal  and accrued  interest  thereon will be due and payable.  The
note accrues interest at 12%.

Stockholder Lock-Up Agreement

     Stockholders owning approximately 70% of our Common Stock have entered into
a lock-up agreement (the "Lock-Up  Agreement") with us by which the stockholders
agreed  to place  certain  restrictions  on their  right  to  sell,  pledge,  or
otherwise  transfer  shares of Common Stock owned by them for one year following
the date that the Common Stock is initially quoted on the OTC Bulletin  Board(R)
or other national exchange (the "Effective Date"). Essentially, the stockholders
who signed the agreement  (the  "Restricted  Stockholders")  agreed not to sell,
pledge, or otherwise  transfer shares of Common Stock owned by them,  subject to
the following: (i) after the expiration of one year from the Effective Date, 20%
of the shares of Common Stock owned by the Restricted Stockholder will no longer
be subject  to the  Lock-Up  Agreement;  (ii)  after the  expiration  of 90 days
following the completion of one year from the Effective  Date, 40% of the shares
of Common Stock owned by the Restricted Stockholder will no longer be subject to
the Lock-Up  Agreement;  (iii) after the  expiration  of 180 days  following the
completion  of one year from the  Effective  Date,  60% of the  shares of Common
Stock  owned by the  Restricted  Stockholder  will no longer be  subject  to the
Lock-Up  Agreement;  (iv)  after  the  expiration  of  270  days  following  the
completion  of one year from the  Effective  Date,  80% of the  shares of Common
Stock  owned by the  Restricted  Stockholder  will no longer be  subject  to the
Lock-Up  Agreement;  and (v) after  expiration  of two years from the  Effective
Date,  100% of the shares of Common  Stock owned by the  Restricted  Stockholder
will no longer be subject to the  Lock-Up  Agreement.  The  restrictions  do not
apply to (i) a bona fide gift made by the Restricted Stockholder,  provided that
the donee of the  shares  of  Common  Stock or  securities  convertible  into or
exchangeable  or exercisable  for any shares of Common Stock agree in writing to
be bound by the  terms  of the  Lock-Up  Agreement  prior  to the  gift;  (ii) a
distribution to partners or stockholders of the Restricted  Stockholder  (and to
any  direct or  indirect  partner or  stockholder  thereof),  provided  that the
ultimate  distributees  of the shares of Common Stock or securities  convertible
into or  exchangeable  or  exercisable  for any shares of Common  Stock agree in
writing  to be  bound  by  the  terms  of the  Lock-Up  Agreement  prior  to the
distribution;  and (iii) transfers,  without consideration,  of shares of Common
Stock or securities  convertible  into or  exchangeable  or exercisable  for any
shares of Common  Stock to family  members or to one or more trusts  established
for the  benefit of one or more family  members,  provided  that the  transferee
agrees in writing to be bound by the terms of the Lock-Up Agreement prior to the
transfer.




                                       38
<PAGE>


Item 13. Exhibits.

     3.1  Articles  of  Incorporation  of  MedSolutions,  Inc.,  filed  with the
Secretary  of Sate of the State of Texas on November  12, 1993 (filed as Exhibit
3.1 to the Company's Form 10-SB filed on July 16, 2001, and incorporated  herein
by reference).

     3.2 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary  of State of the State of Texas on January  10,
1994 (filed as Exhibit 3.2 to the  Company's  Form 10-SB filed on July 16, 2001,
and incorporated herein by reference).

     3.3 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary  of State of the State of Texas on January  31,
1996 (filed as Exhibit 3.3 to the  Company's  Form 10-SB filed on July 16, 2001,
and incorporated herein by reference).

     3.4 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary  of State of the State of Texas on November 12,
1996 (filed as Exhibit 3.4 to the  Company's  Form 10-SB filed on July 16, 2001,
and incorporated herein by reference).

     3.5 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary  of State of the State of Texas on December 23,
1999 (filed as Exhibit 3.5 to the  Company's  Form 10-SB filed on July 16, 2001,
and incorporated herein by reference).

     3.6 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary of State of the State of Texas on June 27, 2001
(filed as Exhibit 3.6 to the  Company's  Form 10-SB filed on July 16, 2001,  and
incorporated herein by reference).

     3.7 Bylaws, as amended, of MedSolutions,  Inc. (filed as Exhibit 3.7 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).

     4.1 Form of Lock-Up  Agreement  (filed as Exhibit 4.1 to the Company's Form
10-SB filed on July 16, 2001, and incorporated herein by reference).

     4.2 Form of Subscription  Agreement  (filed as Exhibit 4.2 to the Company's
Form 10-SB filed on July 16, 2001, and incorporated herein by reference).

     4.3 Stock Purchase Option,  dated January 15, 1997,  between  MedSolutions,
Inc. and Gary S. Krall (filed as Exhibit 4.3 to the Company's Amendment No. 1 to
Form 10-SB filed on February 13, 2002, and incorporated herein by reference).(*)

     4.4  Certificate of Designation of the Series A 10%  Convertible  Preferred
Stock, as filed with the Texas Secretary of State on November 12, 2004 (filed as
Exhibit  4.1 to  the  Company's  Form  8-K  filed  on  November  12,  2004,  and
incorporated herein by reference).

     10.1 Firm Commitment Agreement, dated October 31, 2000, between Lilly Beter
Capital  Group,  Ltd.  and  MedSolutions,  Inc.  (filed as  Exhibit  10.1 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).

     10.2 Loan  Conversion and Common Stock  Agreement  between Mark M. Altenau,
M.D. and  MedSolutions,  Inc., dated July 31, 2000 (filed as Exhibit 10.2 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).

     10.3  Contractor  Services  Agreement  effective  May 28, 1995, as amended,
between  MedSolutions,  Inc.  and The  University  of Texas  Medical  Branch  at
Galveston  (filed as Exhibit 10.3 to the Company's  Form 10-SB filed on July 16,
2001, and incorporated herein by reference).

     10.4 Memorandum of Agreement,  dated June 15, 2001,  between  MedSolutions,
Inc. and  Intercontinental  Manufacturing  Company (filed as Exhibit 10.4 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).



                                       39
<PAGE>


     10.5  Exclusive  Medical  Waste  Service  Agreement,  dated March 21, 2002,
between EnviroClean  Management Services,  Inc. and Christus Spohn Health System
(filed as Exhibit  10.5 to the  Company's  Form 10-QSB filed on August 16, 2002,
and incorporated herein by reference).+

     10.6 Medical Waste  Transportation and Disposal  Agreement,  dated March 1,
2001, between EnviroClean Management Services,  Inc., and Trinity Mother Frances
Regional  Health Center (filed as Exhibit 10.6 to the Company's  Amendment No. 1
to  Form  10-SB  filed  on  February  13,  2002,  and  incorporated   herein  by
reference).+

     10.7  Amended  and  Restated   Promissory  Note  dated  July  31,  2001  by
MedSolutions,  Inc. to Mark M. Altenau,  M.D. for $171,666.67  (filed as Exhibit
10.7 to the Company's  Amendment No. 1 to Form 10-SB filed on February 13, 2002,
and incorporated herein by reference).

     10.8  Amended and  Restated  Loan  Conversion  and Common  Stock  Agreement
between Mark M. Altenau, M.D. and MedSolutions, Inc., dated July 31, 2001 (filed
as Exhibit 10.8 to the Company's Amendment No. 1 to Form 10-SB filed on February
13, 2002, and incorporated herein by reference).

     10.9 Amendment 4 to the Contractor Services Agreement between MedSolutions,
Inc. and University of Texas Medical  Branch at Galveston  (Exhibit 10.9) (filed
as Exhibit 10.9 to the Company's Amendment No. 1 to Form 10-SB filed on February
13, 2002, and incorporated herein by reference).

     10.10 LBCG  Financing  Proposal  (filed as Exhibit  10.10 to  MedSolutions,
Inc.'s  Amendment  No.  1  to  Form  10-SB  filed  on  February  13,  2002,  and
incorporated herein by reference).

     10.11 Purchase Agreement for the purchase of an autoclave for MedSolutions,
Inc.'s  Garland  facility  between  EnviroClean  Management  Services,  Inc. and
BondTech,  Inc.  (filed as Exhibit 10.11 to the  Company's  Form 10-QSB filed on
August 19, 2002, and incorporated herein by reference).

     10.12 Promissory Note dated August 28, 2002 by MedSolutions, Inc. to Vivian
Eriksen for  $202,250.79.  (filed as Exhibit 10.12 to the Company's  Form 10-QSB
filed on November 14, 2002, and incorporated herein by reference).

     10.13 Promissory Note dated August 28, 2002 by MedSolutions, Inc. to Vivian
Eriksen for  $90,000.00.  (filed as Exhibit 10.13 to the  Company's  Form 10-QSB
filed on November 14, 2002, and incorporated herein by reference).

     10.14 Promissory Note dated August 28, 2002 by MedSolutions, Inc. to Vivian
Eriksen for  $322,749.21.  (filed as Exhibit 10.14 to the Company's  Form 10-QSB
filed on November 14, 2002, and incorporated herein by reference).

     10.15 Asset Purchase Agreement and related exhibits thereto, dated November
7, 2003, between MedSolutions, Inc. and AmeriTech Environmental,  Inc. (filed as
Exhibit  2.1 to  the  Company's  Form  8-K  filed  on  November  24,  2003,  and
incorporated herein by reference).

     10.16 Promissory Note dated March 7, 2004, by MedSolutions, Inc. to Ajit S.
and Saroj Brar for  $500,000.00.  (filed as Exhibit 10.16 to the Company's  Form
10-QSB filed on July 14, 2004, and incorporated herein by reference).

     10.17 Promissory Note dated July 7, 2004, by MedSolutions,  Inc. to Ajit S.
Brar for $250,000.00  (filed as Exhibit 10.17 to the Company's Form 10-QSB filed
on November 19, 2004, and incorporated herein by reference).

     10.18  Promissory  Note dated September 27, 2004 by  MedSolutions,  Inc. to
Ajit S. Brar for $150,000.  (filed as Exhibit 10.18 to the Company's Form 10-QSB
filed on November 19, 2004, and incorporated herein by reference).

     10.19  Promissory  Note dated September 29, 2004 by  MedSolutions,  Inc. to
Winship Moody for $150,000. (filed as Exhibit 10.19 to the Company's Form 10-QSB
filed on November 19, 2004, and incorporated herein by reference).



                                       40
<PAGE>


     10.20  Promissory  Note dated  November  7, 2003 by  MedSolutions,  Inc. to
Winship Moody for $238,225. (filed as Exhibit 10.20 to the Company's Form 10-QSB
filed on November 19, 2004, and incorporated herein by reference).

     10.21  Promissory  Note dated July 19,  2004 by  MedSolutions,  Inc. to Don
McAfee for  $35,562.99.  (filed as Exhibit  10.21 to the  Company's  Form 10-QSB
filed on November 19, 2004, and incorporated herein by reference).

     10.22 Asset  Purchase  Agreement,  dated as of September  30, 2004,  by and
between MedSolutions,  Inc. and Med-Con Waste Solutions,  Inc. (filed as Exhibit
2.1 to the Company's Form 8-K filed on October 6, 2004, and incorporated  herein
by reference).

     10.23 Promissory Note dated December 6, 2004 by MedSolutions,  Inc. to Ajit
S. Brar for $100,000. (filed as Exhibit 10.23 to the Company's Form 10-KSB filed
on April 15, 2005, and incorporated herein by reference).

     10.24 Employment  Agreement dated September 30, 2004 between  MedSolutions,
Inc.  and  Lonnie P.  Cole,  Sr.  (the form of which was an exhibit to the Asset
Purchase  Agreement  filed as  Exhibit  2.1 to the  Company's  Form 8-K filed on
October 6, 2004, and incorporated herein by reference).*

     10.25  Employment  Agreement dated December 30, 2004 between  MedSolutions,
Inc. and Matthew H. Fleeger  (filed as Exhibit  10.1 to the  Company's  Form 8-K
filed on December 30, 2004, and incorporated herein by reference).*

     10.26  Employment  Agreement  dated February 1, 2005 between  MedSolutions,
Inc. and J. Steven Evans (filed as Exhibit  10.14 to the  Company's  Form 10-QSB
filed on November 21, 2005, and incorporated herein by reference).* **

     10.27 Employment Agreement dated March 1, 2005 between  MedSolutions,  Inc.
and Alan Larosee  (filed as Exhibit 10.15 to the Company's  Form 10-QSB filed on
November 21, 2005, and incorporated herein by reference).* **

     10.28 Promissory Note dated June 30, 2005 by MedSolutions,  Inc. to Ajit S.
Brar for $488,149 (filed as Exhibit 10.16 to the Company's  Quarterly  Report on
Form 10-QSB on August 22, 2005, and incorporated herein by reference).

     10.29 Promissory Note dated June 30, 2005 by MedSolutions,  Inc. to Winship
Moody for  $23,728(filed  as Exhibit 10.17 to the Company's  Quarterly Report on
Form 10-QSB on August 22, 2005, and incorporated herein by reference).

     10.30 Investment Agreement dated as of July 15, 2005 between  MedSolutions,
Inc. and Tate  Investments,  LLC (filed as Exhibit 10.1 to the Company's Current
Report  on  Form  8-K  filed  on July  20,  2005,  and  incorporated  herein  by
reference).

     10.31 General Business Security Agreement dated as of July 15, 2005 between
MedSolutions,  Inc.  and Tate  Investments,  LLC (filed as  Exhibit  10.2 to the
Company's  Current Report on Form 8-K filed on July 20, 2005,  and  incorporated
herein by reference).

     10.32  Deed of Trust  dated  as of July 15,  2005  granted  by  EnviroClean
Management Services, Inc. (filed as Exhibit 10.3 to the Company's Current Report
on Form 8-K filed on July 20, 2005, and incorporated herein by reference).

     10.33  Loan  Agreement  dated  as of  July  29,  2005  between  EnviroClean
Management  Services,  Inc. and Park Cities Bank (filed as Exhibit  10.21 to the
Company's  Form 10-QSB filed on November 21, 2005,  and  incorporated  herein by
reference).

     10.34  Promissory  Note  dated as of July 29,  2005  issued by  EnviroClean
Management  Services,  Inc. to Park Cities Bank for  $325,000  (filed as Exhibit
10.22 to the Company's Form 10-QSB filed on November 21, 2005, and  incorporated
herein by reference).

     10.35 Asset Purchase  Agreement dated as of August 29, 2005, by and between
MedSolutions,  Inc. and On Call Medical Waste  Service,  Ltd.  (filed as Exhibit
10.1 to the Company's  Current  Report on Form 8-K filed on August 31, 2005, and
incorporated herein by reference).

     10.36 Promissory Note dated February 14, 2005 by MedSolutions, Inc. to Ajit
S. Brar for $75,000  (filed as Exhibit 10.26 to the Company's  Form 10-QSB filed
on November 21, 2005, and incorporated herein by reference).



                                       41
<PAGE>


     10.37  Promissory  Note dated  February 17, 2005 by  MedSolutions,  Inc. to
Winship Moody for $75,000  (filed as Exhibit 10.27 to the Company's  Form 10-QSB
filed on November 21, 2005, and incorporated herein by reference).

     10.38 Promissory Note dated October 7, 2005 issued by MedSolutions, Inc. to
On Call Medical Waste Service,  Ltd. for $375,000 (filed as Exhibit 10.38 to the
Company's  Form  10-KSB  filed on April 17,  2006,  and  incorporated  herein by
reference).

     10.39 Promissory Note dated November 28, 2005 issued by MedSolutions,  Inc.
to Ajit S. Brar for $75,000 (filed as Exhibit 10.39 to the Company's Form 10-KSB
filed on April 17, 2006, and incorporated herein by reference).

     10.40 Promissory Note dated November 30, 2005 issued by MedSolutions,  Inc.
to Winship  Moody for  $75,000  (filed as Exhibit  10.40 to the  Company's  Form
10-KSB filed on April 17, 2006, and incorporated herein by reference).

     10.41 Promissory Note dated February 7, 2006 issued by  MedSolutions,  Inc.
to On Call Medical Waste Service,  Ltd. for $200,000  (filed as Exhibit 10.41 to
the Company's  Form 10-KSB filed on April 17, 2006, and  incorporated  herein by
reference).

     10.42 Promissory Note dated February 7, 2006 issued by  MedSolutions,  Inc.
to On Call Medical Waste Service,  Ltd. for $175,000  (filed as Exhibit 10.42 to
the Company's  Form 10-KSB filed on April 17, 2006, and  incorporated  herein by
reference).

     10.43 First  Amendment to Investment  Agreement  dated as of March 15, 2006
between MedSolutions,  Inc. and Tate Investments, LLC (filed as Exhibit 10.43 to
the Company's  Form 10-KSB filed on April 17, 2006, and  incorporated  herein by
reference).

     10.44 Loan Agreement dated as of March 15, 2006 between MedSolutions,  Inc.
and Tate  Investments,  LLC (filed as Exhibit 10.44 to the Company's Form 10-KSB
filed on April 17, 2006, and incorporated herein by reference).

     10.45  Convertible  Secured  Promissory Note dated March 15, 2006 issued by
MedSolutions, Inc. to Tate Investments, LLC for $500,000 (filed as Exhibit 10.45
to the Company's Form 10-KSB filed on April 17, 2006, and incorporated herein by
reference).

     10.46 Security  Agreement dated as of March 15, 2006 between  MedSolutions,
Inc. and Tate  Investments,  LLC (filed as Exhibit 10.46 to the  Company's  Form
10-KSB filed on April 17, 2006, and incorporated herein by reference).

     10.47  Employment  Agreement  dated December 1, 2005 between  MedSolutions,
Inc. and James Treat (filed as Exhibit 10.47 to the Company's  Form 10-KSB filed
on April 17, 2006, and incorporated herein by reference).

     10.48 Asset  Purchase  Agreement  dated as of  November  30,  2005,  by and
between  MedSolutions,  Inc. and Positive Impact Waste Solutions,  LLC (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K on December 5, 2005, and
incorporated herein by reference).

     10.49  Amendment and Settlement  Agreement dated as of June 30, 2006 by and
between  MedSolutions,  Inc. and Positive Impact Waste Solutions,  LLC (filed as
Exhibit  10.49 to the  Company's  Quarterly  Report on Form 10-QSB on August 21,
2006, and incorporated herein by reference).

     10.50 Merger  Agreement and Plan of  Reorganization  dated as of August 16,
2006 by and between MedSolutions,  Inc., SteriLogic Acquisition Subsidiary, Inc.
and  SteriLogic  Waste  Systems,  Inc.  (filed as Exhibit 10.50 to the Company's
Quarterly Report on Form 10-QSB on August 21, 2006, and  incorporated  herein by
reference).

     10.51 Promissory Note dated October 3, 2006 issued by MedSolutions, Inc. to
Winship B. Moody,  Sr. for  $100,000  (filed as Exhibit  10.51 to the  Company's
Quarterly Report on Form 10-QSB on November 20, 2006, and incorporated herein by
reference).

     10.52 Promissory Note dated October 3, 2006 issued by MedSolutions, Inc. to
Ajit S. Brar for $100,000  (filed as Exhibit  10.52 to the  Company's  Quarterly
Report  on Form  10-QSB  on  November  20,  2006,  and  incorporated  herein  by
reference).



                                       42
<PAGE>


     10.53 Loan and Security  Agreement dated as of March 27, 2007, by and among
EnviroClean Management Services,  Inc., Park Cities Bank, Matthew H. Fleeger and
Winship B. Moody, Sr. (filed as Exhibit 10.1 to the Company's  Current Report on
Form 8-K on April 2, 2007, and incorporated herein by reference).

     10.54 $1,500,000 Revolving Note issued by EnviroClean  Management Services,
Inc.  to Park  Cities  Bank on March  27,  2007  (filed as  Exhibit  10.2 to the
Company's  Current Report on Form 8-K on April 2, 2007, and incorporated  herein
by reference).

     10.55  Convertible   Promissory  Note  dated  January  2,  2007  issued  by
MedSolutions, Inc. to Tate Investments, LLC for $175,000.**

     10.56  Convertible  Promissory  Note  dated  December  21,  2006  issued by
MedSolutions, Inc. to Winship Moody for $175,000.**

     31.1  Certification  of  Chief  Executive  Officer  of  MedSolutions,  Inc.
Pursuant to Rule 13a-14(a)/15d-14(a).**

     31.2  Certification  of Chief  Accounting  Officer  of  MedSolutions,  Inc.
Pursuant to Rule 13a-14(a)/15d-14(a).**

     32.1  Certification  of  Chief  Executive  Officer  of  MedSolutions,  Inc.
Pursuant to 18 U.S.C. Section 1350.**

     32.2  Certification  of Chief  Accounting  Officer  of  MedSolutions,  Inc.
Pursuant to 18 U.S.C. Section 1350.**

----------

     (*)  Denotes a management contract or compensatory plan or arrangement.

     (+)  Confidential  treatment was requested with respect to certain portions
          of this exhibit.  Omitted  portions were filed separately with the SEC
          at the time the exhibit was filed.

     (**) Filed herewith.

Item 14. Principal Accountant Fees and Services.

     Audit Fees. The aggregate fees billed by Marcum & Kliegman,  L.L.P. for the
fiscal years ended December 31, 2006 and 2005 for professional services rendered
for the audit of the Company's  annual financial  statements,  the review of the
financial  statements  included in the Company's  Forms 10-QSB and services that
were provided in connection with statutory and regulatory filings or engagements
totaled $95,675 and $86,500, respectively.

     Audit-Related Fees. The aggregate fees billed by Marcum & Kliegman,  L.L.P.
for the fiscal years ended  December 31, 2006 and 2005 for assurance and related
services that are reasonably  related to the  performance of the audit or review
of the  Company's  financial  statements  and are not disclosed in the paragraph
captioned "Audit Fees" above were $0 and $0, respectively.

     Tax Fees.  The aggregate fees billed by Marcum & Kliegman,  L.L.P.  for the
fiscal years ended December 31, 2006 and 2005 for professional services rendered
for tax  compliance,  tax  advice and tax  planning  were  $9,500  and  $10,000,
respectively.  The fees were for  preparing  the  Company's  federal  income tax
returns.

     All Other Fees. The aggregate fees billed by Marcum & Kliegman,  L.L.P. for
the fiscal years ended  December  31, 2006 and 2005 for  products and  services,
other than the services  described in the  paragraphs  captioned  "Audit  Fees",
"Audit-Related   Fees",   and  "Tax  Fees"   above  were   $33,729  and  $2,793,
respectively.  The fees were for  professional  services related to acquisitions
and SEC matters.

     The  Audit  Committee  has  established  its   pre-approval   policies  and
procedures,  pursuant  to which  the  Audit  Committee  approved  the  foregoing
services provided by Marcum & Kliegman, LLP in 2006.



                                       43
<PAGE>




                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                                     MEDSOLUTIONS, INC.


Dated:  April 16, 2007            By:  /s/ Matthew H. Fleeger
                                       ----------------------------------------
                                           Matthew H. Fleeger
                                           President and Chief Executive Officer

                                  By: /s/ J. Steven Evans
                                      -------------------
                                          Vice President/Finance and Chief
                                          Accounting Officer



     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

               Signature                   Title                       Date

/s/ Matthew H. Fleeger          President, Chief Executive        April 16, 2007
---------------------------     Officer and Director
    Matthew H. Fleeger

/s/ Winship B. Moody, Sr.       Chairman of the Board             April 16, 2007
-------------------------       of Directors
Winship B. Moody, Sr.

/s/ Ajit S. Brar                Director                          April 16, 2007
--------------------
Ajit S. Brar

/s/ David L. Mack               Director                          April 16, 2007
-----------------
David L. Mack

/s/ Steven R. Block             Director                          April 16, 2007
-------------------
Steven R. Block






                                       44
<PAGE>

                               MEDSOLUTIONS, INC.

                          INDEX TO FINANCIAL STATEMENTS


                                                                           Page
                                                                         -------
 PART II - FINANCIAL INFORMATION:


    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                  F-1


    CONSOLIDATED BALANCE SHEETS                                              F-2
      At December 31, 2006 and 2005


    CONSOLIDATED STATEMENTS OF OPERATIONS                                    F-3
      For the Years Ended December 31, 2006 and 2005


    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                    F-4 - F-5
      For the YearsEnded December 31, 2006 and 2005


    CONSOLIDATED STATEMENTS OF CASH FLOWS                              F-6 - F-7
      For the Years Ended December 31, 2006 and 2005


    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                        F-8 - F-40






                                       F-i
<PAGE>




To the Board of Directors
MedSolutions, Inc.



            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------

We have audited the  accompanying  consolidated  balance sheets of MedSolutions,
Inc.  (the  "Company")  as of  December  31,  2006  and  2005,  and the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  years  then  ended.  These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated financial statements are free of material misstatement. The Company
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial reporting.  Our audit included  consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness  of the Company's  internal  control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the consolidated  financial statements,  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall consolidated financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
MedSolutions,  Inc.  as of December  31,  2006 and 2005,  and the results of its
operations  and  cash  flows  for the  years  then  ended,  in  conformity  with
accounting principles generally accepted in the United States of America.




                                                          MARCUM & KLIEGMAN, LLP

New York, New York
March 17, 2007









                                      F-1


<PAGE>
<TABLE>
<CAPTION>

                               MEDSOLUTIONS, INC.
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS

                                                                                                   December 31,
                                                                                              2006               2005
                                                                                         ---------------    -------------
<S>                                                                                      <C>                <C>

Current Assets:
  Cash                                                                                 $          -         $         -
  Accounts receivable - trade, net of allowance
    of $174,989 and $69,240                                                               1,847,541           1,405,603
  Prepaid expenses and other current assets                                                 366,141             258,523
  Supplies                                                                                   26,109              14,106
                                                                                        -----------         -----------
      Total Current Assets                                                                2,239,791           1,678,232

Property and equipment - at cost, net of accumulated
  depreciation of $2,805,851 and $1,836,756                                               3,586,766           3,150,504
Intangible assets - Customer list, net of accumulated
  amortization of $1,028,993 and $624,770                                                 1,408,189           1,437,912
Intangible assets - Goodwill                                                              3,403,025           2,597,021
Intangible assets - permits                                                                 152,749              65,007
Other assets                                                                                 46,943             102,126
                                                                                        -----------         -----------
      Total Assets                                                                     $ 10,837,463         $ 9,030,802
                                                                                        ===========         ===========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Convertible debentures                                                               $          -           $  40,135
  Current maturities of long-term obligations                                               372,552             145,628
  Accounts payable                                                                        1,507,220           1,130,155
  Accrued liabilities                                                                     1,281,443             962,327
  Current maturities - notes payable to Tate Investments, LLC                                     -             250,000
  Current maturities - notes payable to Med-Con                                             127,703             157,861
  Current maturities - notes payable to On Call                                             294,541             495,819
  Current maturities - notes payable to Positive Impact                                      97,705             360,669
  Current maturities - notes payable to Abele-Kerr Investments, LLC                          38,948                   -
  Current maturities - notes payable stockholders                                           419,600             487,891
  Current maturities - litigation settlements                                                     -              26,735
  Advances from stockholders                                                                      -              19,004
                                                                                        -----------         -----------
      Total Current Liabilities                                                           4,139,712           4,076,224

Long-term obligations, less current maturities                                            1,003,174             806,952
Notes payable - Tate Investments, LLC, less current maturities, net of
discount of $102,564 and $0                                                               1,397,436             725,000
Notes payable - Med-Con, less current maturities                                            147,047             274,749
Notes payable - On Call, less current maturities                                                  -             119,541
Notes payable - Positive Impact, less current maturities                                    333,796             489,331
Notes payable - Abele-Kerr Investments, LLC, less current maturities                        211,052                   -
Notes payable - stockholders, less current maturities                                       294,267             359,131
                                                                                        -----------         -----------
      Total Liabilities                                                                   7,526,484           6,850,928
                                                                                        -----------         -----------


Commitments and Contingencies

Stockholders' Equity:
 Preferred stock (par value $.001) - 100,000,000
   shares authorized at December 31, 2006 and December 31,2005,respectively,
   96,667 shares issued and outstanding  at December 31,2006 and 283,172 shares
   issued at December 31, 2005 (liquidation preference $145,001 - 2006;
   $424,758 - 2005)
 Common stock (par value $.001) - 100,000,000 shares authorized at December
   31, 2006 and December 31, 2005; 23,792,985 shares issued and 23,780,785
   outstanding at December 31, 2006 and 22,228,980 shares issued and 22,216,780
   outstanding at December 31, 2005                                                            23,793              22,229
Additional paid-in capital                                                                 26,558,608          24,657,770
Accumulated deficit                                                                      (23,253,519)        (22,482,408)
Treasury stock, at cost - 12,200 shares at December 31, 2006
   and December 31, 2005                                                                     (18,000)            (18,000)
                                                                                          -----------         -----------
        Total Stockholders' Equity                                                          3,310,979           2,179,874
                                                                                          -----------         -----------
        Total Liabilities and Stockholders' Equity                                       $ 10,837,463         $ 9,030,802
                                                                                         ============         ============
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      F-2

<PAGE>



                               MEDSOLUTIONS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
                                                For the Years Ended
                                                    December 31,
                                             -------------------------
                                             2006            2005
                                             --------      --------
--------------------------------------------------------------------------------


Revenues                                    $ 12,799,132       9,415,558
Cost of revenues *                             7,925,086       5,680,379
                                            ------------    ------------
Gross profit                                   4,874,046       3,735,179

Operating expenses:
 Selling, general and administrative
 expenses**                                    3,829,489       2,449,460
 Depreciation and amortization                 1,373,318         751,257
                                            ------------    ------------
Total operating expenses                       5,202,807       3,200,717
                                            ------------    ------------
Income (loss) from operations                   (328,761)        534,462

Other (income) expenses:
 Interest expense                                482,485         374,260
 ATE settlement                                     --          (650,468)
 Other income                                    (40,135)           --
                                            ------------    ------------
                                                 442,350        (276,208)
                                            ------------    ------------
Net income (loss)                           $   (771,111)   $    810,670

Preferred stock dividend                         (35,500)        (40,875)
                                            ------------    ------------
Net income (loss) applicable to common
stockholders                                $   (806,611)   $    769,795
                                            ============    ============
Basic net income (loss) per share
attributable to common stockholders                (0.04)   $       0.04
                                            ============    ============
Diluted net income (loss) per share
attributable to common stockholders         $      (0.04)   $       0.04
                                            ============    ============
Weighted average common shares
  used in basic income (loss)
  per share                                   22,875,017      19,857,233
                                            ============    ============
Weighted average common shares
  and dilutive securities used in diluted
  income (loss)  per share                    22,875,017      20,691,501
                                            ============    ============




--------------------------------------------------------------------------------

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

     * Excludes  depreciation  of  $969,095  and  $501,865  for the years  ended
December 31, 2006 and 2005, respectively.

     **  Includes  stock  compensation  charge of  $240,000  for the year  ended
December 31, 2006.


                                      F-3
<PAGE>
<TABLE>
<CAPTION>



                               MEDSOLUTIONS, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


                                                          MSI Preferred Stock
                                                               Series A                  MSI Common Stock
                                                        ----------------------         ----------------------
                                                          Shares      Amount             Shares      Amount
                                                        ----------  ----------         ----------  ----------
 Year Ended December 31, 2006
 ---------------------------------
<S>                                                     <C>          <C>                <C>        <C>

Balance - December 31, 2005                               283,172    $       283     22,228,980    $    22,229
MSI preferred stock converted into common stock          (186,505)          (186)       186,505            186
MSI common stock sold for cash net of transaction
  costs of $106,132                                          --             --          429,500            430
MSI common stock returned due to PIWS settlement             --             --          (52,000)           (52)
MSI conversion price adjustment on convertible debt
  To Tate Investments, LLC                                   --             --             --             --
MSI common stock issued for acquisition                      --             --        1,000,000          1,000
Preferred stock dividend                                     --             --             --             --

Net loss                                                     --             --             --             --
                                                      -----------    -----------    -----------    -----------
Balance - December 31, 2006                                96,667    $        97     23,792,985    $    23,793
                                                      ===========    ===========    ===========    ===========

</TABLE>



                                           ****************************
<TABLE>
<CAPTION>


                                         Additional
                                         Paid-in       Accumulated         Treasury
                                         Capital       Deficit              Stock          Total
                                        ----------     ------------       ---------     ------------
Year Ended December 31, 2006
---------------------------------
<S>                                     <C>            <C>                <C>           <C>

Balance - December 31, 2005             $ 24,657,770    $(22,482,408)   $    (18,000)   $  2,179,874
MSI preferred stock converted into
  common stock                                  --              --              --              --
MSI common stock sold for cash net of
  transaction costs of $106,132              702,438            --              --           702,868
MSI common stock returned due to PIWS
  settlement                                 (38,948)           --              --           (39,000)
MSI conversion price adjustment on
  Convertible debt to Tate
  Investments, LLC                           153,848            --              --           153,848
MSI common stock issued for
  acquisition                                879,000            --              --           880,000
MSI stock compensation charge                240,000            --              --           240,000
Preferred stock dividend                     (35,500)           --              --           (35,500)

Net loss                                        --          (771,111)           --          (771,111)
                                        ------------    ------------    ------------    ------------
Balance - December 31, 2006             $ 26,558,608    $(23,253,519)   $    (18,000)   $  3,310,979
                                        ============    ============    ============    ============

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      F-4

<PAGE>
<TABLE>
<CAPTION>


                               MEDSOLUTIONS, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


                                                  MSI Preferred Stock
                                                       Series A                  MSI Common Stock
                                                ----------------------         ----------------------
                                                  Shares      Amount             Shares      Amount
                                                ----------  ----------         ----------  ----------
 Year Ended December 31, 2005
 ---------------------------------
<S>                                             <C>         <C>                <C>         <C>

Balance - December 31, 2004                        143,333   $       143    18,515,755    $    18,516
MSI preferred stock sold for cash                  139,839           140          --             --
MSI common stock sold for cash
  net of transaction costs of $50,443                 --            --       1,667,672          1,668
MSI common stock issued for ATE settlement            --            --          60,746             61
MSI common stock returned by directors                --            --         (20,000)           (20)
MSI common stock issued for debt conversions          --            --       1,468,140          1,468
MSI common stock issued for acquisitions              --            --         536,667            536
Preferred stock dividend                              --            --            --             --

Net income                                            --            --            --             --
                                               -----------   -----------   -----------    -----------
Balance - December 31, 2005                        283,172   $       283    22,228,980    $    22,229
                                               ===========   ===========   ===========    ===========

</TABLE>



                                           ****************************

<TABLE>
<CAPTION>

                                              Additional
                                               Paid-in       Accumulated         Treasury
                                               Capital       Deficit              Stock          Total
                                             -----------     ------------       ---------     ------------
Year Ended December 31, 2005
---------------------------------
<S>                                          <C>             <C>                <C>           <C>

Balance - December 31, 2004                    $ 21,595,239    $(23,293,078)   $    (18,000)   $ (1,697,180)
MSI preferred stock sold for cash                   209,618            --              --           209,758
MSI common stock sold for cash
  net of transaction costs of $50,443             1,077,099            --              --         1,078,767
MSI common stock issued for ATE
  settlement                                         83,006            --              --            83,067
MSI common stock issued for director
  fees                                              100,689            --              --           100,689
MSI common stock returned by directors                   (2)           --              --               (22)
MSI common stock issued for debt conversions      1,228,532            --              --         1,230,000
MSI common stock issued for acquisitions            404,464            --              --           405,000
Preferred stock dividend                            (40,875)           --              --           (40,875)

Net income                                             --           810,670            --           810,670
                                               ------------    ------------    ------------    ------------
Balance - December 31, 2005                    $ 24,657,770    $(22,482,408)   $    (18,000)   $  2,179,874
                                               ============    ============    ============    ============


</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                      F-5

<PAGE>
<TABLE>
<CAPTION>

                                MEDSOLUTIONS, INC.

                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                  FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005



                                                                For the Years Ended
                                                                    December 31,
                                                          ---------------------------
                                                              2006           2005
                                                          -----------     -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                       <C>             <C>

  Net income (loss)                                        $  (771,111)   $   810,670
  Adjustments to reconcile net income (loss) to net
    cash (used in) provided by operating activities:
      Depreciation and amortization                          1,373,318        751,258
      Provision for bad debts                                  112,000          3,000
      Gain on ATE settlement                                      --         (650,468)
      Litigation settlement                                       --          (53,023)
      Stock compensation                                       240,000        100,667
      Amortization of finance fees and debt discount            29,527           --
      Cancellation of convertible debentures, advances
        from stockholders and related accrued interest        (130,135)          --
    Changes in assets (increase) decrease:
      Accounts receivable                                     (441,125)      (375,950)
      Supplies                                                  12,247         (2,195)
      Prepaid expenses and other current assets                 95,565        128,244
      Other non-current assets                                (108,851)       (64,335)
    Changes in liabilities increase (decrease)
      Accounts payable, accrued liabilities & litigation
      settlements                                              186,294       (959,282)
                                                           -----------    -----------
      NET CASH (USED IN) PROVIDED BY OPERATING
      ACTIVITIES                                               597,729       (311,414)
                                                           -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment                         (596,760)      (225,713)
  Asset acquisition of On Call Medical Waste, Ltd.                --         (375,000)
  Asset acquisition of Cooper Biomed, Ltd.                        --          (40,000)
  Asset acquisition of Positive Impact Waste Solutions            --         (700,000)
  Asset acquisition of SteriLogic Waste Systems, Inc.          (24,283)          --
                                                           -----------    -----------
      NET CASH USED IN INVESTING ACTIVITIES                   (621,043)    (1,340,713)
                                                           -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sale of preferred stock                           --          209,758
  Proceeds from sale of common stock                           809,000      1,129,210
  Proceeds from note payable - stockholders                  1,150,000      1,375,000
  Cash paid for transaction costs associated with equity
    transactions                                              (106,132)       (50,443)
  Dividend on preferred stock                                  (42,500)       (37,250)
  Payments on long-term obligations to stockholders         (1,516,833)      (521,053)
  (Repayments to) advances from stockholders                   (19,005)      (152,840)
  Payments on long-term obligations to others                 (251,216)      (300,255)
                                                           -----------    -----------
      NET CASH PROVIDED BY FINANCING ACTIVITIES                 23,314      1,652,127
                                                           -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                         --             --

CASH AND CASH EQUIVALENTS - BEGINNING                             --             --
                                                           -----------    -----------
CASH AND CASH EQUIVALENTS - END                            $      --      $      --
                                                           ===========    ===========

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



                                      F-6
<PAGE>
<TABLE>
<CAPTION>


                               MEDSOLUTIONS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


                                                             For the Years Ended
                                                                 December 31,
                                                        -----------------------------
                                                            2006           2005
                                                        -----------     -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<S>                                                     <C>             <C>

  Interest paid                                         $   493,440    $   430,803
                                                        ===========    ===========
  Income taxes paid                                     $      --      $      --
                                                        ===========    ===========
  Issuance of notes payable for property & equipment    $   570,463    $   601,518
                                                        ===========    ===========
  Common stock reclaimed in connection to clawback
    provision regarding the PIWS acquisition                 39,000           --
                                                        ===========    ===========
  Reduction in notes payable from PIWS purchase price
    settlement                                          $   130,000           --
                                                        ===========    ===========

  Notes payable converted into MSI common stock         $      --      $   775,843
                                                        ===========    ===========
  Accrued salaries and related interest converted
    into MSI common stock and stock options             $      --      $   454,157
                                                        ===========    ===========

  Insurance premiums financed with debt                 $   169,363    $   163,804
                                                        ===========    ===========

  Director fees paid with non plan stock options        $      --      $   100,667
                                                        ===========    ===========

Net assets acquired and liabilities assumed (See
    Acquisitions Note 4)

Total purchase price                                    $ 1,267,500    $ 3,150,900
Less: cash consideration paid for acquisition               (24,284)    (1,115,000)
Less: cash acquired                                         (25,716)          --
                                                        -----------    -----------
Non-cash consideration                                  $ 1,217,500    $ 2,035,900
                                                        ===========    ===========

Short term note                                         $      --      $   740,000
Long term note                                              250,000        800,000
Common stock issued                                         880,000        405,000
Acquisition costs                                            87,500         90,900
                                                        -----------    -----------
Allocation of non-cash consideration                    $ 1,217,500    $ 2,035,900
                                                        ===========    ===========

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                      F-7

<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 1 DESCRIPTION OF BUSINESS

MedSolutions,  Inc. ("MSI" or the "Company") was  incorporated in Texas in 1993,
and through its subsidiary,  EnviroClean  Management  Services,  Inc.  ("EMSI"),
principally  collects,  transports  and disposes of regulated  medical  waste in
north Texas, south Texas, Oklahoma, Louisiana and Arkansas. MSI markets, through
its wholly-owned subsidiary SharpsSolutions,  Inc. ("Sharps"), a reusable sharps
container service program to healthcare facilities that we expect will virtually
eliminate the current method of utilizing disposable sharps containers.  Another
subsidiary of MSI, ShredSolutions,  Inc. ("Shred"),  markets a fully integrated,
comprehensive  service for the  collection,  transportation  and  destruction of
Protected  Healthcare  Information  ("PHI")  and other  confidential  documents,
primarily  those  generated by health care  providers  and  regulated  under the
Health  Insurance  Portability  and  Accountability  Act ("HIPAA").  The Company
operates another wholly owned subsidiary, Positive Impact Waste Servicing, Inc.,
which uses mobile treatment  equipment to treat and dispose of regulated medical
waste on site.  Positive  Impact  Waste  Servicing,  Inc.  was  acquired  by the
Company's from its asset acquisition from Positive Impact Waste Solutions,  Ltd.
("PIWS") on November  30,  2005.  The assets  acquired by the Company  from PIWS
included customer  contracts and equipment.  The Company operates another wholly
owned subsidiary,  SteriLogic Waste Systems, Inc.  ("SteriLogic"),  in Syracuse,
New  York  which  services  RMW  and  Sharps  customers  in  the  New  York  and
Pennsylvania markets.  SteriLogic was acquired by the Company on August 21, 2006
and the stock acquisition  included customer  contracts,  equipment and a rented
facility in Syracuse, New York.

Liquidity and Capital Resources
-------------------------------

Our principal  source of liquidity is  collections on accounts  receivable  from
waste management  service revenue,  from sales of our Common and Preferred Stock
through   private   offerings  to  certain   individuals,   primarily   existing
stockholders,  and from loans and advances  received from certain  stockholders.
Revenues  during 2006 were  approximately  $282,000 per month  higher,  stemming
primarily  from  organic  growth and from an  acquisition  in the second half of
2006. The Company continues to pursue acquisition targets to expand its existing
business. The principal uses of liquidity are payments for labor, fuel, material
and expenses,  and debt and lease obligations to carry out our regulated medical
waste management services.

Historically,  we have  met our cash  requirements  based  on a  combination  of
revenues from operations,  stockholder loans and advances, and proceeds from the
sale of debt and equity securities.  Based on the projected operations for 2007,
management  believes cash to be generated from  operations and funds raised from
other alternative sources if needed, will be sufficient to satisfy the Company's
historical and current cash obligations.




                                      F-8


<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005




NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

The accompanying  consolidated  financial statements include the accounts of the
Company, its subsidiaries,  EMSI, SharpsSolutions,  Inc., ShredSolutions,  Inc.,
Positive  Impact Waste  Servicing,  Inc. doing business as EnviroClean  On-Site,
Inc.,  SteriLogic  Waste  Systems,  Inc.  and  EnviroClean  Transport,  Inc. All
significant  inter-company balances and transactions between the Company and its
subsidiaries have been eliminated in consolidation.

Cash and Cash Equivalents
-------------------------

For purposes of the consolidated  statement of cash flows, the Company considers
all  investments  with an original  maturity of three  months or less to be cash
equivalents.

Allowance for Doubtful Accounts
-------------------------------

The  Company's  trade  accounts  receivable  is stated net of an  allowance  for
doubtful  accounts  of  $174,989  and  $69,240 at  December  31,  2006 and 2005,
respectively.  Our  assumptions in determining the adequacy of the allowance for
doubtful accounts include reviewing historical charge-offs over the previous two
years,  and analyzing  current aging reports by performing a specific  review of
customer  balances  for  possible  payment  problems.  Based on our review,  the
allowance for doubtful accounts is adjusted accordingly.

Supplies
--------

Supplies  are  stated at the lower of  average  cost or fair  value and  consist
primarily of medical waste containers and supplies provided to our medical waste
generator customers.

Property and Equipment
----------------------

Property and equipment are stated at cost less appropriate  valuation allowances
and accumulated  depreciation and amortization.  Depreciation is provided on the
straight-line  method over the  estimated  useful  lives of the related  assets,
generally  three to twenty  years.  Amortization  of leasehold  improvements  is
provided on the  straight-line  method over the lesser of the  estimated  useful
lives of the  improvements  or the  initial  term of the lease.  Gain or loss is
recognized upon sale or other disposition of property and equipment.


                                      F-9



<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Goodwill and Intangible Assets
------------------------------

In  accordance  with the  requirements  of  Statement  of  Financial  Accounting
Standards  No.  141 ("SFAS  No.  141"),  "Business  Combinations",  the  Company
recognizes  certain  intangible  assets  acquired  in  acquisitions,   primarily
goodwill and customer lists.  To determine the adequacy of the carrying  amounts
on an ongoing basis, the Company,  in accordance with the provisions of SFAS No.
142, "Goodwill and Other Intangible Assets", performs its annual impairment test
at the end of the year each December 31, unless  triggering events indicate that
an event has occurred which would require the test to be performed  sooner.  The
Company  monitors the  performance of its  intangibles by analyzing the expected
future  cash flows  generated  from such  related  intangibles  to ensure  their
continued performance. If necessary, the Company may hire an outside independent
consultant to appraise the fair value of such assets.

As of December 31, 2006, goodwill totaled $3,234,025. This amount is a result of
seven  acquisitions  where goodwill was recorded in six of those acquisitions as
part of the purchase  price.  With regard to the AmeriTech  Environmental,  Inc.
("ATE")  acquisition,  closed on November 7, 2003,  goodwill was recorded in the
amount of $969,387.  With regard to the B. Bray Medical Waste  Service  ("Bray")
acquisition,  closed on January 1, 2004,  goodwill was recorded in the amount of
$3,600. Our third acquisition,  Med-Con Waste Solutions,  Inc. ("Med-Con"),  was
closed  on  September  30,  2004 and  goodwill  was  recorded  in the  amount of
$522,186.  Our fourth acquisition,  On Call Medical Waste, Ltd. ("On Call"), was
closed on August 29, 2005 and  goodwill  was recorded in the amount of $653,922.
Our sixth acquisition, Positive Impact Waste Solutions, Ltd. ("PIWS") was closed
on  November  30, 2005 and  goodwill  was  originally  recorded in the amount of
$447,926.  The  goodwill  assigned  to the  PIWS  acquisition  was  subsequently
increased by $50,000 to $497,925 during the quarter ended September 30, 2006 due
to additional estimated  acquisition costs. Our seventh acquisition,  SteriLogic
was closed on August 21, 2006 and $756,004  was assigned to goodwill  based upon
an independent appraisal of the intangible assets acquired.  All of the goodwill
associated with these acquisitions is deductible for income tax purposes.

As of December 31, 2006,  intangible  assets associated with customer lists were
$1,408,189 net of accumulated amortization of $1,028,993. All values assigned to
customer list were derived by independent  appraisals and were assigned lives of
5 years over which to amortize the assigned cost.


                                      F-10

<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The  amortization  of customer lists for the 5 years ending December 31, 2011 is
as follows:

            Year Ended December 31,                             Amount
            ----------------------                            ----------

                     2007                                     $  440,125
                     2008                                        413,374
                     2009                                        302,246
                     2010                                        197,244
                     2011                                         55,200
                                                              ----------
                                                              $1,408,189
                                                              ==========

Both the goodwill and customer  list values are subject to an annual  impairment
test.

Amortization expense for the years ended December 31,2006 and 2005, was $404,223
and $249,392 respectively.

As of December 31, 2006, the Company  determined  there was no impairment of its
goodwill or intangible assets.

Convertible Notes and Convertible Preferred
-------------------------------------------

The Company accounts for conversion  options  embedded in convertible  notes and
convertible preferred stock in accordance with Statement of Financial Accounting
Standard  ("SFAS) No. 133  "Accounting  for Derivative  Instruments  and Hedging
Activities"  ("SFAS 133") and EITF 00-19  "Accounting  for Derivative  Financial
Instruments  Indexed to, and  Potentially  Settled  in, a  Company's  Own Stock"
("EITF 00-19").  SFAS 133 generally requires  Companies to bifurcate  conversion
options  embedded  in  convertible  notes and  preferred  shares from their host
instruments  and to  account  for  them as free  standing  derivative  financial
instruments in accordance with EITF 00-19. SFAS 133 provides for an exception to
this rule when convertible notes and mandatorily redeemable preferred shares, as
host instruments, are deemed to be conventional as that term is described in the
implementation  guidance  provided in paragraph 61 (k) of Appendix A to SFAS 133
and further  clarified  in EITF 05-2 "The Meaning of  "Conventional  Convertible
Debt  Instrument"  in Issue  No.  00-19.  SFAS 133  provides  for an  additional
exception  to this  rule  when the  economic  characteristics  and  risks of the
embedded  derivative  instrument are clearly and closely related to the economic
characteristics and risks of the host instrument.






                                      F-11


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


The  Company   accounts  for  convertible   notes  (deemed   conventional)   and
non-conventional  convertible debt  instruments  classified as equity under EITF
00-19  "Accounting  for  Derivative   Financial   Instruments  Indexed  to,  and
Potentially  Settled in, a Company's Own Stock" ("EITF  00-19")and in accordance
with  the  provisions  of  Emerging   Issues  Task  Force  Issue  ("EITF")  98-5
"Accounting for Convertible  Securities  with Beneficial  Conversion  Features,"
("EITF  98-5"),  EITF 00-27  "Application  of EITF 98-5 to  Certain  Convertible
Instruments."  Accordingly,  the Company  records,  as a discount to convertible
notes, the intrinsic value of such conversion options based upon the differences
between the fair value of the underlying  common stock at the commitment date of
the note  transaction and the effective  conversion  price embedded in the note.
Debt  discounts  under these  arrangements  are  amortized  over the term of the
related debt to their  earliest  date of  redemption.  During 2005,  the Company
issued $1,000,000 in principal of convertible notes with an embedded  conversion
option,  which was classified as equity. There was no intrinsic value related to
the  embedded  conversion  option and  accordingly,  there was no recorded  debt
discount.

The  Company  determined  that the  conversion  option  embedded in its Series A
Preferred  stock  is not a free  standing  derivative  in  accordance  with  the
implementation guidance provided in paragraph 61 (l) of Appendix A to SFAS 133.

Impairment of Long-Lived Assets
-------------------------------

The Company continuously monitors events and changes in circumstances that could
indicate carrying amounts of long-lived assets, including intangible assets, may
not be  recoverable.  An impairment  loss is recognized when expected cash flows
are less than the  assets'  carrying  value.  Accordingly,  when  indicators  of
impairment are present,  the Company evaluates the carrying value of such assets
in relation to the operating  performance and future  undiscounted cash flows of
the underlying  business.  The Company's  policy is to record an impairment loss
when  it is  determined  that  the  carrying  amount  of the  asset  may  not be
recoverable.  At December  31,  2006,  there were no  indicators  of  impairment
present.

Revenue Recognition and Processing Costs
----------------------------------------

We  recognize  revenue  for our medical  waste  services at the time the medical
waste  is  collected  from  our  customers.   Revenue  is  only  recognized  for
arrangements  with  customers in which (1),  there is  persuasive  evidence of a
contract  or  agreement  which  sets  forth the terms of the  arrangement;  (2),
services have been rendered; (3), our prices are fixed,  determinable and agreed
upon; and, (4), collectibility is reasonably assured.


                                      F-12

<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005



NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments
-----------------------------------

The recorded carrying values of accounts receivable, accounts payable, and other
long-term  obligations  are  considered to  approximate  the fair values of such
financial instruments because of the short maturities.

Provisions for Income Taxes
---------------------------

No provisions have been made for federal or state income taxes since the Company
has incurred net operating losses since its inception. The Company is subject to
certain local minimum taxes.

Stock-Based Compensation
------------------------

Effective  January 1, 2006,  the Company  adopted SFAS 123R which  replaces SFAS
123,  "Accounting  for  Stock-Based   Compensation"  and  supersedes  Accounting
Principles  Board Opinion No. 25,  "Accounting  for Stock Issued to  Employees."
SFAS 123R requires all share-based  payments to employees,  including  grants of
employee stock options,  to be recognized in the financial  statements  based on
their fair values. Pro forma disclosure is no longer an alternative to financial
statement recognition.

The Company has selected the  Black-Scholes  method of valuation for share-based
compensation and has adopted the modified  prospective  transition  method under
SFAS 123R, which requires that compensation cost be recorded, as earned, for all
unvested  stock options  outstanding as of the beginning of the first quarter of
adoption of SFAS 123R.  As permitted by SFAS 123R,  prior  periods have not been
restated.  The  charge  is  generally  recognized  as  compensation  cost  on  a
straight-line  basis over the remaining  service  period after the adoption date
based on the options' original estimate of fair values.

Prior   to   the   adoption   of   SFAS   123R,   the   Company    applied   the
intrinsic-value-based  method of  accounting  prescribed  by APB 25 and  related
interpretations,  to  account  for its stock  options to  employees.  Under this
method,  compensation  cost  was  recorded  only  if  the  market  price  of the
underlying  stock on the date of grant exceeded the exercise price. As permitted
by SFAS 123, the Company elected to continue to apply the  intrinsic-value-based
method  of  accounting   described   above,  and  adopted  only  the  disclosure
requirements  of  SFAS  123.  The  fair-value-based  method  used  to  determine
historical  pro forma amounts under SFAS 123 was similar in most respects to the
method used to determine stock-based compensation expense under SFAS 123R.



                                      F-13

<PAGE>






                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005



NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Periods Ended December 31, 2005 (in thousands)
                                                        2005
                                                       -----
Net income (loss) applicable to common stockholders,
Prior to stock-based employee compensation             $ 770

Stock-based employee compensation cost                    --
                                                       -----

Net income (loss) applicable to common stockholders,
as reported                                            $ 770

Stock-based employee compensation cost
determined under fair value method,
net of tax effects                                      (291)
                                                       -----
Pro-forma net income (loss) under
fair value method - Basic                              $ 479

Effect of dilutive securities
         Preferred Stock                                  41

         Convertible notes payable and advances
         interest expense                                 45

Pro-forma net income (loss) under                         --
Fair value method - Dilutive                           $ 565
                                                       =====
Net income (loss) per share applicable to
common stockholders - Basic                            $0.04

Stock-based employee compensation cost
determined under fair value method,
net of tax effects                                     (0.01)

Pro-forma loss per share applicable to
common stockholders- Basic                             $0.03
                                                       =====
Net income (loss) per share applicable to
common stockholders- Diluted                           $0.04

Stock-based employee compensation cost
determined under fair value method,
net of tax effects                                     (0.01)

Pro-forma net income (loss) per share
attributable to common stockholder- Diluted            $0.03
                                                       =====


                                      F-14

<PAGE>



                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


The fair value of each option grant was estimated at the date of grant using the
Black-Scholes  option valuation model. The Black-Scholes  option valuation model
was developed for use in estimating  the fair value of traded options which have
no  vesting  restrictions  and are fully  transferable.  During  the year  ended
December  31, 2006 and 2005,  the  Company  granted  478,796  and 674,336  stock
options,(fair  value $0.00 and $0.51 per share for 2006 and 2005,  respectively)
respectively  to employees under an adopted 2002 Employee Stock Option Plan. The
exercise prices of the stock options were $0.75 and $1.00 and vest  immediately.
The options may be exercised over a period of ten years.  The Company recorded a
non cash charge of $240,000  during the year ended December 31, 2006 because the
options granted in 2005 to executives  exceeded the authorized amount of options
to grant that was in effect as of December 31, 2005. The  authorized  amount was
increased from 850,000 shares to 3,000,000 shares in October, 2006 by a majority
of  the  Company's  shareholders.  Because  the  Company's  stock  options  have
characteristics  significantly  different  from  those of  traded  options,  and
because changes in the subjective  input  assumptions can materially  affect the
fair  value  estimate,  in  management's  opinion,  the  existing  models do not
necessarily  provide a reliable single measure of the fair value estimate of its
stock options. During the years ended December 31, 2006 and 2005,  respectively,
the  Company   granted  its  directors  0  and  215,431,   plan  stock  options,
respectively.  The options were granted in lieu of payment of director fees. The
total number of stock options  outstanding as of December 31, 2006 and 2005, was
1,328,796.  In calculating  the fair values of the stock options,  the following
assumptions were used:

                                                  YEAR                 YEAR
                                               2006 GRANTS          2005 GRANTS

Dividend yield                                       --                  --
Weighted average expected life:                  5 years             5 years
Weighted average risk-free interest rate           4.75%                4.25%
Expected volatility                              101.00%               92.00%



Income (Loss) Per Share of Common Stock
---------------------------------------

Basic net income (loss) per share of common stock has been computed based on the
weighted  average  number  of  common  shares  outstanding  during  the  periods
presented.

Diluted  net income  per share of common  stock has been  computed  based on the
weighted  average  number  of  common  shares  outstanding  during  the  periods
presented plus any dilutive  securities  outstanding  unless such combination of
shares  and  dilutive  securities  were  determined  to  be  anti-dilutive.  The
numerator  and  denominator  for basic and diluted  earnings  per share  ("EPS")
consist of the following:



                                      F-15

<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

                                                          2006            2005
                                                       ---------       ---------

Numerator:
   Net income (loss)                               $   (771,111)   $    810,670
   Convertible preferred stock
     dividends                                          (35,500)        (40,875)
   Numerator for basic earnings per                ------------    ------------
     share - income available to
     common stockholders                           $   (806,611)   $    769,795

   Effect of dilutive securities:
     Preferred stock dividends                             --            40,875
     Convertible notes payable
       and advances interest expense                       --            44,987
                                                   ------------    ------------
                                                   $       --      $     85,862
                                                   ------------    ------------
      Numerator for diluted earnings per share -
income available to common
stockholders after assumed conversions
                                                   $   (806,611)   $    855,657
Denominator:
   Denominator for basic earnings per share -
weighted average shares
                                                     22,875,017      19,857,233
   Effect of dilutive securities:
     Convertible accrued salaries                          --            35,060
     Preferred convertible stock                           --           250,528
     Convertible debentures and
     unpaid interest                                       --            58,334
     Note payable to stockholders and
     accrued interest                                      --            34,283
     Note payable to Tate Investments,
       LLC                                                 --           407,070
     Advances from stockholders                            --            48,992
                                                   ------------    ------------
        Total potentially dilutive
        securities                                         --           834,267

Denominator for diluted earnings per share -
adjusted weighted average shares and assumed
conversions
                                                     22,875,017      20,691,501
Basic earnings per share                             ==========      ==========
                                                   $      (0.04)   $       0.04
Diluted earnings per share                           ==========      ==========
                                                   $      (0.04)   $       0.04
                                                   ============    ============

For the year ended December 31, 2005, 850,000 shares attributable to outstanding
stock options were excluded from the  calculation of diluted  earnings per share
because the exercise  prices of the stock  options were greater than or equal to
the average price of the common shares  ($0.75),  and therefore  their inclusion
would have been  anti-dilutive.  For the year ended  December 31,  2006,  common
stock  equivalents  totaling  4,216,035 that  consisted of options,  convertible
preferred  shares and convertible  notes were not included in the calculation of
diluted  loss per share  because  their  inclusion  would have had the effect of
decreasing the loss per share otherwise compute.


                                      F-16


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Advertising Expenses
--------------------

Advertising costs are charged to expense when incurred.  Advertising expense for
the years ended  December  31, 2006 and 2005  approximated  $28,991 and $20,256,
respectively.

Environmental Expenditures
--------------------------

Environmental  expenditures  are  capitalized  if the costs  mitigate or prevent
future  environmental  contamination  or if the costs improve  existing  assets'
environmental  safety or efficiency.  All other  environmental  expenditures are
expensed.  Liabilities  for  environmental  expenditures  are accrued when it is
probable  that  such  obligations  have been  incurred  and the  amounts  can be
reasonably  estimated.  Currently,  there are no ongoing environmental issues or
activities.  At December 31, 2006 and 2005,  there have been no amounts recorded
as capitalized assets related to any environmental costs.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses  during the related  periods.  Actual results could differ
from such estimates.

NOTE 3 RECENTLY ISSUED ACCOUNTING STANDARDS

The  following  pronouncements  have  been  issued by the  Financial  Accounting
Standards Board ("FASB").


In February  2006, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standard 155  "Accounting for Certain Hybrid
Financial  Instruments"  ("SFAS  155"),  which  eliminates  the  exemption  from
applying SFAS 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS  133") to  interests  in  securitized  financial  assets so that  similar
instruments  are  accounted  for  similarly   regardless  of  the  form  of  the
instruments.  SFAS 155 also  allows the  election of fair value  measurement  at
acquisition,  at issuance,  or when a previously recognized financial instrument
is subject to a  remeasurement  event.  Adoption is effective  for all financial
instruments acquired or issued after the beginning of the first fiscal year that
begins after  September 15, 2006.  Early adoption is permitted.  The adoption of
SFAS 155 is not expected to have a material effect on the Company's consolidated
financial position, results of operations or cash flows.


                                      F-17


<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 3 RECENTLY ISSUED ACCOUNTING STANDARDS (continued)


In March 2006, the FASB issued  Statement of Financial  Accounting  Standard 156
"Accounting for Servicing of Financial Assets" ("SFAS 156"),  which requires all
separately  recognized  servicing assets and servicing  liabilities be initially
measured at fair value. SFAS 156 permits,  but does not require,  the subsequent
measurement  of  servicing  assets  and  servicing  liabilities  at fair  value.
Adoption is required as of the  beginning  of the first  fiscal year that begins
after September 15, 2006. Early adoption is permitted.  The adoption of SFAS 156
is not  expected  to  have a  material  effect  on  the  Company's  consolidated
financial position, results of operations or cash flows.

In July  2006,  the  FASB  released  FASB  Interpretation  No.  48  ("FIN  48"),
"Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109." FIN 48 clarifies the  accounting  and reporting for  uncertainties  in
income  tax law.  FIN 48  prescribes  a  comprehensive  model for the  financial
statement recognition, measurement, presentation and disclosure of uncertain tax
positions  taken or  expected  to be  taken in  income  tax  returns.  FIN 48 is
effective for fiscal years beginning after December 15, 2006.  Earlier  adoption
is permitted as of the beginning of an  enterprise's  fiscal year,  provided the
enterprise  has  not  yet  issued  financial  statements,   including  financial
statements for any interim period for that fiscal year. The cumulative  effects,
if any,  of  applying  FIN 48 will be  recorded  as an  adjustment  to  retained
earnings as of the  beginning of the period of adoption.  The adoption of FIN 48
is not  expected  to  have a  material  effect  on  the  Company's  consolidated
financial position, results of operations or cash flows.

In  September  2006,  the FASB issued SFAS No. 157,  "Accounting  for Fair Value
Measurements"  ("SFAS  157").  SFAS 157 defines fair value,  and  establishes  a
framework for measuring fair value in generally accepted  accounting  principles
and expands disclosure about fair value measurements.  SFAS 157 is effective for
financial  statements  issued by the Company for fiscal  years  beginning  after
November  15,  2007.  The  Company  does not expect the new  standard  to have a
material impact on the Company's  financial  position,  results of operations or
cash flows.

In September  2006,  the FASB issued SFAS No. 158,  "Employers'  Accounting  for
Defined Benefit Pension and Other  Postretirement  Plans" ("SFAS 158"). SFAS 158
requires an employer to recognize  the  overfunded  or  underfunded  status of a
defined  benefit  postretirement  plan (other than a  multiemployer  plan) as an
asset or  liability  in its  statement  of  financial  position and to recognize
changes in that  funded  status in the year in which the changes  occur  through
comprehensive  income of a business entity or changes in unrestricted net assets
of a not-for-profit organization.  SFAS 158 also requires an employer to measure
the  funded  status  of a plan  as of the  date  of its  year-end  statement  of
financial  position,  with limited  exceptions.  SFAS 158 is  effective  for the
Company for the year ended December 31, 2006. The adoption of this pronouncement
did not have a material effect on the Company's financial statements.


                                      F-18


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE  3 RECENTLY ISSUED ACCOUNTING STANDARDS (continued)

In September  2006, the staff of the Securities and Exchange  Commission  issued
Staff  Accounting  Bulletin No. 108 ("SAB  108"),  which  provides  interpretive
guidance  on how  the  effects  of the  carryover  or  reversal  of  prior  year
misstatements  should be considered in quantifying a current year  misstatement.
SAB 108 becomes  effective  for the first fiscal year ending after  November 15,
2006.  The adoption of SAB 108 is not expected to have a material  impact on the
Company's consolidated financial position, results of operations or cash flows.

In December  2006, the FASB approved FASB Staff Position (FSP) No. EITF 00-19-2,
"Accounting for Registration Payment  Arrangements" ("FSP EITF 00-19-2"),  which
specifies  that the contingent  obligation to make future  payments or otherwise
transfer consideration under a registration payment arrangement,  whether issued
as a separate agreement or included as a provision of a financial  instrument or
other agreement, should be separately recognized and measured in accordance with
SFAS No. 5,  "Accounting  for  Contingencies".  FSP EITF 00-19-2  also  requires
additional   disclosure   regarding  the  nature  of  any  registration  payment
arrangements,  alternative  settlement methods,  the maximum potential amount of
consideration  and the current  carrying  amount of the  liability,  if any. The
guidance in FSP EITF 00-19-2  amends FASB  Statements No. 133,  "Accounting  for
Derivative  Instruments and Hedging  Activities",  and No. 150,  "Accounting for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity", and FASB Interpretation No. 45, "Guarantor's  Accounting and Disclosure
Requirements for Guarantees,  Including  Indirect  Guarantees of Indebtedness of
Others", to include scope exceptions for registration payment arrangements.

FSP EITF 00-19-2 is effective  immediately for registration payment arrangements
and the financial  instruments  subject to those  arrangements  that are entered
into or modified  subsequent  to the issuance date of this FSP, or for financial
statements  issued for fiscal years  beginning  after  December  15,  2006,  and
interim periods within those fiscal years, for registration payment arrangements
entered  into  prior to the  issuance  date of this FSP.  The  adoption  of this
pronouncement  is not expected to have an impact on the  Company's  consolidated
financial position, results of operations or cash flows.

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial  Assets and Financial  Liabilities"  ("SFAS  159").  SFAS 159 provides
companies with an option to report selected  financial assets and liabilities at
fair value. The objective of SFAS 159 is to reduce both complexity in accounting
for financial  instruments  and the  volatility in earnings  caused by measuring
related  assets  and  liabilities  differently.  Generally  accepted  accounting
principles have required different  measurement  attributes for different assets
and liabilities that can create artificial volatility in earnings.  The FASB has
indicated   it  believes   that  SFAS  159  helps  to  mitigate   this  type  of
accounting-induced volatility by enabling companies to report related assets and
liabilities  at fair value,  which would likely reduce the need for companies to
comply  with  detailed  rules for hedge  accounting.  SFAS 159 also  establishes
presentation and disclosure requirements designed to


                                      F-19


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 3 RECENTLY ISSUED ACCOUNTING STANDARDS (continued)

facilitate  comparisons  between  companies  that choose  different  measurement
attributes  for  similar  types of  assets  and  liabilities.  SFAS 159 does not
eliminate  disclosure  requirements  included  in  other  accounting  standards,
including requirements for disclosures about fair value measurements included in
SFAS  157  and  SFAS  No.  107,  "Disclosures  about  Fair  Value  of  Financial
Instruments."  SFAS 159 is  effective  for the  Company as of the  beginning  of
fiscal year 2009.  The Company  has not yet  determined  the impact SFAS 159 may
have on its  consolidated  financial  position,  results of operations,  or cash
flows.

NOTE 4 ACQUISITIONS

Med-Con Waste Solutions, Inc. ("Med-Con")

At December  31,  2006,  the Company owed  $274,749 in two  promissory  notes to
Med-Con as payment for part of the purchase price for the Company's  acquisition
of certain Med-Con assets  completed on September 30, 2004. The first promissory
note has a balance of $235,749 as of December  31, 2006 and accrues  interest at
8%. The Company pays monthly  installments  of $8,696  including  principal  and
interest and the note matures on May 1, 2009. The second  promissory  note has a
balance of $39,001 as of  December  31, 2006 and  accrues  interest at 10%.  The
Company pays monthly installments of $6,691 including principal and interest and
the note matures on May 1, 2007.


On Call Medical Waste Service ("On Call")

On August 29, 2005, we acquired certain assets including customer contracts from
On Call for a total  purchase  price of  $1,155,500.  The purchase price for the
acquired  assets was (i) $375,000 cash,  (ii) a promissory  note in the original
principal amount of $250,000 bearing interest at a rate per annum of 8%, payable
in 24 equal monthly  installments  of principal and interest with the first such
installment  due on December 27, 2005,  (iii) a promissory  note in the original
principal  amount of $375,000  with no interest,  (iv) 166,667  shares of Common
Stock,  and (v) $30,500 of transaction  costs incurred by the Company.  The cash
portion of the  purchase  price was funded  from the  proceeds  of a sale of the
Company's  Common  Stock in a private  placement  to, and a loan to the  Company
pursuant to a promissory note from, one of its shareholders.

Positive Impact Waste Solutions, Ltd. ("PIWS")

On November 30, 2005, the Company  acquired certain assets,  including  customer
contracts,  and took over the  regulated  medical  waste  operations of Positive
Impact Waste Solutions,  LLC, a Delaware  limited  liability  company  ("PIWS").
Subsequent to the Company's  acquisition of PIWS' assets, it was determined that
PIWS had not complied with certain terms of the asset  purchase  agreement  (the
"PIWS  Agreement").  On June 30,  2006,  a  settlement  was reached and executed
between the Company and PIWS relating to such noncompliance. As a result of this
noncompliance  and in  accordance  with  the  terms  of the  PIWS  Agreement,  a
reduction of the total purchase price by $169,000 was agreed to by both parties.
The purchase price  adjustment  reduced the amount  assigned to customer list by
$169,000.  The  goodwill  assigned  to the  PIWS  acquisition  was  subsequently
increased by $50,000 to $497,925 during the quarter ended September 30, 2006 due
to additional estimated acquisition costs.


                                      F-20


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005



NOTE 4 ACQUISITIONS (continued)

At December 31, 2006, the Company owed $431,501 in a promissory  note to PIWS as
payment for part of the purchase price.  The promissory note accrues interest at
8% and the Company pays monthly  installments of $10,725 including principal and
interest. The note matures on November 30, 2010.

Cooper Biomed, Ltd. ("Cooper")

On  September  30,  2005,  we  acquired  certain  assets,  principally  customer
contracts,  from Cooper.  On March 31, 2006,  the Company  calculated a purchase
price  reduction of $8,500 in accordance  with the asset purchase  agreement and
reduced the $40,000 promissory note to Cooper  accordingly.  The promissory note
has subsequently been paid and all obligations of the Company to Cooper pursuant
to such  agreement have been  satisfied.  The cash portion of the purchase price
was  funded  from the  proceeds  of a sale of the  Company's  Common  Stock in a
private  placement to, and a loan to the Company  pursuant to a promissory  note
from,  one of its  stockholders.  As provided for in the  agreement  the Company
calculated a $8,500  purchase  price  adjustment  and reduced the  principal due
under the $25,000  promissory  note and the amount  assigned  to customer  list,
accordingly.

SteriLogic Waste Systems, Inc. ("SteriLogic")

On August 16, 2006,  MedSolutions,  Inc., a Texas  corporation  (the "Company"),
acquired   SteriLogic   Waste   Systems,   Inc.,  a   Pennsylvania   corporation
("SteriLogic")  located in Syracuse, New York. SteriLogic is a regulated medical
waste management company that provides  collection,  transportation and disposal
of regulated  medical waste  services in addition to providing  reusable  sharps
container  programs to its customers who are primarily  located in the states of
New York and  Pennsylvania.  SteriLogic also designs,  manufactures  and markets
reusable  sharps  containers  to medical  waste  service  providers  who provide
reusable sharps container programs to their medical waste customers.

The  acquisition  was  effected  pursuant  to a  Merger  Agreement  and  Plan of
Reorganization  dated  as of  August  16,  2006,  by and  between  the  Company,
SteriLogic  Acquisition  Subsidiary,  Inc., a Texas corporation and wholly-owned
subsidiary of the Company  ("Subsidiary"),  and  SteriLogic,  by the merger (the
"Merger") of SteriLogic with and into Subsidiary,  with Subsidiary continuing as
the surviving  corporation.  At the effective time of the Merger,  each share of
SteriLogic  common  stock,  par value  $0.01 per share,  issued and  outstanding
immediately  prior to such  time was  converted  into the right to  receive  200
shares of the  Company's  common  stock,  par value  $0.001  per share  ("Merger
Shares"), for an aggregate of 1,000,000 Merger Shares.



                                      F-21


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 4 ACQUISITIONS (continued)

In addition, the Company paid Abele-Kerr Investments, LLC (i) $50,000 in readily
available funds, and (ii) a convertible  promissory note in the principal amount
of  $250,000  with simple  interest  at the annual rate of 8% accruing  from the
effective  time and payable in 12 equal  installments  of  interest  only in the
amount  of  $1,666.67  each due  monthly  beginning  on the 30th day  after  the
effective  time,  and 24 equal  installments  of  principal  and interest in the
amount of $11,306.82  each due monthly  thereafter.  The note holder may convert
the unpaid  principal  and  interest at any time,  but prior to August 16, 2007,
into the Company's common stock at $1.50 per share. The Merger consideration may
be adjusted downward  depending upon the amount of sales or earnings realized by
the Company from the customer  contracts  acquired  through the  acquisition  of
SteriLogic for the 12 months following the closing of the transaction.  Any such
adjustment to the Merger  consideration  will be deducted 25% from the principal
amount of the $250,000 promissory note, and 75% from the Merger Shares, pro rata
against  each former  holder of  SteriLogic  common stock that  received  Merger
Shares in  proportion to the  percentage  of the Merger Shares  received by each
such holder, at the rate of $1.50 per share; provided,  that the Company may not
deduct more than 400,000 Merger Shares with respect to the adjustment.  The cash
portion of the Merger  consideration was funded from working capital. The Merger
consideration  was  determined   largely  based  upon  the  amount  of  revenues
SteriLogic has generated from its regulated  medical waste disposal business and
the value of the net assets acquired.

On January 15, 2007,  the former owners of SteriLogic  and the Company agreed by
mutual consent to amend the original Merger Agreement  whereby the former owners
of SteriLogic agreed to reduce the number of Merger Shares issued by the Company
from 1,000,000 to 700,000 shares and to terminate the conversion  feature of the
$250,000 promissory note issued by the Company as part of the purchase price. As
a result of these  amendments,  the Company recorded a reduction in the purchase
price with  regard to the  SteriLogic  acquisition  by $264,000  reflecting  the
return of the 300,000 shares issued by the Company. The corresponding  reduction
reduced the value assigned to SteriLogic's customer list by $264,000.


                                      F-22


<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 4 ACQUISITIONS (continued)

MedSolutions  purchased the following  assets in the following table in exchange
for the amount paid.

         Description                                 Amount

         Purchase price:

 Cash paid                                      $    50,000
 Promissory note                                    250,000
 MSI Common Stock issued, 1,000,000 shares          880,000
 Acquisition related costs                           87,500
                                                -----------
 Total purchase price                           $ 1,267,500
                                                ===========
 Assets acquired and liabilities assumed:

 Cash                                           $    25,716
 Accounts Receivable, Inventory,
   and other assets                                 155,336
 Equipment at Fair Value                            100,000
 Liabilities assumed                               (321,557)
 Allocation to customer list, to be amortized
over 5 years                                        552,000
 Allocation to goodwill                             756,005
                                                -----------
 Total assets acquired                          $ 1,267,500
                                                ===========


                                      F-23


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 4 ACQUISITIONS (continued)

Pro Forma Results
-----------------

The  following  table  presents  the  unaudited  pro-forma  combined  results of
operations of the Company for its 2006 results and  acquisitions  as if they had
been combined from the beginning of 2006 and 2005.


                                    Pro forma Combined        Pro forma Combined
                                    For the year ended        for the year ended
                                    December 31, 2006         December 31, 2005


     Revenues:
       Net Sales                        $13,381,088                $12,124,379
                                        ============               ============

       Net income (loss)                $ (670,674)                $   157,744
                                        ============               ============
     Basic net income (loss) per
     common share                       $    (0.03)                $     0.01
                                        ============               ============
     Diluted net income (loss) per
     common share                       $    (0.03)                $     0.01
                                        ============               ============
     Weighted average common shares
     outstanding - basic
                                         23,499,674                 21,296,703
     Weight average common shares       ============               ============
     outstanding - diluted

                                         23,499,674                 22,130,972
                                        ============               ============

The pro forma  combined  results are not  necessarily  indicative of the results
that actually  would have occurred if the  acquisition  had been completed as of
the beginning of the 2006 and 2005 years, nor are they necessarily indicative of
future consolidated results.



                                      F-24



<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 5 PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

                                           At December 31,
                                       -----------------------
                                           2006        2005         Useful Life
                                       ----------   ----------      -----------

   Land                                $  151,180    $  151,180          -
   Building                             1,124,276     1,050,711       20 years
   Furniture and equipment              5,117,161     3,785,369     3 to 5 years
                                       ----------    ----------
                                        6,392,617     4,987,260
   Less:  Accumulated depreciation      2,805,851     1,836,756
                                       ----------    ----------
   Property and Equipment, Net         $3,586,766    $3,150,504
                                       ==========    ==========

Depreciation of property and equipment for the years ended December 31, 2006 and
2005 amounted to $969,095 and $501,685, respectively.

NOTE  6 INCOME TAXES

The current year's Federal and State income tax provision consists substantially
of minimum taxes. The principal  reasons for the variation  between income taxes
at the statutory federal rate and that shown in the statement of operations were
as follows:



                                          Years Ended
                                          -----------
                                       2006         2005
                                       ----         ----
Statutory federal income tax rate      34.0%        34.0%
State income taxes, net of
     federal income tax benefit         6.0%         6.0%
Adjustment for change in valuation
     allowance                         (40.0)      (40.0%)
                                      ------        -----
                                           -            -
                                      ======        =====


Temporary  differences  between the financial  statement and tax basis of assets
and liabilities which give rise to a significant  portion of deferred tax assets
and deferred tax liabilities were as follows:


                                      F-25


<PAGE>



                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 6 INCOME TAXES (continued)



                                                     Year Ended
                                                     ----------
                                                2006            2005
                                                ----            ----
Deferred Tax Assets:
  Operating loss carryforwards                $8,000,000    $7,500,000
  Accounts receivable allowance                   70,000        28,000
                                               ----------     -------
  Total Tax Assets                            $8,070,000    $7,528,000
                                              ----------    ----------


Deferred Tax Liabilities:
  Fixed Assets                                   $286,000   $ 238,000
  Goodwill and intangibles                        409,000     213,000
                                                   -------     -------
  Total Tax Liabilities                           695,000     451,000
  Less- Valuation Allowance                    (7,375,000) (7,077,000)
                                                   -------     -------
 Net Deferred Tax Asset                         $      -    $       -
                                                   =======     =======


The valuation allowance primarily relates to the Federal and State net operating
losses for which  utilization  in future  periods  is  uncertain.  The  ultimate
realization  of deferred tax assets is dependent  upon the  generation of future
taxable income during the periods in which those  temporary  differences  become
deductible.  The  Company  considers  projected  future  taxable  income and tax
planning  strategies in making this assessment.  Based on the historical taxable
income and  projections  for future  taxable  income over the  periods  that the
deferred tax assets are deductible,  the Company believes it is more likely than
not that the Company will not realize all of its tax benefits in the near future
and  therefore a valuation  allowance was  established  in 2006 in the amount of
$7,375,000.

As of December 31, 2006 the Company has  approximately  $19.9 million of federal
and state net operating losses available to offset future taxable income,  which
if not utilized will expire through 2025.  The Company's  ability to utilize its
carryforwards  may be subject to an annual limitation in future periods pursuant
to Section 382 of the Internal Revenue Code, as amended.


                                      F-26




<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 7 ACCRUED LIABILITIES

Accrued liabilities consist of the following:

                                                 At December 31,
                                            -------------------------
                                             2006               2005
                                            ----------     ----------

        Salaries and other taxes         $  347,545          $  244,268
        Accrued director fees               269,891                   -
        Interest                             27,408             116,598
        Insurance                           169,363             254,042
        Other accrued liabilities           467,236             347,419
                                          ----------          ----------
                                         $1,281,443          $  962,327
                                          ==========          ==========










                                      F-27




<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 8 LONG-TERM OBLIGATIONS

Long-term obligations are comprised of the following:

                                                      At December 31,
                                                 -----------------------------
                                                      2006              2005
                                                 ----------         ----------

           Bank notes - EMSI facilities          $  511,465          $  505,216
           Installment notes - equipment            864,261             447,364
                                                 ----------          ----------
           Total indebtedness to bank and
             financial institutions               1,375,726             952,580

           Less:  Current maturities                372,552             145,628
                                                 ----------          ----------
                Total Long-Term Obligations      $1,003,174          $  806,952
                                                 ==========          ==========

On August 9, 2006, the Company,  through its subsidiary EMSI, secured additional
financing from a bank to expand its Houston facility.  The facility is currently
being used as a transfer facility for the South Texas operations.  The expansion
will allow  EMSI to treat  medical  waste at the  facility  once the  permitting
process is completed from the state of Texas.  The total costs of expansion will
be  approximately  $275,000  with  $200,000  of those  funds  coming  from  bank
financing and the remainder from working  capital.  The  promissory  note to the
bank is payable in 60 monthly  installments  of $822 in principal  plus interest
accruing at the Prime Rate as published in the Wall Street  Journal from time to
time plus 1%,  with the  balance of the  principal  and all  accrued  and unpaid
interest due upon maturity of the loan on July 19, 2011.  The note is secured by
a second lien on the Houston  facility and is personally  guaranteed by both our
President/Chief  Executive Officer and our Chairman of the Board. As of December
31, 2006,  the Company has drawn  $55,634  against the  promissory  note and the
funds were used for the commencement phase of expansion.  The amount outstanding
at  December  31,  2006 is $52,347  and the net  carrying  value of our  Houston
facility is approximately $370,000.

On August 3, 2005, the Company,  through its subsidiary EMSI,  borrowed $325,000
from a bank. The note is secured by a first lien on EMSI's  facility in Houston,
Texas and accrues  interest at a variable rate based on the national prime rate,
plus 2.0%,  aggregating  10.25% at December 31, 2006.  The note is payable in 60
minimum monthly installments of $3,656,  including principal and interest, based
upon a straight  line  amortization  of 240  payments,  and matures on August 3,
2010,  with a balloon  payment of $243,750.  The  promissory  note is personally
guaranteed  by  our   President/Chief   Executive  Officer.   The  total  amount
outstanding at December 31, 2006 is $303,333.

In July 1996, the Company borrowed  $367,500 from a bank. The note is secured by
a first lien on EMSI's  facility in Garland,  Texas,  and accrues  interest at a
variable rate based on the national prime rate, plus 0.5%,  aggregating 8.75% at
December  31,  2006.  The note is  payable in minimum  monthly  installments  of
principal and interest  totaling $3,459 and matures in July 2011. The promissory
note is personally  guaranteed by our  President/Chief  Executive  Officer.  The
total amount  outstanding  at December 31, 2006 is $155,785 and the net carrying
value of the Garland facility is approximately $263,000.


                                      F-28

<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005



NOTE  8  LONG-TERM OBLIGATIONS (continued)


The  Company is  obligated  under  various  installment  notes  payable  for the
purchase of equipment with an aggregate cost of $864,261.  The notes, which bear
interest at rates  ranging from 8.0% to 16.1%,  are due at various dates through
2011 and are  payable in monthly  installments  totaling  approximately  $30,549
consisting of principal and interest. The equipment acquired  collateralizes the
notes.

Aggregate  maturities of long-term  indebtedness  (including the notes payable -
stockholders described in Note 9 below) at December 31, 2006 are as follows:



               Year Ended December 31,                             Amount
               ----------------------                            ----------

                     2007                                        $1,351,050
                     2008                                         1,845,110
                     2009                                         1,047,873
                     2010                                           531,812
                     2011 and thereafter                             64,538
                                                                 ----------
                     Total Annual Payments                       $4,840,383

                     Less: Debt Discount                            102,564
                                                                 ----------
                     Total (Net of Discount)                     $4,737,819
                                                                 ==========


                                      F-29


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 9 NOTES PAYABLE - STOCKHOLDERS

On March 15,  2006,  the Company  issued a  convertible  promissory  note in the
amount of $500,000 to Tate Investments LLC ("the Investor"). The promissory note
is payable in 35 monthly  installments  of interest  only with all principal and
interest due on March 31, 2009.  The note accrues  interest at 10% for the first
12 months,  11% for months 13 through 24 and 12% for months 25 through maturity.
The effect of the  increasing  interest  rate under EITF 86-15  "Increasing-Rate
Debt" was  determined to be de minimus.  The Company may prepay a portion or all
of the  amount  outstanding  under the terms of the note after  March 31,  2007,
provided that the Company notify the Investor of the Company's  intent to prepay
after  which,  the  Investor  will  have 30 days to  convert  the note  into the
Company's  Common  Stock.  The  Investor  has the right to  convert  the  amount
outstanding  plus  accrued but unpaid  interest at the time of  conversion.  The
conversion  price agreed to is $0.85 per share during the period beginning March
15, 2006  through  March 31, 2007,  $1.00 per share during the period  beginning
April 1, 2007  through  March 31,  2008,  and $1.15 per share  during the period
April 1, 2008  through  maturity.  The  promissory  note is  secured by two PIWS
mobile units, with a net carrying value of $271,867 and is  cross-collateralized
by the  Investor's  liens on the Company's  accounts  receivable and its Garland
facility pursuant to the Investment  Agreement dated July 15, 2005,  between the
Company  and the  Investor  ("Investment  Agreement").  The  proceeds  from  the
promissory note were used by the Company to purchase equipment.

On May 22,  2006,  the Company and the Investor  agreed to amend the  Investment
Agreement to lower the conversion  price for the $1,000,000  Promissory  Note to
$0.55 per share from $0.65 per share in exchange for the Investor  retroactively
(as  of  July  15,  2005,  the  date  the  Investment  Agreement  was  executed)
eliminating the requirements for the Company to achieve certain earnings targets
thereunder. In connection with the conversion price adjustment,  the Company was
required to record a beneficial  conversion  charge of $153,846.  The beneficial
conversion  charge  represents  the  incremental  fair value of the impact  from
lowering the  conversion  rate and will be amortized  over the remaining life of
the note. The note accrues interest at 10% and matures on July 15, 2008 when all
outstanding  principal and accrued interest is due. As of December 31, 2006, the
remaining amount of the beneficial conversion charge to amortize was $102,564.

As of December 31, 2006, the total  principal  amount owed by the Company to the
Investor was $1,397,436, net of discount of $102,564.

On October 3, 2006,  the Company  issued a  convertible  promissory  note to our
Chairman of the Board who loaned  $100,000 for the purpose of providing  working
capital to the Company.  The promissory note is payable in interest only monthly
installments for three months and afterwards,  it begins paying 24 equal monthly
installments  of principal  and interest in the amount of $4,707 each.  The note
accrues  interest at 12% and at the option of the holder,  any unpaid  principal
and accrued  interest may be converted into Common Stock at the conversion price
of $1.00 per share. The note matures on January 3, 2009 at which time all unpaid
principal and accrued interest thereon is due.

On December 28, 2006,  the Company  issued a promissory  note to our Chairman of
the Board who loaned $175,000 for the purpose of providing  equipment  financing
to the Company.  The promissory note is payable in 24 equal monthly installments
of  principal  and  interest  in the  amount of $5,813  each.  The note  accrues
interest at 12% and matures on December 28, 2008.


                                      F-30


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 9 NOTES PAYABLE - STOCKHOLDERS (continued)


On October 3, 2006, the Company issued a convertible  promissory  note to one of
our  directors/shareholders  who loaned  $100,000  for the purpose of  providing
working capital to the Company.  The promissory note is payable in interest only
monthly  installments for 24 months at $1,000 per installment.  The note accrues
interest  at 12% and at the  option of the  holder,  any  unpaid  principal  and
accrued  interest may be converted  into Common Stock at the conversion of $1.00
per share. The note matures on October 3, 2008.


NOTE 10 EXTINGUISHMENT OF CONVERTIBLE DEBENTURES

The Company  issued an aggregate of  $1,100,000  of 15%  Convertible  Redeemable
Subordinated  Debentures  (the  "Series I  Debentures")  in 1994 and 1995 with a
final maturity date of March 31, 1999, and containing a provision for conversion
of the Series I Debentures, at the option of the holders thereof, into shares of
Common  Stock.  The  Company  also  issued  an  aggregate  of  $256,125  of  10%
Convertible Redeemable Debentures ("Series II Debentures," and together with the
Series I Debentures,  the "Debentures") in 1998 with a maturity date of November
1, 1999,  and containing a provision for conversion of the Series II Debentures,
at the option of the holders thereof, into shares of Common Stock.

Due to cash  constraints,  the Company was not able to redeem the  Debentures in
1999 pursuant to their  respective  terms.  The Company offered (the "Conversion
Offering") the holders of the Debentures the opportunity to convert their Series
I  Debentures  and  Series  II  Debentures  into  shares  of  Common  Stock at a
conversion rate of $1.50 and $1.75, respectively.

Certain  holders of  Debentures  did not respond to the  Conversion  Offering in
1999,  and the offer to convert the Debentures  into the Company's  Common Stock
has  since  expired  and any  contractual  claims  for  rights  pursuant  to the
Debentures  have been  time-barred  by the  applicable  statute of  limitations.
Accordingly,  the Company  extinguished  the Debentures on November 15, 2006 and
any  obligation  owed under their terms.  The Company  recorded  other income of
$40,135 and reversed all accrued interest as a result of extinguishment.



                                      F-31



<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 11 STOCKHOLDERS' EQUITY

Stock Issuances
---------------

During the year ended  December 31, 2006, the Company sold 429,500 shares of its
Common Stock to new  stockholders for a total  consideration  of $809,000,  less
$106,132 in transaction costs.

During the year ended  December 31, 2006,  186,505  shares of Series A Preferred
Stock were  converted  into  186,505  shares of the  Company's  Common  Stock in
accordance  with the Certificate of Designation for the Series A Preferred Stock
(the "Certificate of Designation").  The terms of the Certificate of Designation
required  the holders of the  Preferred  Stock to convert  their shares into the
Company's Common Stock on a share for share basis on the second anniversary from
the date of issuance of the  Preferred  Stock.  The  remaining  shares of 96,667
shares of Preferred Stock sold under the Certificate of Designation will convert
into shares of Common Stock during the 3 month period ended March 31, 2007.

The total  amount of dividends  declared to the holders of  Preferred  Stock was
$35,500 during the year ended December 31, 2006.

Stock Grants and Options
------------------------

At the annual meeting of  stockholders  of the Company on December 18, 2002, the
stockholders  approved the adoption of the  MedSolutions,  Inc. 2002 Stock Plan.
The  purpose of the plan is to attract and retain the best  available  personnel
for positions of substantial responsibility,  to provide additional incentive to
employees, directors and consultants and to promote the success of the Company's
business.  Options  granted  under the plan may be  Incentive  Stock  Options or
Nonstatutory Stock Options,  as determined by the Board of Directors at the time
of grant. On August 17, 2006, the Board of Directors approved an increase in the
number of shares  available  for future  grants and awards  under the 2002 Stock
Plan to 3,000,000  shares from 850,000 shares.  The  shareholders of the Company
approved  the  amendment  to the 2002 Stock Plan at their  Annual  Shareholder's
Meeting on October 19, 2006.

The option grants have a contractual  life up to ten years.  Options for 478,796
and 674,336 shares were granted to directors and employees during 2006 and 2005,
respectively.  During the year ended  December 31, 2006 and 2005,  respectively,
the Company  granted its  directors  134,223  and  81,208,  respectively,  stock
options in lieu of payment of director  fees. As of December 31, 2006, all stock
options  outstanding are fully vested. The amount of stock options available for
future issuance is 1,671,204 shares as of December 31, 2006.


                                      F-32



<PAGE>
<TABLE>
<CAPTION>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 11 STOCKHOLDERS' EQUITY (continued)


Stock Grants and Options (continued)
------------------------------------

A summary of activity involving options on the Company's common stock follows:


                                                                                                           Aggregate
                                                                                   Weighted Average        Intrinsic
                                                                Number of Options   Exercise Price            Value
                                                                ------------       ------------            ----------
<S>                                                            <C>                 <C>                     <C>

Balance outstanding at December 31, 2004                             268,118             $1.00

Granted                                                              674,336             $0.82
Exercised                                                               --                 --
Cancelled/Expired                                                     92,454             $1.00
                                                                    --------
Balance outstanding at December 31, 2005                             850,000             $0.82           $        0
                                                                                                            ========
Granted                                                              478,796             $0.75
Exercised                                                                -                  -
Cancelled/Expired                                                        -                  -
                                                                    --------            -------
Balance outstanding at December 31, 2006                           1,328,796             $0.80             $106,303
                                                                   =========            =======             ========

Number of options exercisable at December 31, 2006
                                                                   1,328,796             $0.80             $106,303
                                                                   =========             ======             ========

</TABLE>


Stock options outstanding at December 31, 2006 for each of the following classes
of options, by exercise price, are summarized as follows:

EXERCISE PRICE    NUMBER OF         WEIGHTED-AVERAGE         NUMBER OF OPTIONS
                                      REMAINING
                  OPTIONS           CONTRACTUAL LIFE       CURRENTLY EXERCISABLE
-----------------------------------------------------------------------------
  $1.00           80,164             7.00 years                    80,164
  $1.00           95,500             8.00 years                    95,500
  $1.00           79,173             8.50 years                    79,173
  $0.75          289,736             8.51 years                   289,736
  $0.75          305,427             9.00 years                   305,427
  $0.75          478,796             9.80 years                   478,796

                                      F-33


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 12 WASTE MANAGEMENT FACILITY AGREEMENT

On June 8, 2006, the operating  agreement between the Company and the University
of Texas Medical Branch ("UTMB")  expired.  The operating  agreement allowed the
Company to manage the UTMB  incineration  facility and process their waste for a
fee as well as provided a facility for the Company to treat waste generated from
EMSI  South  Texas and  Louisiana  customers  in return  for a fee paid to UTMB.
Currently,  the Company is taking generated waste from South Texas and Louisiana
to other third party facilities in South Texas and Northern Louisiana and to its
Garland facility.


NOTE 13 COMMITMENTS AND CONTINGENCIES

Risks and Concentrations
------------------------

Financial  instruments,  which potentially subject the Company to concentrations
of  credit  risk,  are  primarily  cash and  cash  equivalents,  trade  accounts
receivable and related party notes.

The Company  carries  $10 million of  liability  insurance  (including  umbrella
coverage),  and $5 million of aggregate  pollution and legal liability insurance
($1  million  per  incident),  which the Company  considers  sufficient  to meet
regulatory and customer  requirements  and to protect its employees,  assets and
operations.  The Company's pollution  liability  insurance excludes  liabilities
under  CERCLA.  There can be no assurance  that the Company will not face claims
under CERCLA or similar state laws resulting in substantial  liability for which
the Company is uninsured and which could have a material  adverse  effect on its
business.

Lease Obligations
-----------------

Effective  February 10, 2005, the Company  extended and renewed its lease at its
corporate  headquarters  in  Dallas,  Texas.  The  Company  has  leases  for its
corporate  office and other  facilities for terms which expire through  December
2012. Minimum annual rentals under the leases are as follows:

                        Years Ended
                        December 31,              Amount
                        ------------            ----------
                           2007                 $   97,547
                           2008                     99,491
                           2009                     99,491
                           2010                    103,118
                           2011                    104,384
                           Thereafter               43,493
                                                ----------
                                                $  547,524
                                                ==========


                                      F-34


<PAGE>



                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005



NOTE 13 COMMITMENTS AND CONTINGENCIES (continued)


During the year ended December 31, 2002,  the Company  entered into an operating
lease agreement for the use of new vehicles to use in the transportation segment
of its business.  The monthly lease  payments  range from $713 to $1,237 and the
lease  periods  range from 60 to 84 months for the  vehicles.  In addition,  the
Company pays a per-mile  maintenance  fee of $0.065 to $0.070 for the use of the
vehicles.  The following table shows the future minimum operating lease payments
that are due under the contracts:

                        Years Ended
                        December 31,                     Amount
                        ------------                   ----------
                           2007                        $  213,378
                           2008                           201,458
                           2009                           121,255
                           2010                            12,138
                           2011 & thereafter                    -
                                                       ----------
                                                       $  548,229
                                                       ==========


Rent expense for all operating  leases during the years ended  December 31, 2006
and 2005 was $924,029 and $729,045, respectively.

Environmental Matters
---------------------

The Company  operates  within the medical waste  management  industry,  which is
subject to various federal, state and local laws and regulations.  Management is
not  aware  of  any  significant   contingent   liabilities  relative  to  these
activities.

Litigation
----------

The  Company  operates  in a  highly  regulated  industry  and  are  exposed  to
regulatory inquiries or investigations from time to time. Government authorities
can initiate  investigations for a variety of reasons.  We have been involved in
certain legal and administrative proceedings that have been settled or otherwise
resolved on terms  acceptable to us, without having a material adverse effect on
our business.




                                      F-35


<PAGE>


                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 13 COMMITMENTS AND CONTINGENCIES (continued)

The Company,  EMSI and one of the Company's employees have been named in a civil
action filed in the Dallas County Court,  Dallas County,  Texas as a result of a
traffic  accident  involving  one of  EMSI's  trucks.  The  complaint,  Case No.
cc-05-04255-E,  was filed on April 8, 2005 and is a civil action titled Kathleen
Bohne and David Ross,  Independent  Executor of the Estate of Robert E. Bohne v.
MedSolutions,  Inc.,  EnviroClean  Management  Services,  Inc.  and Turner Bruce
Yarbrough.  The complaint  seeks damages from the Company for losses suffered by
the  plaintiffs  as  a  result  of  an  accidental  death.  The  Company  denies
responsibility  for the  claims  alleged  by the  plaintiffs  and is  vigorously
defending the action through its insurance  carrier.  The Company  believes that
this lawsuit is adequately covered by insurance; however, to the extent that the
amount of any award  exceeds  the  Company's  insurance  coverage,  such  excess
amounts  could have a material  impact on the Company's  financial  condition or
results of operations.  The  plaintiffs are litigating for damages,  which could
exceed $4.4 million plus punitive  damages.  The Company maintains $6 million of
insurance  coverage  to cover  potential  claims.  If the suit is settled for an
amount exceeding $6 million the Company will be responsible for this excess.

We are also a party to various legal proceedings  arising in the ordinary course
of business.  However, except as described above, there are no legal proceedings
pending or, to our knowledge,  threatened against us that could adversely affect
our financial condition or our ability to carry on the business.

mployment Agreements
---------------------

Matthew H. Fleeger serves as the Company's President and Chief Executive Officer
and entered into a three-year employment agreement dated December 30, 2004 to be
effective  as of January 1, 2005.  Mr.  Fleeger is entitled to receive an annual
base salary of $200,000,  increased 5% annually, and is also entitled to be paid
a cash bonus of $25,000 on April 15,  2005.  Pursuant  to the  Executive  Target
Bonus  Program,  Mr.  Fleeger is also  eligible for an annual bonus based on the
Company achieving  certain goals related to EBITDA.  Any such bonus will be paid
to Mr.  Fleeger in the form of a stock  option to purchase a number of shares of
Common Stock equal to the amount of such bonus at an exercise price per share of
Common  Stock  equal to the fair  market  value (as such term is  defined in the
Company's  2002 Stock Option Plan or any successor  plan thereto) of such Common
Stock as of the effective date that such option is granted;  provided,  however,
that in the event that Mr. Fleeger becomes the owner of equity securities of the
Company  representing  more than 10% of the total  combined  voting power of all
classes of equity  securities  of the Company,  the exercise  price per share of
Common  Stock  shall be equal to 110% of the fair  market  value of such  Common
Stock as of the effective  date that such option is granted;  provided  further,
however,  that Mr.  Fleeger shall have the option,  in his sole  discretion,  to
receive up to 50% of the amount of any such bonus in the form of cash in lieu of
such stock option.

Mr. Lonnie P. Cole, Sr. serves as a Senior Vice President in charge of our Sales
Department.  Mr. Cole  entered  into a  three-year  employment  agreement  dated
September 30, 2004 to be effective as of October 1, 2004. Mr. Cole is to receive
a base salary of $100,000 annually and is eligible for bonus incentives based on
the Company achieving certain goals related to revenue growth.

                                      F-36

<PAGE>



                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 13 COMMITMENTS AND CONTINGENCIES (continued)

Mr. J. Steven Evans serves as Vice President of Finance in charge of our Finance
and  Accounting  Department.  Mr. Evans  entered  into a  three-year  employment
agreement  dated  February  1, 2005.  Mr.  Evans is to receive a base  salary of
$95,000  annually  and is  eligible  for  bonus  incentives  based  on  personal
performance and the Company achieving certain financial goals.

Mr. Alan Larosee  serves as Vice President of  Operations.  Mr. Larosee  entered
into a three-year  employment  agreement  dated March 1, 2005. Mr. Larosee is to
receive a base salary of $95,000  annually and is eligible for bonus  incentives
based on personal performance and the Company achieving certain financial goals.

Mr. James M. Treat serves as Vice President of Business  Development.  Mr. Treat
entered into a three-year employment agreement dated December 1, 2005. Mr. Treat
is to receive a base  salary of  $100,000  annually  and is  eligible  for bonus
incentives  based on  personal  performance  and the Company  achieving  certain
financial goals.


NOTE 14 RELATED PARTY TRANSACTIONS

Related party expenses included in the accompanying  consolidated  statements of
operations are as follows:

                                             Years Ended December 31,
                                          ---------------------------
                                             2006            2005
                                          ----------      ----------

                   Interest expense       $  183,082           $  139,705
                                          ==========           ==========






                                      F-37


<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 15 SUBSEQUENT EVENTS


On January 1, 2007,  the Company  issued  promissory  notes to its directors for
payment of their  2006  board  compensation.  Additional  promissory  notes were
issued to the Chairman of the Board and the President/Chief Executive Officer of
the Company for payment of  compensation  for giving their  personal  guaranties
related to certain  indebtedness  by the Company to various third  parties.  The
total  amount of the  promissory  notes  issued is $292,005 and the notes accrue
interest at 12% with final payment of all principal and accrued  interest due on
July 1, 2007.

On January 2, 2007,  the Company issued a promissory  note to Tate  Investments,
LLC, which loaned $175,000 to the Company for equipment expansion purposes.  The
promissory  note  bears  interest  at 12% and is  payable  in 24  equal  monthly
installments  of principal  and interest in the amount of $5,813 each,  with the
balance of the principal  and any accrued and unpaid  interest due upon maturity
of the note on December 28, 2008.

On January 31, 2007, the Company  renewed and extended for six months a $175,000
promissory  note to On Call Medical Waste  Services,  Ltd ("On Call").  The note
accrues interest at 12% and is payable in monthly  installments of interest only
with the principal and any accrued and unpaid  interest due upon maturity of the
note on July 31, 2007. As consideration  for this extension,  the Company agreed
to enter into an agreement with Medical Waste of North Texas,  LLC ("MWNT"),  an
entity  owned by the  former  owner of On Call,  for the  Company  to treat  and
dispose of regulated  medical  waste that is brought to its Garland  Facility by
MWNT,  effective September 1, 2007. The initial term of this agreement is for 24
months,  and  the  agreement   automatically   renews  for  additional  one-year
extensions  unless either party  notifies the other party in writing at least 30
days but not more than 90 days prior to any such  renewal date of its desire not
to renew the agreement.

On March 27, 2007,  EMSI entered into a $1,500,000  secured,  one-year  loan and
security agreement (the "Loan Agreement") with Park Cities Bank,  Dallas,  Texas
(the  "Bank"),  and Mr.  Matthew  H.  Fleeger  and Mr.  Winship  B.  Moody,  Sr.
(collectively,  the "Guarantors").  The terms of the Loan Agreement provide EMSI
with a  $1,500,000  revolving  line  of  credit,  subject  to  certain  downward
adjustments  from time to time based upon the value of the  collateral  securing
the line of credit.  The performance by EMSI of its  obligations  under the Loan
Agreement  is  secured by all of EMSI's  personal  property,  including  without
limitation its account  receivables,  and a first-lien mortgage deed of trust on
EMSI's facility located in Garland, Texas, and is unconditionally  guaranteed by
the Guarantors. The proceeds of the borrowings under the Loan Agreement may only
be used for general corporate purposes,  including without limitation  providing
working capital to EMSI for the purposes of financing its operations, production
and  marketing  and sales  efforts,  costs  related to the  expansion  of EMSI's
business operations,  and the acquisition of the assets of businesses engaged in
businesses  the same  as,  similar  to,  or  complementary  to  EMSI's  business
operations. Borrowings under the Loan Agreement will bear interest at the lesser
of (1) a fluctuating  rate of interest equal to 1.0% in excess of the prime rate
as designated in the Money Rates Section of the Wall Street Journal from time to
time or (2) the maximum rate  permissible by applicable law.  Accrued and unpaid
interest  under the Loan  Agreement  is  payable  on the first day of each month
commencing on April 1, 2007. In addition, EMSI paid an

                                      F-38
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 15 SUBSEQUENT EVENTS (continued)

origination  fee to the  Bank in the  amount  of  $15,000.  The  Loan  Agreement
contains,   among   other   provisions,    conditions   precedent,    covenants,
representations and warranties and events of default customary for facilities of
this size, type and purpose.  Negative covenants include certain restrictions or
limitations on, among other provisions,  the incurrence of indebtedness;  liens;
investments,  loans and  advances;  restricted  payments,  including  dividends;
consolidations and mergers; sales of assets (subject to customary exceptions for
sales of inventory in the ordinary  course and sales of equipment in  connection
with the replacement  thereof in the ordinary course);  and changes of ownership
or control of EMSI.  Affirmative  covenants include covenants  regarding,  among
other provisions, financial reporting. The Loan Agreement will mature and expire
on April 1, 2008, at which time all outstanding amounts under the Loan Agreement
will be due and payable. The outstanding amounts under the Loan Agreement may be
prepaid by EMSI at any time without penalty,  and any principal amounts borrowed
and repaid  thereunder  may be  reborrowed by EMSI prior to the maturity date so
long as the aggregate  principal amount  outstanding at any time does not exceed
the $1,500,000 maximum loan commitment (as subject to downward  adjustment based
on the value of the collateral as described above). Under certain conditions the
loan  commitment  under the Loan  Agreement  may be  terminated  by the Bank and
amounts outstanding under the Loan Agreement may be accelerated.  Bankruptcy and
insolvency  events with respect to EMSI or either of the Guarantors  will result
in an automatic  termination  of lending  commitments  and  acceleration  of the
indebtedness  under the Loan  Agreement.  Subject to notice and cure  periods in
certain  cases,  other events of default under the Loan Agreement will result in
termination of lending  commitments and  acceleration of indebtedness  under the
Loan Agreement at the option of the Bank.

Such  other  events of  default  include  failure  to pay any  principal  and/or
interest when due, failure to comply with covenants,  breach of  representations
or warranties in any respect, non-payment or acceleration of other material debt
of EMSI or the Guarantors,  the death of either  Guarantor of the termination of
either of their guaranties,  certain  judgments  against EMSI or a Guarantor,  a
material adverse change in the business or financial condition of EMSI or either
Guarantor, or if the Bank in good faith deems itself insecure.

On March 1, 2007, the Company provided written notice to the Investor,  that the
Company  intended to prepay in full on April 2, 2007 all  outstanding  principal
and interest  owed by the Company to the  Investor  pursuant to (1) that certain
10% Senior  Convertible  Note issued by the Company to the  Investor on July 15,
2005 in the  principal  amount of  $1,000,000  (the "2005  Note"),  and (2) that
certain  Convertible  Secured  Promissory  Note  issued  by the  Company  to the
Investor on March 15, 2006 in the principal amount of $500,000 (the "2006 Note,"
and together with the 2005 Note,  the "Notes").  The 2005 Note was issued by the
Company in connection with the Investment Agreement. The Company intended to use
the proceeds of the Loan Agreement described above to prepay the Notes.

                                      F-39
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE 15 SUBSEQUENT EVENTS (continued)

On March 31,  2007,  96,667  shares of the  Company's  Series A 10%  Convertible
Preferred  Stock (the  "Series A Preferred  Stock") were  converted  into 96,667
shares of the  Company's  Common Stock in  accordance  with the  Certificate  of
Designation for the Series A Preferred Stock (the "Certificate of Designation").
The  terms  of the  Certificate  of  Designation  required  the  holders  of the
Preferred  Stock to convert  their shares into the  Company's  Common Stock on a
share for share basis on the second anniversary from the date of issuance of the
Series A Preferred Stock. All dividends  declared with regard to the issuance of
the Series A Preferred Stock have been paid. As of March 31, 2007, there were no
shares of Series A Preferred Stock outstanding.


                                      F-40

<PAGE>



                                  EXHIBIT INDEX

EXHIBIT  NO.               DESCRIPTION

     3.1  Articles  of  Incorporation  of  MedSolutions,  Inc.,  filed  with the
Secretary  of Sate of the State of Texas on November  12, 1993 (filed as Exhibit
3.1 to the Company's Form 10-SB filed on July 16, 2001, and incorporated  herein
by reference).

     3.2 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary  of State of the State of Texas on January  10,
1994 (filed as Exhibit 3.2 to the  Company's  Form 10-SB filed on July 16, 2001,
and incorporated herein by reference).

     3.3 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary  of State of the State of Texas on January  31,
1996 (filed as Exhibit 3.3 to the  Company's  Form 10-SB filed on July 16, 2001,
and incorporated herein by reference).

     3.4 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary  of State of the State of Texas on November 12,
1996 (filed as Exhibit 3.4 to the  Company's  Form 10-SB filed on July 16, 2001,
and incorporated herein by reference).

     3.5 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary  of State of the State of Texas on December 23,
1999 (filed as Exhibit 3.5 to the  Company's  Form 10-SB filed on July 16, 2001,
and incorporated herein by reference).

     3.6 Articles of Amendment to the Articles of Incorporation of MedSolutions,
Inc.,  filed with the  Secretary of State of the State of Texas on June 27, 2001
(filed as Exhibit 3.6 to the  Company's  Form 10-SB filed on July 16, 2001,  and
incorporated herein by reference).

     3.7 Bylaws, as amended, of MedSolutions,  Inc. (filed as Exhibit 3.7 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).

     4.1 Form of Lock-Up  Agreement  (filed as Exhibit 4.1 to the Company's Form
10-SB filed on July 16, 2001, and incorporated herein by reference).

     4.2 Form of Subscription  Agreement  (filed as Exhibit 4.2 to the Company's
Form 10-SB filed on July 16, 2001, and incorporated herein by reference).

     4.3 Stock Purchase Option,  dated January 15, 1997,  between  MedSolutions,
Inc. and Gary S. Krall (filed as Exhibit 4.3 to the Company's Amendment No. 1 to
Form 10-SB filed on February 13, 2002, and incorporated herein by reference).(*)

     4.4  Certificate of Designation of the Series A 10%  Convertible  Preferred
Stock, as filed with the Texas Secretary of State on November 12, 2004 (filed as
Exhibit  4.1 to  the  Company's  Form  8-K  filed  on  November  12,  2004,  and
incorporated herein by reference).

     10.1 Firm Commitment Agreement, dated October 31, 2000, between Lilly Beter
Capital  Group,  Ltd.  and  MedSolutions,  Inc.  (filed as  Exhibit  10.1 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).

     10.2 Loan  Conversion and Common Stock  Agreement  between Mark M. Altenau,
M.D. and  MedSolutions,  Inc., dated July 31, 2000 (filed as Exhibit 10.2 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).

     10.3  Contractor  Services  Agreement  effective  May 28, 1995, as amended,
between  MedSolutions,  Inc.  and The  University  of Texas  Medical  Branch  at
Galveston  (filed as Exhibit 10.3 to the Company's  Form 10-SB filed on July 16,
2001, and incorporated herein by reference).

     10.4 Memorandum of Agreement,  dated June 15, 2001,  between  MedSolutions,
Inc. and  Intercontinental  Manufacturing  Company (filed as Exhibit 10.4 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).


<PAGE>


     10.5  Exclusive  Medical  Waste  Service  Agreement,  dated March 21, 2002,
between EnviroClean  Management Services,  Inc. and Christus Spohn Health System
(filed as Exhibit  10.5 to the  Company's  Form 10-QSB filed on August 16, 2002,
and incorporated herein by reference).+

     10.6 Medical Waste  Transportation and Disposal  Agreement,  dated March 1,
2001, between EnviroClean Management Services,  Inc., and Trinity Mother Frances
Regional  Health Center (filed as Exhibit 10.6 to the Company's  Amendment No. 1
to  Form  10-SB  filed  on  February  13,  2002,  and  incorporated   herein  by
reference).+

     10.7  Amended  and  Restated   Promissory  Note  dated  July  31,  2001  by
MedSolutions,  Inc. to Mark M. Altenau,  M.D. for $171,666.67  (filed as Exhibit
10.7 to the Company's  Amendment No. 1 to Form 10-SB filed on February 13, 2002,
and incorporated herein by reference).

     10.8  Amended and  Restated  Loan  Conversion  and Common  Stock  Agreement
between Mark M. Altenau, M.D. and MedSolutions, Inc., dated July 31, 2001 (filed
as Exhibit 10.8 to the Company's Amendment No. 1 to Form 10-SB filed on February
13, 2002, and incorporated herein by reference).

     10.9 Amendment 4 to the Contractor Services Agreement between MedSolutions,
Inc. and University of Texas Medical  Branch at Galveston  (Exhibit 10.9) (filed
as Exhibit 10.9 to the Company's Amendment No. 1 to Form 10-SB filed on February
13, 2002, and incorporated herein by reference).

     10.10 LBCG  Financing  Proposal  (filed as Exhibit  10.10 to  MedSolutions,
Inc.'s  Amendment  No.  1  to  Form  10-SB  filed  on  February  13,  2002,  and
incorporated herein by reference).

     10.11 Purchase Agreement for the purchase of an autoclave for MedSolutions,
Inc.'s  Garland  facility  between  EnviroClean  Management  Services,  Inc. and
BondTech,  Inc.  (filed as Exhibit 10.11 to the  Company's  Form 10-QSB filed on
August 19, 2002, and incorporated herein by reference).

     10.12 Promissory Note dated August 28, 2002 by MedSolutions, Inc. to Vivian
Eriksen for  $202,250.79.  (filed as Exhibit 10.12 to the Company's  Form 10-QSB
filed on November 14, 2002, and incorporated herein by reference).

     10.13 Promissory Note dated August 28, 2002 by MedSolutions, Inc. to Vivian
Eriksen for  $90,000.00.  (filed as Exhibit 10.13 to the  Company's  Form 10-QSB
filed on November 14, 2002, and incorporated herein by reference).

     10.14 Promissory Note dated August 28, 2002 by MedSolutions, Inc. to Vivian
Eriksen for  $322,749.21.  (filed as Exhibit 10.14 to the Company's  Form 10-QSB
filed on November 14, 2002, and incorporated herein by reference).

     10.15 Asset Purchase Agreement and related exhibits thereto, dated November
7, 2003, between MedSolutions, Inc. and AmeriTech Environmental,  Inc. (filed as
Exhibit  2.1 to  the  Company's  Form  8-K  filed  on  November  24,  2003,  and
incorporated herein by reference).

     10.16 Promissory Note dated March 7, 2004, by MedSolutions, Inc. to Ajit S.
and Saroj Brar for  $500,000.00.  (filed as Exhibit 10.16 to the Company's  Form
10-QSB filed on July 14, 2004, and incorporated herein by reference).

     10.17 Promissory Note dated July 7, 2004, by MedSolutions,  Inc. to Ajit S.
Brar for $250,000.00. (filed as Exhibit 10.17 to the Company's Form 10-QSB filed
on November 19, 2004, and incorporated herein by reference).

     10.18  Promissory  Note dated September 27, 2004 by  MedSolutions,  Inc. to
Ajit S. Brar for $150,000.  (filed as Exhibit 10.18 to the Company's Form 10-QSB
filed on November 19, 2004, and incorporated herein by reference).

     10.19  Promissory  Note dated September 29, 2004 by  MedSolutions,  Inc. to
Winship Moody for $150,000. (filed as Exhibit 10.19 to the Company's Form 10-QSB
filed on November 19, 2004, and incorporated herein by reference).

     10.20  Promissory  Note dated  November  7, 2003 by  MedSolutions,  Inc. to
Winship Moody for $238,225. (filed as Exhibit 10.20 to the Company's Form 10-QSB
filed on November 19, 2004, and incorporated herein by reference).


<PAGE>


     10.21  Promissory  Note dated July 19,  2004 by  MedSolutions,  Inc. to Don
McAfee for  $35,562.99.  (filed as Exhibit  10.21 to the  Company's  Form 10-QSB
filed on November 19, 2004, and incorporated herein by reference).

     10.22 Asset  Purchase  Agreement,  dated as of September  30, 2004,  by and
between MedSolutions,  Inc. and Med-Con Waste Solutions,  Inc. (filed as Exhibit
2.1 to the Company's Form 8-K filed on October 6, 2004, and incorporated  herein
by reference).

     10.23 Promissory Note dated December 6, 2004 by MedSolutions,  Inc. to Ajit
S. Brar for $100,000. (filed as Exhibit 10.23 to the Company's Form 10-KSB filed
on April 15, 2005, and incorporated herein by reference).

     10.24 Employment  Agreement dated September 30, 2004 between  MedSolutions,
Inc.  and  Lonnie P.  Cole,  Sr.  (the form of which was an exhibit to the Asset
Purchase  Agreement  filed as  Exhibit  2.1 to the  Company's  Form 8-K filed on
October 6, 2004, and incorporated herein by reference).*

     10.25  Employment  Agreement dated December 30, 2004 between  MedSolutions,
Inc. and Matthew H. Fleeger  (filed as Exhibit  10.1 to the  Company's  Form 8-K
filed on December 30, 2004, and incorporated herein by reference).*

     10.26  Employment  Agreement  dated February 1, 2005 between  MedSolutions,
Inc. and J. Steven Evans (filed as Exhibit  10.14 to the  Company's  Form 10-QSB
filed on November 21, 2005, and incorporated herein by reference).* **

     10.27 Employment Agreement dated March 1, 2005 between  MedSolutions,  Inc.
and Alan Larosee  (filed as Exhibit 10.15 to the Company's  Form 10-QSB filed on
November 21, 2005, and incorporated herein by reference).* **

     10.28 Promissory Note dated June 30, 2005 by MedSolutions,  Inc. to Ajit S.
Brar for $488,149 (filed as Exhibit 10.16 to the Company's  Quarterly  Report on
Form 10-QSB on August 22, 2005, and incorporated herein by reference).

     10.29 Promissory Note dated June 30, 2005 by MedSolutions,  Inc. to Winship
Moody for  $23,728(filed  as Exhibit 10.17 to the Company's  Quarterly Report on
Form 10-QSB on August 22, 2005, and incorporated herein by reference).

     10.30 Investment Agreement dated as of July 15, 2005 between  MedSolutions,
Inc. and Tate  Investments,  LLC (filed as Exhibit 10.1 to the Company's Current
Report  on  Form  8-K  filed  on July  20,  2005,  and  incorporated  herein  by
reference).

     10.31 General Business Security Agreement dated as of July 15, 2005 between
MedSolutions,  Inc.  and Tate  Investments,  LLC (filed as  Exhibit  10.2 to the
Company's  Current Report on Form 8-K filed on July 20, 2005,  and  incorporated
herein by reference).

     10.32  Deed of Trust  dated  as of July 15,  2005  granted  by  EnviroClean
Management Services, Inc. (filed as Exhibit 10.3 to the Company's Current Report
on Form 8-K filed on July 20, 2005, and incorporated herein by reference).

     10.33  Loan  Agreement  dated  as of  July  29,  2005  between  EnviroClean
Management  Services,  Inc. and Park Cities Bank (filed as Exhibit  10.21 to the
Company's  Form 10-QSB filed on November 21, 2005,  and  incorporated  herein by
reference).

     10.34  Promissory  Note  dated as of July 29,  2005  issued by  EnviroClean
Management  Services,  Inc. to Park Cities Bank for  $325,000  (filed as Exhibit
10.22 to the Company's Form 10-QSB filed on November 21, 2005, and  incorporated
herein by reference).

     10.35 Asset Purchase  Agreement dated as of August 29, 2005, by and between
MedSolutions,  Inc. and On Call Medical Waste  Service,  Ltd.  (filed as Exhibit
10.1 to the Company's  Current  Report on Form 8-K filed on August 31, 2005, and
incorporated herein by reference).

     10.36 Promissory Note dated February 14, 2005 by MedSolutions, Inc. to Ajit
S. Brar for $75,000  (filed as Exhibit 10.26 to the Company's  Form 10-QSB filed
on November 21, 2005, and incorporated herein by reference).

     10.37  Promissory  Note dated  February 17, 2005 by  MedSolutions,  Inc. to
Winship Moody for $75,000  (filed as Exhibit 10.27 to the Company's  Form 10-QSB
filed on November 21, 2005, and incorporated herein by reference).


<PAGE>


     10.38 Promissory Note dated October 7, 2005 issued by MedSolutions, Inc. to
On Call Medical Waste Service,  Ltd. for $375,000 (filed as Exhibit 10.38 to the
Company's  Form  10-KSB  filed on April 17,  2006,  and  incorporated  herein by
reference).

     10.39 Promissory Note dated November 28, 2005 issued by MedSolutions,  Inc.
to Ajit S. Brar for $75,000 (filed as Exhibit 10.39 to the Company's Form 10-KSB
filed on April 17, 2006, and incorporated herein by reference).

     10.40 Promissory Note dated November 30, 2005 issued by MedSolutions,  Inc.
to Winship  Moody for  $75,000  (filed as Exhibit  10.40 to the  Company's  Form
10-KSB filed on April 17, 2006, and incorporated herein by reference).

     10.41 Promissory Note dated February 7, 2006 issued by  MedSolutions,  Inc.
to On Call Medical Waste Service,  Ltd. for $200,000  (filed as Exhibit 10.41 to
the Company's  Form 10-KSB filed on April 17, 2006, and  incorporated  herein by
reference).

     10.42 Promissory Note dated February 7, 2006 issued by  MedSolutions,  Inc.
to On Call Medical Waste Service,  Ltd. for $175,000  (filed as Exhibit 10.42 to
the Company's  Form 10-KSB filed on April 17, 2006, and  incorporated  herein by
reference).

     10.43 First  Amendment to Investment  Agreement  dated as of March 15, 2006
between MedSolutions,  Inc. and Tate Investments, LLC (filed as Exhibit 10.43 to
the Company's  Form 10-KSB filed on April 17, 2006, and  incorporated  herein by
reference).

     10.44 Loan Agreement dated as of March 15, 2006 between MedSolutions,  Inc.
and Tate  Investments,  LLC (filed as Exhibit 10.44 to the Company's Form 10-KSB
filed on April 17, 2006, and incorporated herein by reference).

     10.45  Convertible  Secured  Promissory Note dated March 15, 2006 issued by
MedSolutions, Inc. to Tate Investments, LLC for $500,000 (filed as Exhibit 10.45
to the Company's Form 10-KSB filed on April 17, 2006, and incorporated herein by
reference).

     10.46 Security  Agreement dated as of March 15, 2006 between  MedSolutions,
Inc. and Tate  Investments,  LLC (filed as Exhibit 10.46 to the  Company's  Form
10-KSB filed on April 17, 2006, and incorporated herein by reference).

     10.47  Employment  Agreement  dated December 1, 2005 between  MedSolutions,
Inc. and James Treat (filed as Exhibit 10.47 to the Company's  Form 10-KSB filed
on April 17, 2006, and incorporated herein by reference).

     10.48 Asset  Purchase  Agreement  dated as of  November  30,  2005,  by and
between  MedSolutions,  Inc. and Positive Impact Waste Solutions,  LLC (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K on December 5, 2005, and
incorporated herein by reference).

     10.49  Amendment and Settlement  Agreement dated as of June 30, 2006 by and
between  MedSolutions,  Inc. and Positive Impact Waste Solutions,  LLC (filed as
Exhibit  10.49 to the  Company's  Quarterly  Report on Form 10-QSB on August 21,
2006, and incorporated herein by reference).

     10.50 Merger  Agreement and Plan of  Reorganization  dated as of August 16,
2006 by and between MedSolutions,  Inc., SteriLogic Acquisition Subsidiary, Inc.
and  SteriLogic  Waste  Systems,  Inc.  (filed as Exhibit 10.50 to the Company's
Quarterly Report on Form 10-QSB on August 21, 2006, and  incorporated  herein by
reference).

     10.51  Convertible   Promissory  Note  dated  October  3,  2006  issued  by
MedSolutions, Inc. to Winship B. Moody, Sr. for $100,000 (filed as Exhibit 10.51
to the  Company's  Quarterly  Report on Form 10-QSB on November  20,  2006,  and
incorporated herein by reference).

     10.52  Convertible   Promissory  Note  dated  October  3,  2006  issued  by
MedSolutions,  Inc. to Ajit S. Brar for $100,000  (filed as Exhibit 10.52 to the
Company's Quarterly Report on Form 10-QSB on November 20, 2006, and incorporated
herein by reference).

     10.53 Loan and Security  Agreement dated as of March 27, 2007, by and among
EnviroClean Management Services,  Inc., Park Cities Bank, Matthew H. Fleeger and
Winship B. Moody, Sr. (filed as Exhibit 10.1 to the Company's  Current Report on
Form 8-K on April 2, 2007, and incorporated herein by reference).


<PAGE>


     10.54 $1,500,000 Revolving Note issued by EnviroClean  Management Services,
Inc.  to Park  Cities  Bank on March  27,  2007  (filed as  Exhibit  10.2 to the
Company's  Current Report on Form 8-K on April 2, 2007, and incorporated  herein
by reference).

     10.55 Promissory Note dated January 2, 2007 issued by MedSolutions, Inc. to
Tate Investments, LLC for $175,000.**

     10.56 Promissory Note dated December 21, 2006 issued by MedSolutions,  Inc.
to Winship Moody for $175,000.**

     31.1  Certification  of  Chief  Executive  Officer  of  MedSolutions,  Inc.
Pursuant to Rule 13a-14(a)/15d-14(a).**

     31.2  Certification  of Chief  Accounting  Officer  of  MedSolutions,  Inc.
Pursuant to Rule 13a-14(a)/15d-14(a).**

     32.1  Certification  of  Chief  Executive  Officer  of  MedSolutions,  Inc.
Pursuant to 18 U.S.C. Section 1350.**

     32.2  Certification  of Chief  Accounting  Officer  of  MedSolutions,  Inc.
Pursuant to 18 U.S.C. Section 1350.**

----------
     (*) Denotes a management contract or compensatory plan or arrangement.
     (+)  Confidential  treatment was requested with respect to certain portions
of this exhibit. Omitted portions were filed separately with the SEC at the time
the exhibit was filed.
     (**) Filed herewith.