##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    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 000-53287
 
 Pure Earth, Inc.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    84-1385335(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)One Neshaminy Interplex, Suite 201Trevose, Pennsylvania
    
    19053(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (215) 639-8755
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredNone.
    
    None.
 Securities registered pursuant to Section 12(g) of the Act:
 Common Stock, par value $0.001 per share
 
 Yes o No þ
 Yes o No þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 Yes o No þ
 ®
  Documents Incorporated by Reference:




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##### 



PURE EARTH, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
 TABLE OF CONTENTS
 PagePART I
    
    
    1Item1. Business
    
    
    1Item1A. Risk Factors
    
    
    27Item1B. Unresolved Staff Comments
    
    
    51Item2. Properties
    
    
    51Item3. Legal Proceedings
    
    
    52Item4. Submission of Matters to a Vote of Security Holders
    
    
    55PART II
    
    
    56Item5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    56Item6. Selected Financial Data
    
    
    57Item7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    57Item7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    100Item8. Financial Statements and Supplementary Data
    
    
    100Item9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
    
    
    100Item9A(T). Controls and Procedures
    
    
    100Item9B. Other Information
    
    
    101PART III
    
    
    102Item10. Directors, Executive Officers and Corporate Governance
    
    
    102Item11. Executive Compensation
    
    
    102Item12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    102Item13. Certain Relationships and Related Transactions, and Director Independence
    
    
    102Item14. Principal Accounting Fees and Services
    
    
    102PART IV
    
    
    103Item15. Exhibits and Financial Statement Schedules
    
    
    103SIGNATURES
    
    
    107Exhibit 10.6.5Exhibit 10.15Exhibit 10.16Exhibit 10.17.1Exhibit 10.17.2Exhibit 10.17.3Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I
 
 Item 1. Business.
 Forward-Looking Statements
   Company Overview
  
    
    Transportation and Disposal We provide transportation and disposal services
for excavated clean and contaminated soils from urban construction projects in the
mid-Atlantic region and the New York metropolitan area.
    
    Treatment and Recycling We remove, process, treat, recycle and dispose of
residual waste from a variety of different industrial and commercial sources,
targeting customers along the U.S. eastern seaboard.
 
    
    Environmental Services We provide a wide range of environmental consulting and
related specialty services, including:
 
    
    environmental investigation and engineering services to
commercial and residential customers; and
  1




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
    
    locating and acquiring Brownfield sites for subsequent
development, restoration and potential resale with capping material from
our existing facilities or directly from our customer base.
 
    
    Materials We produce and sell recycled construction materials for a variety of
construction and other applications, including crushed stone and recycled
aggregate. Our construction materials are produced to meet all prevailing
specifications for their use.
    
    Concrete Fibers We recycle used carpet fibers into environmentally
sustainable, or green, fiber material used to reinforce concrete. We also repack
and distribute various other fibers as additives to concrete products. This
segment began its operations on April 1, 2008 with our acquisition of specified
assets of Nycon, Inc.
   Organizational Summary
  Subsidiary/Joint
    
    Immediate
    
    Business
    
    
    
    Primary
    
    Primary TargetVenture
    
    Parent Entity
    
    Segment
    
    Headquarters
    
    Operations
    
    MarketsPure Earth
Transportation &
Disposal, Inc.
 (PE
Disposal)
    
    Pure Earth
Materials, Inc.
    
    Transportation and
Disposal
    
    Bronx, New York
    
    Transportation and
disposal of
contaminated and
clean soils
    
    New York City
metropolitan area
and northern New
JerseyJuda Construction,
Ltd. (Juda)
    
    Pure Earth
Materials, Inc.
    
    Transportation and
Disposal
    
    Bronx, New York
    
    Transportation of
contaminated and
clean soils,
primarily to serve
PE Disposal
    
    New York City
metropolitan area
and northern New
JerseyPEI Disposal Group,
Inc. (PEI Disposal
Group)
    
    Pure Earth, Inc.
    
    Transportation and
Disposal
    
    Long Island, New
York
    
    Transportation and
disposal of
contaminated and
clean soils
    
    New York City
metropolitan area
and 
Long Island
  2




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Subsidiary/Joint
    
    Immediate
    
    Business
    
    
    
    Primary
    
    Primary TargetVenture
    
    Parent Entity
    
    Segment
    
    Headquarters
    
    Operations
    
    MarketsCasie Ecology Oil
Salvage, Inc.
(Casie) and
MidAtlantic
Recycling
Technologies, Inc.
(MART)
    
    Pure Earth, Inc.
    
    Treatment and
Recycling
    
    Vineland, New Jersey
    
    Processing and
recycling of oils,
solvents, refinery
wastes,
contaminated soils
and filter cakes in
solid and liquid
form
    
    Northeastern United
StatesRezultz,
Incorporated
(Rezultz)
    
    Pure Earth, Inc.
    
    Treatment and
Recycling
    
    Vineland and
Millville, New
Jersey
    
    Owns 32 acres of
real property on
which Casie, MART
and New Nycon
operations are
conducted, as well
as recycling
equipment to
process and recycle
waste products
    
    Northeastern United
StatesAdvanced Catalyst
Recycling, LLC
(50%-owned joint
venture) (ACR)
    
    Casie
    
    Treatment and
Recycling
    
    Hudson, New York
    
    Identify, develop
and market
recycling solutions
for generators of
spent metal
catalysts
    
    United StatesPure Earth Energy
Resources, Inc.
(PE Energy)
    
    Pure Earth, Inc.
    
    Treatment and
Recycling
    
    Trevose,
Pennsylvania
    
    Start up business
to explore
recycling of
alternative wastes
into fuels
    
    Northeastern United
StatesPure Earth
Environmental, Inc.
(PE
Environmental)
    
    Pure Earth, Inc.,
    
    Environmental
Services
    
    Waterbury,
Connecticut
    
    Environmental
engineering and
consulting services
for commercial and
residential
customers
    
    Connecticut and New
YorkBio Methods LLC

(Bio Methods)
    
    Pure Earth, Inc.
    
    Environmental
Services
    
    Waterbury,
Connecticut
    
    Disposal of
regulated medical
waste from doctors
offices, hospitals
and nursing homes
    
    ConnecticutGeo Methods, LLC

(Geo Methods)
    
    Pure Earth, Inc.
    
    Environmental
Services
    
    Waterbury,
Connecticut
    
    Environmental well
drilling for
commercial
customers
    
    Connecticut and New
York
  3




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Subsidiary/Joint
    
    Immediate
    
    Business
    
    
    
    Primary
    
    Primary TargetVenture
    
    Parent Entity
    
    Segment
    
    Headquarters
    
    Operations
    
    MarketsEcho Lake
Brownfield, LLC
(Echo Lake)
    
    PE Environmental
    
    Environmental
Services
    
    Waterbury,
Connecticut
    
    Owns Brownfield site
    
    Central ConnecticutHFH Acquisition
Corp. (HFH
Acquisition)
    
    Pure Earth, Inc.
    
    Environmental
Services
    
    Trevose,
Pennsylvania
    
    Formed for the
purpose of
purchasing an
interest in a
Brownfield site
    
    New Jersey and New
YorkPure Earth
Materials, Inc.
(PE Materials)
    
    Pure Earth, Inc.
    
    Materials
    
    Lyndhurst, New
Jersey
    
    Rock crushing and
material recycling
operation
    
    New York City
metropolitan area
and northern New
JerseyPure Earth
Materials (NJ) Inc.
(PE Materials
(NJ))
    
    Pure Earth, Inc.
    
    Materials
    
    Trevose,
Pennsylvania
    
    Holding company for
material recycling
operation
    
    NoneNew Nycon, Inc.

(New Nycon)
    
    Pure Earth, Inc.
    
    Concrete Fibers
    
    Westerly, Rhode
Island
    
    Distributor of
fiber products and
related accessories
to the concrete
industry
    
    United States
  Formation of Our Business
  Development of Our Business and Significant Acquisitions
 Acquisition of South Jersey Development, Inc.
   4




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Acquisitions Related to Transportation and Disposal Segment
    Acquisitions Related to Treatment and Recycling Segment
 Acquisition of Casie Group
   5




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Formation of Catalyst Recycling Joint Venture
  Formation of PE Energy
   6




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Acquisitions Related to Environmental Services Segment
     Acquisitions Related to Materials Segment
     7




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Acquisition Related to Concrete Fibers Segment
    Our Business Strategy
   
    
    Continue to Focus on Our Core Transportation and Disposal Business.We intend to
expand and grow this segment, which involves the management, transportation and
disposal of excavated clean and contaminated soils from urban construction projects
throughout the mid-Atlantic and New England regions. We have hired additional sales
representatives and have started up PEI Disposal Group in December 2007 in an
attempt to penetrate further the transportation and disposal market and diversify
our customer base. We seek to market our transportation and disposal services to
Fortune 500 companies, which we believe will present a significant source of large
customer accounts.
 
    
    Develop and Grow Revenues from Green Construction Materials and Related
Products.We will seek to sell a growing variety of construction materials produced
by reusing materials transported from construction job sites. We seek to identify
new construction sites strategically located in the New York City metropolitan
area. These new sources of reusable material, when
  8




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coupled with the operation of our higher-capacity rock crushing unit, will serve to
generate additional revenues for our Materials segment. By acquiring companies with
eco-friendly product offerings, such as Nycon, we also intend to expand our line of
recycled construction materials.
 
    
    Strive to Be a Leading Provider of Treatment and Recycling Services.Waste
disposal and recycling can be a costly problem for owners and developers of various
real estate projects and properties. Our Treatment and Recycling segment has one of
three facilities in the United States, and the only one in the northeastern U.S.,
to process hazardous waste for beneficial reuse, which costs the customer on
average 50% less than incineration. We also intend to leverage our geographic
breadth and services portfolio to offer our customers a single source for treatment
and recycling services, thereby simultaneously expanding the options available to
our customers and reducing the cost of providing those services. We plan to expand
our permits to accept higher levels of contaminated wastes as well as increased
volumes of waste.
 
    
    Recycle Waste Products into Alternate Fuels. We plan to develop and process
high BTU waste products into a form of fuel that can be used in place of or
together with fossil fuels such as coal, natural gas and oil. We are currently
investigating potential sites in the northeastern United States to commence
operations.We are also exploring various initiatives to process selected energy materials and
provide technical support for the use of alternative fuels in an effort to reduce
costs, conserve fossil fuels and reduce the carbon footprint of the energy consumer.
Specifically, we are seeking to provide alternative fuel and raw materials services
and solutions to the cement industry and other industrial users of fossil fuels,
produce alternative fuels from a variety of recyclable materials, including
bio-solids, and to provide engineering and environmental support for our products
and services.We believe that these alternative fuels can serve, in part, as replacements for
conventional fossil fuels and can be recycled from post-industrial and post-consumer
byproducts. A significant degree of processing is typically required in order to
use these materials as an alternative fuel source in the conventional combustion
process. We seek to partner with the end users of these alternative fuels to
provide the procurement of the raw materials, processing and engineering of the
material into alternative fuels, and delivery of the alternative fuels to the end
user.
 
    
    Expand Geographic Reach and Capacity of Environmental Recycling Facilities.We
will generate additional revenues through the growth and expansion of our existing
Casie and MART soil treatment and processing facilities. We intend to seek
opportunities to acquire additional waste recycling and processing facilities,
which would allow us to recycle and process greater quantities of contaminated
materials. Finally, we plan to acquire companies operating in markets in which we
do not presently serve customers, such as in Massachusetts and Delaware.
 
    
    Leverage Brownfield Sites to Drive Environmental Services Revenue.We intend to
increase, over the long-term, the number of Brownfield sites that we own, control,
operate or develop. We believe that, by obtaining new disposal sites closer to the
markets for our transportation and disposal business, these properties will provide
us with potential sources of revenue and lower operating costs, as well as promote
additional opportunities for our environmental consulting and engineering services.
Also, in viewing these Brownfield sites as real estate ownership and development
opportunities, we seek to derive revenues from the ultimate development of
Brownfield properties by reselling them to third parties as property that can once
again serve a number of desirable uses on a selective basis.
  9




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Our Integrated Environmental Services
  Transportation and Disposal Segment
 Disposal of Urban Construction Site Materials
   
    
    clean soil reuse
 
    
    quarry reclamation
 
    
    landfill cover
 
    
    demolition debris
 
    
    hazardous waste
 
    
    residual waste
 
    
    contaminated soils reuse and recycling
  Mine Reclamation Activities
  Landfill Services
   10




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Refinery Services
  Treatment and Recycling Segment
   
    
    metal processing slags and spent sands
 
    
    inert filter cakes
 
    
    refinery tank bottoms
 
    
    biosolids
 
    
    coal tar soils
 
    
    demolition debris
 
    
    high BTU, or heat value, materials for alternative energy sources
  
    
    land application sites
 
    
    cement kilns
 
    
    asphalt plants
 
    
    landfill cover projects
    11




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Environmental Services Segment
 Engineering and Consulting Services
  
    
    site assessment and investigation
  12




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
    
    regulatory compliance and permitting
 
    
    engineering and design
 
    
    underground storage tank services
 
    
    remedial investigations and feasibility studies
 
    
    risk-based closures and corrective actions
 
    
    equipment maintenance, optimization and operation services
 
    
    environmental liability transfer
 
    
    environmental risk assessment
 
    
    environmental and commercial drilling services
 
    
    contract staffing and program outsourcing
 Medical Waste Disposal
  Brownfield Site Redevelopment
     13




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
    
    We have personnel who have what we believe to be the real estate industry
background necessary to assess the economics of potential Brownfield sites.
 
    
    We have a staff of environmental professionals who can plan the most
cost-effective clean-up methods and direct outside environmental consultants and
remediation specialists, if necessary.
 
    
    We have significant experience in navigating complex environmental regulatory
rules and in working with environmental regulatory personnel at all levels to
complete necessary engineering work and to obtain final regulatory approvals.
    14




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Materials Segment
  1 3
 Concrete Fibers Segment
    
    
    higher lease rates;
 
    
    enhanced resale values;
 
    
    potential federal, state and local tax credits and incentives; and
 
    
    the ability to offer financial benefits to tenants, such as operating cost
savings, improved worker productivity and health, and insurance and risk management
benefits.
  
    
    keeping up to date on changes in the concrete and synthetic fiber industries;
 
    
    developing new applications for fiber technology;
 
    
    educating customers in the latest industry advances; and
  15




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
    
    providing timely and responsive customer support.
  Impact of 2009 Stimulus Plan
  
    
    $3.1 billion designated for repair, restoration, and improvement of public
facilities;
 
    
    $27.5 billion for highway investments and improvements;
 
    
    $1.5 billion for competitive grants to state and local governments for
transportation improvements;
 
    
    $750 million for New Starts and Small Starts projects that are already in
construction or in the final design stages;
 
    
    $1.2 billion for environmental cleanup programs;
 
    
    $1.3 billion for loans and grants for water and waste disposal facilities in
rural areas;
 
    
    $3.5 billion for fossil energy research and development;
 
    
    $2.5 billion for renewable energy research; and
 
    
    $6.0 billion for loan guarantees of renewable energy projects.
  
    
    $1.3 billion for projects in New York;
 
    
    $2.7 billion for projects in New Jersey;
 
    
    $2.7 billion for projects in Connecticut; and
  16




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
    
    $4.5 billion for projects in Pennsylvania.
   Raw Materials
   Sales and Distribution
 Transportation and Disposal, and Materials Segments
   17




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Treatment and Recycling Segment
  Environmental Services Segment
  Concrete Fibers Segment
  Customer Concentration
   
    
    Transportation and Disposal.Three customers accounted for approximately 36% of
this segments revenues for the year ended December 31, 2008 and two customers
accounted for 74% of its revenues for the year ended December 31, 2007.
 
    
    Treatment and Recycling. Five customers accounted for approximately 42% of
revenues in this segment for the year ended December 31, 2008. One customer
accounted for approximately 15% of revenues in this segment for the year ended
December 31, 2007.
 
    
    Environmental Services.Two customers accounted for approximately 49% of
revenues in this segment for the year ended December 31, 2008. Three customers
accounted for approximately 43% of revenues in this segment for the year ended
December 31, 2007.
 
    
    Materials. Two customers accounted for approximately 49% of revenues in this
segment for the year ended December 31, 2008. Three customers accounted for
approximately 93% of such revenues for the year ended December 31, 2007.
 
    
    Concrete Fibers. Three customers accounted for 17% of revenues in this segment
for the period from April 1, 2008, the date that this segments operations began,
through December 31, 2008.
  18




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Competition
  Transportation and Disposal Segment
  Treatment and Recycling Segment
  Environmental Services Segment
  Materials Segment
   19




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Concrete Fibers Segment
 Ô
 Government Regulation
    Federal Environmental Laws and Regulations
  RCRA
   20




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CERCLA
  Hazardous Materials Transportation Act
  
    
    use Department of Transportation-approved containers;
 
    
    properly mark and label those containers;
 
    
    use specified shipping papers; and
 
    
    properly placard vehicles carrying hazardous materials.
  Clean Air Act
  Clean Water Act
   21




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OSHA
  State and Local Regulations
  Pennsylvania Surface Mining Conservation and Reclamation Act
    22




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Voluntary Cleanup Programs
    
    
    fraud or any material misrepresentation;
 
    
    new information that may show that the contamination or environmental risk to
the property or the surrounding area was greater than originally believed;
 
    
    contamination that existed on the property but was not specifically tested for;
 
    
    contamination that existed on the property but was not detected, even if tests
were made to detect it;
  23




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
    
    claims of the EPA under federal law in connection with any contamination or
unlawful discharges; and
 
    
    subsequent use of property that does not conform to the specific standards used
to rehabilitate the property (for example, residential use of the property when
cleanup standards for non-residential use were followed).
  Licenses and Permits
   
    
    hazardous waste storage and transfer permits;
 
    
    recycling center approvals;
 
    
    pollution control and discharge permits and approvals; and
 
    
    environmental laboratory permits.
     24




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Product Liability and Warranties
  Insurance and Financial Assurance
 Insurance
   
    
    as a contractor performing services at customer sites;
 
    
    as a transporter of waste; and
 
    
    for waste processing and recycling at our facilities.
     25




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Financial Assurance
  Intellectual Property
 ® Ô
   ®
 ® ®
   26




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Employees
   
 Item 1A. Risk Factors.
   Risks Inherent in Our Business
 Challenges posed by the current economic environment may materially and adversely affect us or our
stock price.
    27




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We may need additional financing and may not be able to raise funding on favorable terms or at all,
which could increase our costs, limit our ability to operate or grow our business and dilute the
ownership interests of existing stockholders.
      28




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We have a limited operating history on which to base an analysis of our future performance.
  
    
    operating under an evolving business model;
 
    
    developing our business plan;
 
    
    managing growth;
 
    
    ensuring positive relationships with federal, state and local governmental
authorities;
 
    
    complying with federal, state and local environmental regulations;
 
    
    operating in a competitive business market;
 
    
    maintaining our properties, equipment and facilities;
 
    
    staying abreast of, and being able to acquire and utilize, the latest
technological advances in the environmental services industry; and
 
    
    being able to locate suitable properties for redevelopment.
  To date, we have had fluctuating operating results, including net losses, and we cannot guarantee
that we will be profitable in the future.
   29




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Demand for our products and services is cyclical and vulnerable to sudden economic downturns and
reductions in private industry. If general economic conditions continue to weaken and current
constraints on the availability of capital continue, then our revenues, profits and our financial
condition may rapidly deteriorate.
    We may be required to record material charges against our earnings due to any number of events that
could cause impairments to our assets.
  If we were required to write down all or part of our goodwill, our net earnings and net worth could
be materially adversely affected.
  Our results of operations depend on new contract awards, and the selection process and timing for
performing these contracts are not within our control.
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We may grow our business through the acquisition of other environmental services companies, which
strategy may expose us to a variety of risks.
   We have grown quickly and if we fail to manage our growth, our business could suffer.
  If we fail to successfully integrate our recent and future acquired facilities and businesses, our
financial performance may be adversely affected.
  
    
    difficulty integrating our operations, services, products, technologies,
financial controls and information systems with those of the acquired business;
 
    
    difficulty in managing and operating numerous businesses in different geographic
locations;
 
    
    diversion of capital and managements attention away from other business issues;
 
    
    an increase in expenses and working capital requirements;
  31




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
    
    failure to achieve potential revenue enhancements, cost savings and other
expected benefits of the acquisition as rapidly or to the extent anticipated by us
or others;
 
    
    payment of acquisition consideration that exceeds the fair value of the acquired
business for purposes of our financial statements, resulting in the recognition of
goodwill that must be continually reviewed for impairment and may potentially be
written down or written off altogether;
 
    
    our inability to apply to the acquired business controls and procedures we are
and will be required to establish as an SEC reporting company;
 
    
    potential loss of management, key employees and customers of facilities or
businesses we acquire; and
    
    financial risks, such as:
 
    
    potential liabilities of the facilities and businesses acquired, including employees;
    
    ongoing cash or equity payment obligations, which may
not directly relate to our economic or financial performance;
    
    our assumption of debt, liabilities or other
obligations of the acquired company, and other financial risks;
    
    the impact of impairment charges that we may need to
recognize, and other expenses that we may incur, with respect to tangible
and intangible assets of the acquired business;
    
    the need to incur additional indebtedness; and
    
    dilution to existing security holders if we issue additional equity securities.
  We have assumed liabilities associated with businesses and assets we have acquired, which may
expose us to additional risks and uncertainties that we would not face if the acquisitions had not
occurred.
  
    
    environmental risks and liabilities related to the operation of the acquired
assets, properties and facilities;
 
    
    existing litigation, claims and tax liabilities involving the acquired business;
 
    
    existing debt, payables and other liabilities of the acquired business;
 
    
    liens and mortgages on acquired assets; and
 
    
    employee and employee benefit obligations and liabilities.
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The significant future liquidity and capital needs of our acquired companies, together with our
current agreements, commitments and contingencies to fund those needs and to repay obligations we
incurred or assumed in the acquisitions, may have a negative impact on our earnings and cash flow.
  Certain investors may have significant influence over our capital raising efforts.
  
    
    issue common stock or common stock equivalents, by requiring us first to satisfy
our investors preemptive rights;
 
    
    incur secured or unsecured indebtedness;
 
    
    dispose of our assets or enter into sale-leaseback transactions;
 
    
    issue shares of preferred stock senior or equal in rank to our outstanding
series of preferred stock; and
 
    
    issue common stock or common stock equivalents to Mr. Alsentzer, our President
and Chief Executive Officer, and Mr. Kopenhaver, our Executive Vice President and
Chief Financial Officer, for less than fair market value.
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Our substantial indebtedness, including our Series B preferred stock, could adversely affect our
ability to complete future acquisitions, grow our business and obtain new capital.
   
    
    make it more difficult for us to acquire additional companies or assume debt in
connection with such acquisitions;
 
    
    make it more difficult for us to continue to satisfy our obligations under our
existing and any future indebtedness;
 
    
    increase our vulnerability to general adverse economic and industry conditions;
 
    
    limit our ability to fund future working capital, capital expenditures, research
and development and other general corporate requirements;
 
    
    require us to dedicate a substantial portion of our cash flow from operations to
service payments on our debt;
 
    
    limit our flexibility to react to changes in our business and the industry in
which we operate;
 
    
    limit our ability to make certain changes to our management;
 
    
    place us at a competitive disadvantage to any of our competitors that have less
debt; and
 
    
    limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
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Our ability to pay principal and interest on our indebtedness may depend upon our receipt of
dividends or other intercompany transfers from our subsidiaries, which we may be prohibited from
making.
  We may not be able to pay the redemption price pursuant to any required redemption of the Series B
preferred stock.
  To service our indebtedness, we may require a significant amount of cash, and our ability to
generate cash depends on many factors beyond our control.
  Failure to comply with covenants in our existing or future financing agreements could result in
defaults, which could jeopardize our ability to operate our business successfully or at all.
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The agreements and instruments that govern our and our subsidiaries indebtedness and our Series B
preferred stock contain various covenants that limit our discretion in the operation of our
business.
  
    
    maintenance of minimum adjusted net income and tangible net worth;
 
    
    maintenance of minimum availability under our revolving line of credit;
 
    
    maintenance of a specified minimum ratio of debt to EBITDA;
 
    
    maintenance of a specific leverage and debt service coverage ratios; and
 
    
    limits on the amount of our unfinanced capital expenditures.
  
    
    incur more debt;
 
    
    create liens;
 
    
    make certain investments and payments;
 
    
    enter into transactions with affiliates;
 
    
    merge or consolidate with, or acquire all or substantially all of the assets of,
another company;
 
    
    amend our and their constituent governing documents;
 
    
    pay dividends or make other distributions on our or their common or preferred
stock;
 
    
    redeem or repurchase any preferred stock, common stock or common stock
equivalents, even if we may be required under the terms of those securities to do
so; and
 
    
    make any loans, advances or guarantees.
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Upon the occurrence of any event of default under our secured debt, the holders of our secured debt
could acquire control of some or all of our and our subsidiaries assets.
  Seasonality makes it harder for us to manage our business and for investors to evaluate our
performance.
  Illiquidity of our current and future Brownfield sites and other real estate investments could
significantly impede our ability to respond to adverse changes in the performance of our
properties.
  A significant portion of our business depends upon the robustness of the real estate construction
industry and the demand for customers to engage in major environmental remedial projects, and thus
our ability to generate revenues may be subject to a wide array of events over which we have no
control.
  
    
    the imposition of building or development moratoria or changes in building
codes;
 
    
    the continued ability for project owners and developers to obtain financing for
construction and environmental engineering and consulting projects, including risks
imposed as a result of recent difficulties in the financial and lending sectors;
 
    
    the continued health and strength of the local, regional, national and
international economies; and
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
    
    budgetary cycles influencing the timing of customers spending for remedial
activities.
   Our investments in Brownfield properties will require us to accept and incur significant costs to
return the property to beneficial use, which costs may be greater than we anticipate.
  Rehabilitating Brownfield properties may take more time to complete than we anticipate, which could
delay our ability to sell these properties or preclude us from doing so.
  Our ability to profitably rehabilitate Brownfield sites may be adversely affected by economic and
regulatory changes pertaining to the ownership and development of real estate, which may prevent us
from realizing growth in the value of Brownfield properties.
  
    
    changes in general economic or local conditions;
    
    our ability to borrow or obtain funds for the costs of development;
    
    periods of high interest rates and tight money supply;
    
    changes in supply of or demand for similar or competing properties in an area;
    
    changes in interest rates and availability of permanent mortgage funds that may
render the sale of a property difficult or unattractive;
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
    
    the illiquidity of real estate investments generally;
    
    changes in tax, real estate, environmental and zoning laws;
    
    perceptions of the safety, convenience and attractiveness of our properties and
the areas in which they are located; and
    
    our ability to provide adequate management, maintenance and insurance.
  The environmental services industry is highly competitive, and if we cannot successfully compete in
the marketplace, our business, financial condition and operating results may be materially
adversely affected.
  We must keep up with technological and market changes to succeed.
   Our business may be affected by catastrophic or other unforeseen events, which could cause us to
incur substantial liabilities and increased operating costs.
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Our business is geographically concentrated and is therefore subject to local and regional economic
downturns.
   If Brownfield sites are not located near sources of materials needed to improve the site, it may be
more difficult for us to realize the financial benefits of our Brownfield strategy.
  If we do not successfully manage our costs, our income from operations could be lower than
expected.
  Significant shortages in fuel supply or increases in fuel prices will increase our operating
expenses and therefore adversely affect our results of operations.
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We are subject to strict regulations regarding employee safety at many of our facilities, and
failure to comply with these regulations could adversely affect us.
  Environmental and transportation regulations and litigation could subject us to fines, penalties
and judgments, and may limit our ability to expand our business.
  Massachusetts, et al. v. EPA Massachusetts Massachusetts
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We may be unable to obtain or retain environmental and other permits required to operate our
business.
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Potential liabilities involving customers and third parties may harm our reputation and financial
condition.
   
    
    a release or discharge of contaminants or pollutants during transportation of
wastes or the performance of services;
    
    the inability, despite reasonable care, of a remedial plan to contain or correct
an ongoing seepage or release of pollutants;
    
    the inadvertent exacerbation of an existing contamination problem; or
    
    a customers reliance on reports prepared by or consulting work performed by the
environmental services company.
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We plan to generate significant revenue from the sale of our recycled materials and concrete
reinforcing fibers, and the potential for product liability exposure from these products could be
significant.
 ®
   We have a relatively new management team, which may make it difficult for you to evaluate its
ability to work individually and together to successfully lead our operations.
  The loss of one of our key personnel may adversely affect our business.
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The loss of one or more of our significant customers could significantly reduce our revenues and
profits.
  We are not subject to certain of the corporate governance provisions of the Sarbanes-Oxley Act of
2002.
  We only have one independent director and may be unable to appoint any qualified independent
directors.
  If we fail to achieve and maintain adequate internal controls, we may not be able to produce
reliable financial reports in a timely manner or prevent financial fraud.
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We are incurring increased costs as a result of becoming a reporting company, which may adversely
affect our results of operations.
    We rely on a combination of provisions and agreements to protect our own proprietary rights, which
may not sufficiently shield these rights from use, devaluation or appropriation by others.
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Risks Related to Our Common Stock
 There is limited liquidity in the market for shares of our common stock, which may make it more
difficult for you to sell your shares at times and prices that you feel are necessary or desirable.
   Failure to remain eligible for quotation on the OTC Bulletin Board may require us to transfer our
securities to the Pink Sheets ® , which would adversely affect the trading market and
price of our common stock and our ability to raise capital.
  ® ® ®
 Our stock price is, and we expect it to remain, volatile, which could limit your ability to sell
our stock at a profit.
  
    
    announcements of pending or completed acquisitions by our competitors or us;
    
    announcements of new operations or businesses by our competitors or us;
    
    industry and general economic conditions;
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
    
    economic or other crises and other external factors;
    
    period-to-period fluctuations in our actual or anticipated sales, earnings and
other quantitative or qualitative measures of our financial performance;
    
    changes in financial estimates by securities analysts;
    
    future sales of our common stock; and
    
    a variety of other factors discussed elsewhere in this annual report on Form
10-K and in Risk Factors.
  We may engage in strategic transactions that may fail to enhance stockholder value.
  Restrictions on the transfer of shares of our capital stock may prohibit or restrict stockholders
from liquidating their investment in our shares.
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We have not paid dividends on our common stock in the past, and we do not anticipate doing so in
the foreseeable future.
  We have a classified board of directors, which may make it more difficult to change our management
or effect a change in control.
  Our chief executive officer and other directors and executive officers, as a group, will be able to
exercise substantial influence over matters submitted to our stockholders for approval.
  Future sales, or the availability for future sales, of substantial amounts of our common stock
could adversely affect the market price of our common stock.
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The rights of our preferred stockholder are superior to the rights of our common stockholders.
  We may issue additional series of preferred stock without stockholder approval, which could be used
to deter a takeover attempt and have a material adverse effect on the market value of the common
stock.
  Our issuance of additional shares of common stock, preferred stock, options or other rights to
purchase those shares would dilute the proportionate ownership and voting rights of existing
stockholders.
  
    
    17,626,799 shares of our common stock;
 
    
    6,300 shares of our Series B preferred stock; and
  50




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
    
    warrants to purchase in the aggregate 1,091,818 shares of common stock.
   
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  Transportation and Disposal Segment
    Treatment and Recycling Segment
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Environmental Services Segment
   Materials Segment
  Concrete Fibers Segment
  Ò
 Corporate Headquarters
  
 Item 3. Legal Proceedings.
   52




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Litigation
 Soil Disposal Litigation
   Defamation Litigation
  Juda Litigation
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
    
    $250,000 was payable upon execution of the settlement agreement; and
 
    
    two consecutive payments of $200,000 each, plus accrued interest, are to be made
on or before December 10, 2008 and 2009, respectively.
  Accounts Receivable Litigation
   New Jersey Sales and Use Tax Audit
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Environmental Matters
    
 Item 4. Submission of Matters to a Vote of Security Holders.
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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
 Market for Our Common Equity
 Ò Ò
  High
    
    
    LowFiscal Year Ended December 31, 2007First Quarter
    
    $
    9.45
    
    
    $
    7.15Second Quarter
    
    
    8.00
    
    
    
    5.90Third Quarter
    
    
    6.00
    
    
    
    3.00Fourth Quarter
    
    
    3.65
    
    
    
    2.20Fiscal Year Ended December 31, 2008First Quarter
    
    $
    3.50
    
    
    $
    1.01Second Quarter
    
    
    2.50
    
    
    
    1.45Third Quarter
    
    
    2.45
    
    
    
    1.21Fourth Quarter
    
    
    1.79
    
    
    
    1.26
   
    
    a surplus, or, if we do not have a surplus,
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
    
    net profit for the year in which the dividend is declared and for the
immediately preceding year.
 Recent Sales of Unregistered Securities
  
    
    In January 2008, we issued 5,000 shares of our common stock to a waste broker,
whom we reasonably believed to be an accredited investor at the time of issuance,
in exchange for marketing services. We valued these services at the time of
issuance to be $15,000. We believe that such issuance was exempt from Securities
Act registration under Section 4(2) of the Securities Act.
    
    In March 2008, we sold 6,300 shares of our Series B preferred stock and a
warrant to purchase 767,375 shares of our common stock to an investor, whom we
reasonably believed to be an accredited investor at the time of sale, for
$6,300,000 in gross proceeds. We believe that such sale was exempt from Securities
Act registration under Section 4(2) of the Securities.
    
    On October 13, 2008, we issued 5,000 shares of our common stock to a new
employee pursuant to that individuals written employment agreement. These shares
were valued at $14,750 at the time of issuance. We believe that the issuance was
exempt from Securities Act registration under Section 4(2) of the Securities Act.
  
    
    the subject securities were sold to a limited group of persons;
    
    we reasonably believed that each investor was purchasing our securities for
investment without a view to resale or further distribution, except in compliance
with the Securities Act;
    
    each investor was reasonably believed to possess one or more of the following characteristics:
 
    
    the investor was a sophisticated investor at the time of the sale;
    
    the investor had a pre-existing business or personal
relationship with us, our management or a placement agent engaged by us; or
    
    the investor received all material information about us
and our business, or was given reasonable access to such information a
reasonable period of time prior to any sale of our securities;
 
    
    restrictive legends stating that the securities may not be offered and sold in
the United States absent registration under the Securities Act or an applicable
exemption therefrom were placed on certificates evidencing the securities or
agreements relating thereto; and
 
    
    no form of general solicitation or general advertising was made by us in
connection with the offer or sale of these securities.
 
 Item 6. Selected Financial Data.
  
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
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Overview and Strategy
     
    
    Transportation and Disposal We provide transportation and disposal services
for excavated clean and contaminated soils from urban construction projects in the
mid-Atlantic region and the New York metropolitan area.
 
    
    Treatment and Recycling We remove, process, treat, recycle and dispose of
residual waste from a variety of different industrial and commercial sources,
targeting customers along the U.S. eastern seaboard. We also plan to recycle waste
products with high BTU value into alternative fuels for consumers and other end
users.
 
    
    Environmental Services We provide a wide range of environmental consulting and
related specialty services, including:
 
    
    environmental investigation, consulting and engineering
services to commercial and residential customers; and
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
    
    locating and acquiring Brownfield sites for subsequent
development, restoration and potential resale, using capping material from
our existing facilities or directly from our customer base.
 
    
    Materials We produce and sell recycled construction materials for a variety of
construction and other applications, including crushed stone and recycled
aggregate. Our construction materials are produced to meet all prevailing
specifications for their use.
 
    
    Concrete Fibers Concrete Fibers is our newest segment, which was created with
our acquisition of Nycon effective April 2008. We recycle used carpet fibers into
environmentally sustainable, or green, fiber material. We also repack and
distribute various other fibers as additives to concrete products.
   
    
    Transportation and Disposal Revenues and cash are derived generally from fees
charged to our customers for the collection, transportation and disposal of
contaminated and clean soils from urban construction projects in the mid-Atlantic
region and the New York metropolitan area.
 
    
    Treatment and Recycling Our revenues and cash are earned primarily through the
following channels:
 
    
    fees earned as a disposal facility for treatment by
thermal desorption of contaminated soils; and
 
    
    performing recycling services, such as oil recycling,
decontamination, wastewater cleanup, and laboratory analysis.
 
    
    Environmental Services We generate revenues from fees charged for our
environmental consulting and related specialty services,including well-drilling
and the disposal of medical waste.We have recently acquired our first Brownfield
site and plan to take steps to cap this property with soils from our Transportation
and Disposal segment. We estimate that we will begin generating revenues from our
Brownfield operations in the fourth quarter of 2009.
 
    
    Materials Revenues and cash are generated by charging fees to customers for
the removal of construction materials, such as rock and aggregate, from jobsites.
These fees are based upon the quantity and weight of material removed and the
distance of the jobsite from our rock crushing facility. We then process the
material at our rock crushing facility into various crushed stone products, which
are then resold to customers for use in other construction projects. We sell our
crushed stone products by weight and at a unit price that varies depending on the
product type. Our Materials revenues are primarily dependent upon the high level
of construction services in and around New York City and the New York-New
Jersey-Connecticut tri-state area, as well as the demand for crushed stone products
used in those construction projects.
 
    
    Concrete Fibers We generate revenues and cash through the sale of packaged
concrete fibers to construction companies, concrete manufacturers and wholesalers
in the domestic and foreign marketplace. The price at which we sell these fibers
is determined based upon the type of fiber, the quantity of the order and the
pricing of our competitors for similar products. Our Concrete
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Fibers revenues are largely dependent upon the demand from the commercial and
residential construction industries and prices set by the large companies that
purchase our concrete fiber output. Also, this segments ability to generate
revenue depends upon our ability to negotiate favorable sales agreements with these
companies and our ability to manage the costs of obtaining raw materials and selling
our concrete fiber products.
      Critical Accounting Policies and Estimates
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Revenue Recognition
  
    
    Transportation and Disposal revenues are recognized upon completion of the
disposal of the waste into a landfill or Brownfield, or when it is shipped to a
third party for processing and disposal. We bill our customers upon acceptance of
the waste. Because the disposal process typically occurs within one day of
acceptance, we do not generally defer revenue based on the minimal amount of time
between billing and completion of waste disposal. At December 31, 2008 and
December 31, 2007, there was not any waste that had been accepted, but not yet
disposed of, into a landfill or other facility.
 
    
    Treatment and Recycling revenues are recognized upon the acceptance of the
waste into our facility and the completion of the treatment of hazardous or
non-hazardous soils and oil byproducts. Revenues from waste that is not yet
completely processed (and their associated costs) are deferred until the services
have been completed. Some of our customer contracts require a certificate of
disposal from a recycling outlet and for those specific contracts revenue is
deferred until the disposal process has been completed. Estimating the amount of
revenue and costs of revenue to be deferred for waste that has not yet been
completely processed requires significant judgments and assumptions to be made by
management, such as the estimated cost per ton for fuel and the costs of handling,
transportation and disposal. At December 31, 2008 and December 31, 2007, we
recorded deferred revenues of approximately $0.1 million and $0.8 million,
respectively.
 
    
    Environmental Services- revenues are recognized as services are rendered.
 
    
    Materials:
 
    
    Revenue from incoming materials is recognized upon
acceptance of the materials into the facility at which time it is deemed
earned.
 
    
    Subsequent to the receipt of unprocessed materials, we
process the material into a finished product. The finished product is
resold to third parties and revenue is recognized upon delivery of the
finished product to the customer.
 
    
    Concrete Fibers revenues are recognized upon the shipment of finished goods to
our customers. Generally, title to the finished goods and risk of loss pass to the
customer when the goods are shipped. Therefore, we recognize revenue for this
segment at that point.
 Accrued Disposal Costs
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Accounts Receivable and Allowance for Doubtful Accounts
 Goodwill and Intangible Assets with Indefinite Lives.
  Intangible Assets with Finite Lives.
 Long-Lived Assets
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Business Combinations.
  Stock-Based Compensation
   Warrants and Derivative Instruments
 
    
    the holders of convertible debentures repaid in November 2007 and a placement
agent in connection with this transaction;
 
    
    the holders of our Series A preferred stock, which shares were originally issued
in May 2007 and were automatically converted into common stock on June 30, 2008;
and
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
    
    the holders of our Series B preferred stock issued in March 2008.
  Derivative Financial Instruments.
 Fair Value Measurements.
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Preferred Stock
 Income Taxes
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Results of Operations  Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
  For the Years Ended December 31,(in thousands, except share and per share data)
    
    2008
    
    
    2007Revenues
    
    $
    62,738
    
    
    $
    59,399Cost of revenues
    
    
    51,636
    
    
    
    46,149Gross profit
    
    
    11,102
    
    
    
    13,250Operating expenses:Salaries and related expenses
    
    
    6,219
    
    
    
    4,450Occupancy and other office expenses
    
    
    1,167
    
    
    
    1,350Professional fees
    
    
    2,029
    
    
    
    1,000Other operating expenses
    
    
    2,188
    
    
    
    903Insurance
    
    
    1,058
    
    
    
    861Depreciation and amortization
    
    
    555
    
    
    
    326Impairment of idle machinery
    
    
    1,618
    
    
    
    (Gain) loss on sale of equipment
    
    
    (245
    )
    
    
    11Total operating expenses
    
    
    14,589
    
    
    
    8,901Income (loss) from operations
    
    
    (3,487
    )
    
    
    4,349Interest expense, net
    
    
    (1,898
    )
    
    
    (933
    )Income (loss) from equity investment
    
    
    (311
    )
    
    
    90Expenses for unrealized acquisitions
    
    
    (271
    )
    
    
    Change in fair value of warrants with contingent redemption
provisions
    
    
    1,151
    
    
    
    Other income
    
    
    218
    
    
    
    88Income (loss) before provision for (benefit from) income taxes
    
    
    (4,597
    )
    
    
    3,593Provision for (benefit from) income taxes
    
    
    (2,057
    )
    
    
    1,564Net income (loss)
    
    
    (2,540
    )
    
    
    2,029Less preferred stock dividends
    
    
    478
    
    
    
    75Income (loss) available for common stockholders
    
    $
    (3,018
    )
    
    
    1,954Income (loss) available for common stockholders
per share (basic)
    
    $
    (0.17
    )
    
    $
    0.12Income (loss) available for common stockholders
per share (diluted)
    
    $
    (0.17
    )
    
    $
    0.12Weighted average shares of common stock outstanding during
the period (basic)
    
    
    17,427,847
    
    
    
    16,428,969Weighted average shares of common stock outstanding during
the period (diluted)
    
    
    17,427,847
    
    
    
    16,662,029Earnings before interest, taxes, depreciation, and
amortization (EBITDA)
    
    $
    328
    
    
    $
    6,915
  
    
    to review and assess the operating performance of our company and our reporting
segments, as permitted by SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information;
 
    
    to compare our current operating results with corresponding periods and with the
operating results of other companies in our industry;
 
    
    as a basis for allocating resources to various segments or projects;
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
    
    as a measure to evaluate potential economic outcomes of acquisitions,
operational alternatives and strategic decisions; and
 
    
    to evaluate internally the performance of our personnel.
   
    
    we believe EBITDA is a useful tool for investors to assess the operating
performance of our business without the effect of interest and income taxes, which
are non-operating expenses, and depreciation and amortization, which are non-cash
expenses;
    
    we believe that it is useful to provide to investors with a standard operating
metric used by management to evaluate our operating performance;
    
    we believe that the use of EBITDA is helpful to compare our results to other
companies by eliminating non-cash depreciation and amortization charges and the
effects of differences in intangible asset valuation, which are often incurred with
significant acquisitions of operations; and
    
    EBITDA is commonly used by companies in the waste management and environmental
industries as a performance measure, and we believe that providing this information
allows investors to compare our operating performance to that of our competitors in
these industries.
  
    
    EBITDA does not reflect our cash expenditures or future requirements for capital
expenditures or contractual commitments;
    
    EBITDA does not reflect changes in, or cash requirements for, our working
capital needs;
    
    EBITDA does not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on our debt;
    
    although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and EBITDA
does not reflect any cash requirements for such replacements;
    
    EBITDA does not reflect income or other taxes or the cash requirements to make
any tax payments; and
    
    other companies in our industry may calculate EBITDA differently than we do,
thereby potentially limiting its usefulness as a comparative measure.
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For the Years EndedDecember 31,2008
    
    
    2007EBITDA
    
    $
    328
    
    
    $
    6,915Depreciation and amortization, including
$2,473 and $2,154 of depreciation and
amortization classified as a component of
cost of revenues
    
    
    3,028
    
    
    
    2,477Interest expense, net
    
    
    1,898
    
    
    
    933Gain on extinguishment of convertible debt (1)
    
    
    
    
    
    
    (88
    )Provision for (benefit from) income taxes
    
    
    (2,058
    )
    
    
    1,564Net income (loss)
    
    $
    (2,540
    )
    
    $
    2,029
 
 (1)
    
    Included on our statement of operations as a component of other income. Revenues
  For the Years Ended December 31,2008
    
    
    2007% of
    
    
    
    
    
    
    % of(in thousands)
    
    Amount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesTransportation and Disposal
    
    $
    32,454
    
    
    
    52
    %
    
    $
    41,026
    
    
    
    69
    %Treatment and Recycling
    
    
    24,878
    
    
    
    40
    %
    
    
    14,819
    
    
    
    25
    %Environmental Services
    
    
    2,008
    
    
    
    3
    %
    
    
    1,842
    
    
    
    3
    %Materials
    
    
    1,826
    
    
    
    3
    %
    
    
    1,712
    
    
    
    3
    %Concrete Fibers
    
    
    1,572
    
    
    
    2
    %
    
    
    
    
    
    
    Total
    
    $
    62,738
    
    
    
    100
    %
    
    $
    59,399
    
    
    
    100
    %
   68




---



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69




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Cost of Revenues
  Cost of Revenues  By SegmentFor the Years Ended December 31,2008
    
    
    2007% of
    
    
    
    
    
    
    % of(in thousands)
    
    Amount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesTransportation and Disposal
    
    $
    22,628
    
    
    
    36
    %
    
    $
    27,910
    
    
    
    47
    %Treatment and Recycling
    
    
    22,234
    
    
    
    35
    %
    
    
    14,492
    
    
    
    24
    %Environmental Services
    
    
    1,685
    
    
    
    3
    %
    
    
    1,411
    
    
    
    2
    %Materials
    
    
    3,827
    
    
    
    6
    %
    
    
    2,336
    
    
    
    4
    %Concrete Fibers
    
    
    1,262
    
    
    
    2
    %
    
    
    
    
    
    
    Total
    
    $
    51,636
    
    
    
    82
    %
    
    $
    46,149
    
    
    
    78
    %
   70




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
    
    growing our Transportation and Disposal segment and increasing the number of
disposal outlets accessible to us that are located closer to customer job sites,
which would decrease our transportation costs and provide alternative disposal
options to landfills;
 
    
    decreasing our direct costs across all of our segments and in particular within
the Treatment and Recycling and Materials segments through cost-cutting
initiatives, including decreasing personnel costs through salary reductions,
reduced headcount and modification of employee benefits.
 
    
    decreasing our transportation and disposal costs through the addition of new
transportation providers, negotiation of long-term contracts at more favorable
prices, and the use of Brownfield properties that we own or operate as additional
disposal outlets.
  Operating Expenses
  
    
    salaries and related expenses (other than direct labor costs and union benefits
described above);
 
    
    occupancy and other office expenses;
 
    
    professional fees;
 
    
    insurance;
 
    
    depreciation and amortization (other than amounts included as a component of
cost of revenues as described above);
 
    
    impairment of idle machinery;
  71




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
    
    gain recognized on our sale of certain equipment; and
 
    
    other miscellaneous operating expenses.
  For the Years EndedDecember 31,
    
    
    Period to Period Change(in thousands, except percentages)
    
    2008
    
    
    2007
    
    
    Amount
    
    
    PercentageSalaries and related expenses
    
    $
    6,219
    
    
    $
    4,450
    
    
    $
    1,769
    
    
    
    40
    %Occupancy and other office expenses
    
    
    1,167
    
    
    
    1,350
    
    
    
    (183
    )
    
    
    (14
    )%Professional fees
    
    
    2,029
    
    
    
    1,000
    
    
    
    1,029
    
    
    
    103
    %Other operating expenses
    
    
    2,188
    
    
    
    903
    
    
    
    1,285
    
    
    
    142
    %Insurance
    
    
    1,058
    
    
    
    861
    
    
    
    197
    
    
    
    23
    %Depreciation and amortization
    
    
    555
    
    
    
    326
    
    
    
    229
    
    
    
    70
    %Impairment of idle machinery
    
    
    1,618
    
    
    
    
    
    
    
    1,618
    
    
    
    *Gain on sale of equipment
    
    
    (245
    )
    
    
    11
    
    
    
    (256
    )
    
    
    *Total operating expenses
    
    $
    14,589
    
    
    $
    8,901
    
    
    $
    5,688
    
    
    
    64
    %
 *
    
    Not meaningful.     72




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##### Table of Contents




    
    consulting fees paid for sales, consulting and marketing assistance, which were
eliminated as of September 2007;
 
    
    audit and accounting fees related to the audit of our consolidated financial
statements, the preparation of our Form 10 registration statement, and quarterly
reviews;
 
    
    legal costs associated with litigation;
 
    
    legal and other related costs associated with the preparation and filing of our
Form 10 registration statement with the SEC;
 
    
    legal and other fees incurred in connection with our acquisitions; and
 
    
    fees paid to third parties and regulatory agencies to monitor safety and
compliance with respect to certain of our operations.
      73




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Income (Loss) from Operations
  For the Years EndedDecember 31,
    
    
    Period to Period Change(in thousands, except percentages)
    
    2008
    
    
    2007
    
    
    Amount
    
    
    PercentageTransportation and Disposal
    
    $
    3,343
    
    
    $
    5,498
    
    
    $
    (2,155
    )
    
    
    (39
    %)Treatment and Recycling
    
    
    (1,084
    )
    
    
    1,760
    
    
    
    (2,844
    )
    
    
    (162
    %)Environmental Services
    
    
    (333
    )
    
    
    (140
    )
    
    
    (193
    )
    
    
    (138
    %)Materials
    
    
    (1,603
    )
    
    
    (527
    )
    
    
    (1,076
    )
    
    
    (204
    %)Concrete Fibers
    
    
    (334
    )
    
    
    
    
    
    
    (334
    )
    
    
    *Corporate and Other
    
    
    (3,476
    )
    
    
    (2,243
    )
    
    
    (1,233
    )
    
    
    (55
    %)Total
    
    $
    (3,487
    )
    
    $
    4,348
    
    
    $
    (7,835
    )
    
    
    (180
    %)
 
 *
    
    Not meaningful.    74




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##### Table of Contents




    
    additional salary costs of approximately $0.3 million for additional accounting
and administrative personnel, an increase in officers salaries (which overall
increase was limited by our decision not to pay bonuses to our Corporate segment
employees), and the hiring of additional sales personnel and vice presidents in the
latter half of 2007 and early 2008.
 
    
    increased legal and professional fees, and other associated costs, of
approximately $0.8 million related to the preparation and filing of our Form 10
registration statement and ongoing litigation; and
 
    
    incremental overhead costs associated with our overall growth.
  75




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Interest Income and Expense
  
    
    approximately $1.0 million of additional interest expense incurred in relation
to our Series B preferred stock offering and related accretion of the debt discount
and amortization of deferred financing costs, offset by
 
    
    a decrease in interest expense incurred on our revolving line of credit as a
result of decreased borrowings during the second, third and fourth quarter of 2008,
coupled with a decline in the interest rate under that line of credit from 7.25% at
December 31, 2007 to 4.75% at September 30, 2008. On October 20, 2008, our
interest rate increased to the banks prime rate, subject to a minimum of 5.00%,
plus 2.75%; however, we also significantly decreased our outstanding borrowing
amounts at the same time, which lessened the impact of the increase in rates. See
- Debt Obligations  Revolving Line of Credit.
   Expenses for Unrealized Acquisitions
  Income from Equity Investment
  Change in Fair Value of Warrants with Contingent Redemption Provisions
   76




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Other Income
    Provision for (Benefit From) Income Taxes
   77




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Liquidity and Capital Resources
 Overview
  
    
    During the year ended December 31, 2008, and in particular during the fourth
quarter of 2008, our operating results in our Transportation and Disposal segment
(and to a lesser extent all of our operating segments) were negatively impacted by
the tightening of the credit markets, and reduced liquidity as a result of the
general economic slowdown. This resulted in increased aging of our Transportation
and Disposal segment accounts receivable, which limited the amount of eligible
borrowing collateral under our revolving credit facility.In particular, we have approximately $2.8 million of outstanding accounts receivable
for a large job in New York City that is subject to dispute and ongoing litigation.
See Item 3. Legal Proceedings  Litigation  Accounts Receivable Litigation.
These accounts receivable are secured by a mechanics lien and in part by a payment
bond, with foreclosure actions in process. The large dollar amount of these
receivables and lack of timely payment on this account by our customer has impacted
our liquidity and borrowing ability under our revolving line of credit during the
year ended December 31, 2008. The successful resolution of this lawsuit would
result in a significant improvement in our cash position and overall liquidity.
 
    
    On March 4, 2008 we issued 6,300 shares of our Series B preferred stock and a
related warrant for net proceeds of $5.8 million (see summary under  Mandatorily
Redeemable Preferred Stock below). We used these net proceeds for working capital
purposes and to reduce outstanding borrowings on our revolving credit facility.
 
    
    On November 12, 2008, Casie Group closed on a new $8.0 million term loan with
Susquehanna Bank, the proceeds of which were used for refinancing existing debt at
Casie Group with the previous lender and to provide for capital expenditures and
working capital. See  Debt Obligations  Long-Term Debt. The loan is
collateralized by the mortgaged properties and equipment held by Casie Group,
excluding accounts receivable, inventory and three pieces of excluded equipment.
The existing line of credit and debt at Casie Group prior to the refinancing
totaled approximately $5.3 million, providing for net proceeds of approximately
$2.6 million, net of fees. The $2.6 million in net proceeds was used to establish
a $0.7 million interest reserve with the new lender in order to cover the first six
months of principal and interest payments and the remaining $1.9 million was used
to pay down the outstanding balance under the Pure Earth revolving line of credit.
In addition, this refinancing allowed for Casie Group and certain of our other
subsidiaries to become borrowers under our revolving line of credit, thereby
increasing our available borrowing collateral by an estimated $2.2 million. The
addition of this collateral was completed concurrently with the execution of a
fifth amendment to our revolving line of credit agreement on March 13, 2009.
 Cash and Cash Equivalents
   78




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Summary of Cash Flows
  For the Years Ended December 31,(in thousands)
    
    2008
    
    
    2007Net cash used in operating activities
    
    $
    (3,113
    )
    
    $
    (1,963
    )Net cash used in investing activities
    
    $
    (489
    )
    
    $
    (4,077
    )Net cash provided by financing activities
    
    $
    2,617
    
    
    $
    5,408
 Net Cash Used in Operating Activities
  
    
    Decrease in income from operations Our income from operations, excluding
depreciation and amortization, decreased by $7.8 million, or 180%, on a
period-to-period basis, which negatively impacted our cash flows from operations
for the year ended December 31, 2008.
 
    
    Decrease in accounts receivable Sources and (uses) of cash from changes in
accounts receivable were approximately $0.9 million and $(4.5) million for the
years ended December 31, 2008 and 2007, respectively. The decrease in accounts
receivable at December 31, 2008 is the result of an overall decrease in the
revenues within our Transportation and Disposal segment, offset in part by
increases in the overall aging of the accounts receivables for this segment. In
particular, we had receivables from one large job outstanding in the amount of
approximately $2.8 million as of December 31, 2008, which is currently the subject
of ongoing litigation. See Item 3. Legal Proceedings  Litigation  Accounts
Receivable Litigation. The increase in accounts receivable as of December 31,
2007, is the result of two large Transportation and Disposal projects that took
place during 2007, which increased revenues from period to period, and the addition
of Casie Group to the Companys operations.
 
    
    Increase in restricted cash We recognized an increase in restricted cash of
$0.8 million for the year ended December 31, 2008. This cash was restricted for
the purpose of establishing a six-month principal and interest payment reserve for
the Susquehanna term loan and to establish a $0.2 million deposit account to
support an outstanding letter of credit.
 
    
    Decrease in prepaid expenses and other current assets Sources and (uses) of
cash from prepaid expenses and other current assets were $0.1 million and $(1.4)
million for the years ended December 31, 2008 and 2007. The source of cash in the
year ended December 31, 2008 was primarily attributed to a decrease in prepaid
expenses relating to Casie Group and our Transportation and Disposal segment. The
use of cash for prepaid expenses for the year ending December 31, 2007 primarily
resulted from increased prepaid expenses at Casie Group for fuel costs and
increases in the prepaid workers compensation insurance at Juda.
 
    
    Decrease in accounts payable Uses of cash for accounts payable were $(0.4)
million and $(0.2) million for the years ended December 31, 2008 and 2007
respectively. The decrease in accounts
  79




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##### Table of Contents




    
    Decrease in accrued expenses and other current liabilities (Uses) and sources
of cash for accrued expenses and other current liabilities were $(1.6) million and
$1.3 million for the years ended December 31, 2008 and 2007, respectively. The
decrease in accrued expenses and other liabilities during the year ended December
31, 2008 was primarily the result of the timing of the payment for items such as
insurance and the settlement of the New Jersey sales and use tax audit at Casie
Group, as well as a decrease in accrued bonuses and commissions due to decreased
sales volumes and profitability and a decrease in accrued liabilities at Juda as a
result of having only one union employee. The increase in accrued expenses and
other current liabilities during the year ended December 31, 2007 was the result of
an increase in our accrued expenses for insurance and consultant fees as well as an
increase in accrued payroll and payroll taxes within the Transportation and
Disposal segment due to higher salaries and compensation paid during this period.
Casie Group had $1.1 million in accrued expenses and other liabilities at December
31, 2007 resulting from an ongoing New Jersey sales and use tax audit and NJ DEP
fines.
 
    
    Decrease in accrued disposal costs During the year ended December 31, 2008 and
2007, we spent $1.0 million and $3.4 million on reducing our accrued disposal
costs, which resulted from transporting processed material from our Treatment and
Recycling operations.
 
    
    Increase in amounts due from joint venture Amounts due from joint venture
increased by $0.3 million as a result of losses incurred in our equity investment
in ACR.
 
    
    Increase in income taxes payable (Uses) and sources of cash relating to income
taxes payable were $(1.0) million and approximately $0.9 million for the years
ended December 31, 2008 and 2007, respectively. The increase in cash used to pay
income taxes was the result of having earned taxable income for the year ended
December 31, 2007, as compared to being in a net loss position for the year ended
December 31, 2008. During the year ended December 31, 2008, we received Federal
income tax refunds of approximately $0.4 million.
    80




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##### Table of Contents



For the Years Ended December 31,(in thousands)
    
    2008
    
    
    2007EBITDA
    
    $
    328
    
    
    $
    6,915Adjustments to reconcile EBITDA to net cash used in operating
activities:Interest expense, net
    
    
    (1,898
    )
    
    
    (933
    )Depreciation expense
    
    
    
    
    
    
    3Provision for (benefit from) income taxes
    
    
    2,058
    
    
    
    (1,564
    )Interest expense for accretion of warrant discount
    
    
    200
    
    
    
    Amortization of deferred financing costs
    
    
    121
    
    
    
    Interest expense for Series B preferred stock payment
in kind
    
    
    210
    
    
    
    Impairment of idle machinery
    
    
    1,618
    
    
    
    Provision for doubtful accounts
    
    
    750
    
    
    
    29(Gain) loss on sale of property and equipment
    
    
    (245
    )
    
    
    11Stock issued for accrued interest on note payable  related party
    
    
    
    
    
    
    91Stock-based payments
    
    
    89
    
    
    
    132Write-off of expenses for unrealized acquisitions
    
    
    271
    
    
    
    Change in fair value of warrants with contingent redemption
provisions
    
    
    (1,151
    )
    
    
    Deferred income taxes
    
    
    (1,309
    )
    
    
    625Changes in operating assets and liabilities:Accounts receivable
    
    
    919
    
    
    
    (4,460
    )Inventories
    
    
    (120
    )
    
    
    27Prepaid expenses and other current assets
    
    
    44
    
    
    
    (1,403
    )Deposits and other assets
    
    
    195
    
    
    
    (109
    )Restricted cash
    
    
    (814
    )
    
    
    Accounts payable
    
    
    (375
    )
    
    
    (178
    )Accrued expenses and other current liabilities
    
    
    (1,573
    )
    
    
    1,331Accrued disposal costs
    
    
    (1,031
    )
    
    
    (3,393
    )Contingent consideration
    
    
    (33
    )
    
    
    Due from joint venture
    
    
    (343
    )
    
    
    Income taxes payable
    
    
    (1,024
    )
    
    
    913Total adjustments
    
    
    (3,441
    )
    
    
    (8,878
    )Net cash used in operating activities
    
    $
    (3,113
    )
    
    $
    (1,963
    )
  81




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Net Cash Used in Investing Activities
    
    
    refinancing Casie Groups existing debt into a consolidated term loan which
provided for additional cash proceeds of approximately $2.6 million;
 
    
    reduced labor and salary costs through a reduction in salaries, reduced
overtime, lower headcount, and modification of benefits, which was primarily
implemented during the fourth quarter of 2008 and which we expect will result in
approximately $0.5 million in cost savings during 2009.
  Net Cash Provided by Financing Activities
  
    
    Private placements of securities 
   82




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##### Table of Contents




    
    In March 2008, we received approximately $5.8 million
in proceeds, net of financing fees and offering expenses of approximately
$0.5 million, from the private placement of 6,300 shares of our Series B
preferred stock and a related warrant, at a purchase price of $1,000 per
share.
 
    
    We paid $100,000 in dividends relating to our then
outstanding Series A preferred stock.
  
    
    We received $3.0 million from an offering of 1,000,000
shares of common stock in March 2007 at a purchase price of $3.00 per
share.
 
    
    In March 2007, we received $1.0 million from an
offering of 20,000 shares of our Series A preferred stock and related
warrants, at a purchase price of $50.00 per share.
 
    
    Other indebtedness During the year ended December 31, 2008 we had net
repayments of $6.0 million under our revolving lines of credit and $5.0 million in
repayments of long-term debt and notes payable. During the year ended December 31,
2007, net borrowings of approximately $2.0 million under our line of credit were
offset by the repayment of approximately $2.7 million of long-term debt. In
December of 2008, the former owners of Nycon agreed to convert our obligation to
repay $150,000 of the former owners notes payable (which obligation had been
originally incurred as part of the Nycon acquisition) into $120,000 of additional
contingent earn-out payments, because New Nycon did not achieve projected financial
results.
  
    
    Equipment refinancings In November 2007, we received $2.3 million in proceeds
from the refinancing of an equipment term loan and equipment notes into a new
five-year equipment term loan, and incurred an additional $700,000 in new debt for
equipment.
  
    
    Financing-related fees During the year ended December 31, 2008, we incurred
$0.7 million in financing fees relating to the Series B preferred stock offering
and the Casie Group refinancing, as compared to $0.1 million for the year ended
December 31, 2007.
 Capital Resources
    83




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##### Table of Contents




    
    approximately $0.7 million in cash dividend payments relating to the outstanding
Series B preferred stock;
 
    
    approximately $2.5 million in principal and interest payments relating to our
outstanding debt, revolving line of credit, term loans and notes payable;
 
    
    approximately $0.5 million of uncommitted but planned capital expenditures
within our Treatment and Recycling segment for additional equipment and or site
improvements;
 
    
    approximately $0.5 million for working capital needs at New Nycon, PE Energy,
and other new business initiatives; and
  84




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##### Table of Contents




    
    general operating and administrative expenses of $12.0 million.
   
    
    delayed payment or non-payment of receivables on certain material accounts;
 
    
    the loss of any of our major customers;
 
    
    our inability to comply with any of the covenants or restrictions on our
indebtedness or the Series B preferred stock;
 
    
    the enactment of new regulatory or environmental laws;
 
    
    our inability to grow our business as we anticipate whether internal growth, by
acquisition, through joint ventures or by forming new subsidiaries;
 
    
    any other changes in the cost structure of our underlying business model; and
 
    
    any of the other risks and uncertainties described in Item 1A. Risk Factors.
  Debt Obligations
  December 31,(in thousands)
    
    2008
    
    
    2007Revolving lines of credit
    
    $
    408
    
    
    $
    6,401Notes payable
    
    
    1,008
    
    
    
    1,717Long-term debt
    
    
    9,983
    
    
    
    5,754Mandatorily redeemable preferred stock
    
    
    4,447
    
    
    
    Total debt
    
    $
    15,846
    
    
    $
    13,872
  85




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##### Table of Contents



Revolving Line of Credit
  Maximum
    
    
    Balance
    
    
    Interest
    
    
    Maturity/Revolving Line of Credit
    
    Outstanding
    
    
    Outstanding
    
    
    Rate
    
    
    Termination Date(in thousands)Pure Earth, Inc.
    
    $
    7,500
    (1)
    
    $
    407
    
    
    
    7.75
    %(2)
    
    October 23, 2009
 
 (1)
    
    Subject to reduction for (i) a borrowing base limitation; (ii) outstanding letters of
credit; and (iii) other loan reserves. As of December 31, 2008, the borrowing base
limitation was approximately $2.9 million, and we had aggregate required loan reserves and
outstanding letters of credit of $1.8 million.(2)
    
    As of December 31, 2008, this line of credit bore interest at the lenders prime rate,
subject to a minimum of 5.0%, plus 2.75%.   
    
    The net proceeds from the Casie Group refinancing, after the repayment of the
existing Casie Group debt and the establishment of the $0.7 million principal and
interest payment reserve, were used to repay $1.9 million of the outstanding
indebtedness under our revolving line of credit.
 
    
    The rate of interest under our floating rate borrowings was changed to equal the
greater of 5.0% or the lenders prime rate, plus 2.75%, and the rate of interest to
be charged under a LIBOR Advance shall be equal to the LIBOR rate, as specified in
the credit agreement, plus 3.00%.
 
    
    We established an additional permanent reserve in the amount of $0.9 million.
    86




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##### Table of Contents




    
    incurring indebtedness;
 
    
    creating or assuming any liens or security interests with respect to our assets;
 
    
    assuming, guaranteeing or otherwise becoming liable for the obligation of any other person;
 
    
    selling, leasing, assigning, transferring or otherwise disposing of:
 
    
    stock in any subsidiary;
 
    
    all or a substantial part of our assets; or
 
    
    any collateral securing the indebtedness under this
revolving line of credit, or any interest in such collateral;
 
    
    making any loans or advances to, or making any investment or acquiring any
interest in, any other person;
 
    
    paying cash dividends on, or making any payment on account of the purchase,
redemption or other retirement of any shares of such stock, or other securities or
evidences of indebtedness, or making any distribution in respect thereof;
 
    
    merging or consolidating with any person, or permitting any person to merge or
consolidate with us, or otherwise acquiring all or substantially all of the assets
of another person;
 
    
    amending our certificate of incorporation or bylaws; or
 
    
    effecting any redemption or repurchase right under our preferred stock.
  
    
    default in the payment of any indebtedness under the revolving line of credit as
it becomes due and payable;
 
    
    default in the performance, or breach, of any covenant or agreement in the
revolving line of credit agreement;
 
    
    an overadvance that arises as a result of any reduction in the borrowing base or
otherwise on terms not otherwise approved of in advance by the lender in writing;
 
    
    the occurrence of a change of control, which includes:
 
    
    the acquisition by any person or group acquiring more
than 51% of the voting power of all classes of equity interests of any
borrower;
 
    
    incumbent directors (as described in the revolving line
of credit agreement) fail to constitute a majority of the board of
directors of any borrower; or
 
    
    Mr. Alsentzer or Mr. Kopenhaver ceasing to actively
manage our day-to-day business activities;
 
    
    a borrower being or becoming insolvent, admitting in writing that it is unable
to pay its debts as they mature, making an assignment for the benefit of creditors,
applying for receivership or having a receiver appointed, or instituting or having
instituted any bankruptcy, insolvency or liquidation proceeding relating to the
borrower, or a judgment, writ, warrant of attachment or execution or similar
process issued or levied against a substantial part of the borrowers property;
  87




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##### Table of Contents




    
    the rendering against us of an arbitration award, final judgment, decree or
order for the payment of money the uninsured portion of which is in excess of
$150,000 and the continuance of such
arbitration award, judgment, decree or order unsatisfied and in effect for any
period of 30 consecutive days without a stay of execution;
 
    
    a default under any material indebtedness (excluding trade indebtedness) owed to
any person other than the lender, or under any material lease or other contract,
and the expiration of the applicable period of grace, if any, specified therein;
 
    
    a breach of the subordination agreement or the making of any payment with
respect to indebtedness that has been subordinated pursuant to the subordination
agreement;
 
    
    the indictment of any of our officers for a felony offense relating to us under
state or federal law, or the indictment of any of our officers for a felony offense
unrelated to us, unless that officer has ceased to be an officer or employee of us
within five days of such indictment;
 
    
    any event that has a material adverse effect on:
 
    
    the business, operations, results of operations,
prospects, assets, liabilities or financial condition of a borrower, taken
as a whole;
 
    
    a borrowers ability to perform its obligations under
the loan documents; or
 
    
    the ability of the lender to enforce the indebtedness
or realize the intended benefits of its security interest; and
 
    
    any uninsured claim against a borrower or uninsured threat of litigation which
if determined adversely to a borrower would be reasonably likely to cause a
borrower to be liable to pay an amount greater than $150,000 or would result in the
occurrence of an event described above.
  Notes Payable
  Long-Term Debt
   88




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December 31,2008
    
    
    2007Equipment term loan
    
    $
    1,603
    
    
    $
    2,225Various equipment notes payable
    
    
    50
    
    
    
    70Casie Group notes payable (bank and equipment)
    
    
    328
    
    
    
    3,459Casie Group term loan
    
    
    7,927
    
    
    
    Nycon assumed liabilities
    
    
    75
    
    
    
    Total
    
    $
    9,983
    
    
    $
    5,754
      89




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##### Table of Contents




    
    undergoing a fundamental corporate change without advance notice, which includes
any mergers, consolidations, major share transactions, recapitalizations,
dissolutions or changes in its legal structure;
 
    
    disposing of assets without prior consent;
 
    
    incurring debt, creating liens, or engaging in sale leaseback transactions
without prior consent;
 
    
    assuming, guaranteeing or otherwise becoming liable for the obligations of any
person;
 
    
    discontinuing any substantial part of the existing business or entering into a
new, unrelated business;
 
    
    terminating any ERISA plan or failing to properly maintain any such plan;
 
    
    use of the proceeds of the term loan for investment in margin securities.
   Year ending December 31,
    
    Amount Due(in thousands)2009
    
    $
    1,5562010
    
    
    1,7382011
    
    
    1,7222012
    
    
    1,2102013
    
    
    1,213Thereafter
    
    
    2,544Total
    
    $
    9,983
 Convertible Debt
   90




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##### Table of Contents



Mandatorily Redeemable Preferred Stock
   Mandatory Redemption
  
    
    a person or persons becoming the beneficial owner of outstanding capital stock
having 50% or more of our total voting power;
 
    
    any sale, assignment, lease, conveyance, exchange, transfer, sale-leaseback or
other disposition of more than 50% of our assets, business or properties;
 
    
    the failure of Mr. Alsentzer to serve as Chief Executive Officer with at least
the duties and responsibilities associated with such title;
 
    
    the failure of Mr. Kopenhaver to serve as Chief Financial Officer with at least
the duties and responsibilities customarily associated with such title;
 
    
    each of Mr. Alsentzer and Mr. Kopenhaver ceasing to serve as a director on the
board of directors of Pure Earth and each of its subsidiaries;
 
    
    Mr. Alsentzer ceasing to beneficially own 1,919,000 shares of our common stock,
subject to adjustment;
 
    
    Mr. Kopenhaver ceasing to beneficially own at least 134,000 shares of our common
stock, subject to adjustment;
 
    
    any event of noncompliance with the terms of the Series B preferred stock
certificate of designation, as defined therein; or
 
    
    the protective provisions of the Series B preferred stock ceasing to be
effective.
  91




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##### Table of Contents



Optional Redemption
  Debt Incurrence Covenant
  
    
    our consolidated funded debt, less our cash and cash equivalents, to
 
    
    the sum of our consolidated EBITDA plus any pro forma acquisition EBITDA for
each acquisition approved by the holders of the Series B preferred stock or
otherwise permitted by the investment agreement for the trailing 12 fiscal months
or four fiscal quarters prior to the date of determination.
   Negative Covenants
  
    
    liquidate, wind up or dissolve;
 
    
    effect a consolidation, merger or other combination;
 
    
    make, create, incur, assume or suffer to exist liens upon our property or
assets;
 
    
    make or agree to make certain dispositions of our assets;
  92




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##### Table of Contents




    
    purchase, own, invest or otherwise acquire capital stock, indebtedness or any
other obligation in or security or interest in any other entity;
 
    
    declare or make any dividend payment or any distribution of cash, property or
assets with respect to our capital stock or rights therein;
 
    
    engage in transactions with our affiliates;
 
    
    engage in lines of business outside of the United States and in lines of
business other than the general lines of business in which we presently operate,
and, specifically, we may not:
 
    
    engage in or own assets related to the nuclear, solar
or wind energy industries;
 
    
    create, generate, use, accept, dispose of or treat
hazardous substances in excess of 2,200 pounds in any calendar month for
any single company other than Casie Group, and excluding the transportation
of hazardous substances; and
 
    
    operate a hazardous waste landfill, a commercial
hazardous waste incinerator or other activity that requires obtaining a
material environmental permit not previously disclosed to the holder of the
Series B preferred stock;
 
    
    engage in sale-leaseback transactions;
 
    
    amend, modify or waive any provision of our organizational documents, the terms
of any class or series of capital stock or any agreement related thereto, other
than in any manner that would not adversely affect the Series B preferred stock;
 
    
    issue securities senior or equal in rank to the Series B preferred stock;
 
    
    permit non-wholly owned subsidiaries to issue shares of their capital stock to
third parties, except for ordinary common equity interests;
 
    
    enter into any restriction or encumbrance on
 
    
    our ability to comply with our obligations under the
Series B preferred stock investment agreements; or
 
    
    the ability of any of our subsidiaries to make a
dividend payment or distribution with respect to its capital stock, to
repay indebtedness owed to us, to make loans or advances to us, or to
transfer any of its assets to us;
 
    
    change our fiscal year; or
 
    
    make any material changes in accounting policies or practices, except as
required under generally accepted accounting principles.
 Accounting Treatment
    93




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Other Contractual Obligations
  Operating Leases
 MinimumAggregate LeaseYears Ending December 31,
    
    Payments Due(in thousands)2009
    
    $
    1,3562010
    
    
    1,1982011
    
    
    4492012
    
    
    3922013
    
    
    310Total
    
    $
    3,705
 Collective Bargaining Agreements
 Contingent Consideration from Acquisitions.
 
    
    Casie Group
 
    
    The amended stock purchase agreement for Casie Group
obligates us to issue an additional 400,000 shares of common stock if the
former owner is successful in obtaining additional permits, implementing
certain equipment by May 29, 2009 to increase facility capacity, and
resolving specified insurance claims.
 
    
    The amended stock purchase agreement also requires us
to issue up to 435,044 additional shares of our common stock to the former
Casie Group owners based upon the resolution of certain liabilities that
existed as of March 30, 2007. The measurement dates for these
contingencies range from June 30, 2008 to September 30, 2008. As of
December 31,
  94




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##### Table of Contents




    
    Soil Disposal Group
 
    
    The owners of Soil Disposal Group are entitled to
receive a maximum of 300,000 additional shares of our common stock
contingent upon the net sales of PEI Disposal Group attaining certain
thresholds during the 36-month period ending November 20,
2010. For the year ended December 31, 2008, we did not issue any additional
 shares to the owners of Soil Disposal Group due to the offset of any amounts
due under this agreement against commissions paid to the owners of Soil
Disposal Group during 2008.
  
    
    We must pay to Nycon 20% of the free cash flow derived from the operation of the
Nycon assets during each of the next four years, up to a maximum cumulative amount
of $1.0 million, not including up to a maximum of $75,000 of debt that the former
owner of Nycon has agreed to repay out of such cash flow. See  Debt Obligations
  Long-Term Debt.
 
    
    We paid the licensor of certain patents and other technology acquired in the
acquisition a fee of 15,000 shares of our common stock, which shares were placed in
escrow pending the satisfaction by New Nycon of certain financial objectives.
 
    
    We agreed to pay the licensor a consulting fee of $7,740 per month for the first
12 months of the license agreement and an annual royalty fee of 30% of the earnings
before taxes, depreciation and amortization generated by New Nycons fiber and
fiber-related products, equipment, technology and services.
 
    
    We also agreed to contribute a minimum of $300,000 to New Nycon on an as-needed
basis for working capital purposes. As of December 31, 2008, we have provided
approximately $273,000 in net advances to New Nycon pursuant to this obligation.
 Employment and Consulting Agreements
 MinimumAggregateYear ending December 31,
    
    Payments Due(in thousands)2009
    
    $
    2,0632010
    
    
    1,9402011
    
    
    9412012
    
    
    6322013
    
    
    292Total
    
    $
    5,868
  95




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Litigation and Legal Proceedings.
 Idle Machinery
   Off-Balance Sheet Arrangements
   Related Party Transactions
    96




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##### Table of Contents



Seasonality and Inflation
   Recently Issued Accounting Pronouncements
 Business Combinations
 Fair Value
   97




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##### Table of Contents



Income Taxes
 Derivatives
 Hierarchy of GAAP
  98




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##### Table of Contents



Intangible Assets
 Convertible Debt Instruments
 Instruments Indexed to Stock
 Conforming Changes to EITF 98-5
 Share Based Payments .
  99




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
  
 Item 9A(T). Controls and Procedures.
   
    
    maintain internal control over financial reporting (as defined in Exchange Act
Rule 13a-15(f)), pursuant to Exchange Act Rule 13a-15(a);
 
    
    evaluate, pursuant to Exchange Act Rule 13a-15(c), our internal control over
financial reporting;
 
    
    evaluate, pursuant to Exchange Act Rule 13a-15(d), any change in our internal
control over financial reporting that occurred during the quarter ended December
31, 2008;
 
    
    include in this annual report a report of managements assessment regarding
internal control over financial reporting pursuant to Exchange Act Rule 13a-15(b);
or
  100




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
    
    include in this annual report an attestation report of our registered
independent public accounting firm.
   
 Item 9B. Other Information.
   101




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PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
  
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accounting Fees and Services.
   102




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PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
 Exhibit No.
    
    Description2.1
    *
    
    Stock Purchase Agreement, dated as of January 19, 2006, by and between South Jersey
Development, Inc., and its shareholders, and Info Investors, Inc. (1)2.2
    *
    
    Asset Purchase Agreement, dated as of January 19, 2006, by and between Whitney
Contracting, Inc. and South Jersey Development, Inc. (1)2.3
    *
    
    Stock Purchase Agreement, dated as of January 19, 2006, by and between American
Transport and Disposal Services Ltd. and South Jersey Development, Inc. (1)2.4
    *
    
    Stock Purchase Agreement, dated as of January 19, 2006, by and between Juda
Construction, Ltd. and South Jersey Development, Inc. (1)2.5
    *
    
    Asset Purchase Agreement, dated as of January 5, 2006, by and between Alchemy
Development, LLC and South Jersey Development, Inc. (1)2.6
    *
    
    Stock Acquisition Agreement, dated as of November 30, 2006, by and among Shari L.
Mahan, as sole shareholder of Terrasyn Environmental Corp., and Pure Earth, Inc. (1)2.7
    *
    
    Membership Interests Purchase Agreement, dated as of November 30, 2006, by and among
Shari L. Mahan, as sole member of Environmental Venture Partners, LLC, Bio Methods LLC
and Geo Methods, LLC, and Pure Earth, Inc. (1)2.8
    *
    
    Stock Purchase Agreement, dated as of February 13, 2007, by and among Pure Earth,
Inc., Gregory W. Call, Casie Ecology Oil Salvage, inc., MidAtlantic Recycling
Technologies, Inc. and Rezultz, Incorporated (1)2.8.1
    
    
    First Amendment to Stock Purchase Agreement, dated as of February 28, 2007, by and
among Pure Earth, Inc. and Casie Ecology Oil Salvage, Inc., Rezultz, Incorporated,
MidAtlantic Recycling Technologies, Inc. and Gregory W. Call (1)2.8.2
    *
    
    Second Amendment to Stock Purchase Agreement, dated as of March 26, 2007, by and among
Pure Earth, Inc. and Casie Ecology Oil Salvage, Inc., Rezultz, Incorporated,
MidAtlantic Recycling Technologies, Inc., Rex Mouser and Gregory W. Call (1)2.8.3
    
    
    Third Amendment to Stock Purchase Agreement, dated as of May 7, 2007, by and among
Pure Earth Inc. and Casie Ecology Oil Salvage, Inc., Rezultz, Incorporated,
MidAtlantic Recycling Technologies, Inc., Rex Mouser and Gregory W. Call (1)2.8.4
    
    
    Fourth Amendment to Stock Purchase Agreement, dated as of August 6, 2007, by and among
Pure Earth Inc. and Casie Ecology Oil Salvage, Inc., Rezultz, Incorporated,
MidAtlantic Recycling Technologies, Inc., Rex Mouser, Brian Horne and Gregory W. Call
(1)2.8.5
    *
    
    Letter, dated December 21, 2007, from Pure Earth, Inc. to Gregory W. Call regarding
Final Purchase Price with respect to the Stock Purchase Agreement, dated as of
February 13, 2007, among Pure Earth, Inc., Casie Ecology Oil Salvage, Inc.,
MidAtlantic Recycling Technologies, Inc., Rezultz, Incorporated, Rex Mouser, Brian
Horne and Gregory W. Call, as amended (1)2.8.5
    (a)
    
    Letter, dated January 7, 2008, from Pure Earth, Inc. to Gregory W. Call, dated
December 21, 2007 (1)2.8.6
    
    
    Joinder Agreement, dated March 21, 2007, of Rex Mouser to the Stock Purchase Agreement
by and among Pure Earth, Inc., Casie Ecology Oil Salvage, Inc., MidAtlantic Recycling
Technologies, Inc., Rezultz, Incorporated, Rex Mouser, Brian Horne and Gregory W. Call
(1)2.8.7
    
    
    Joinder Agreement, dated May 30, 2007, of Brian Horne to the Stock Purchase Agreement
by and among Pure Earth, Inc., Casie Ecology Oil Salvage, Inc., MidAtlantic Recycling
Technologies, Inc., Rezultz, Incorporated, Rex Mouser and Gregory W. Call (1)
  103




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Exhibit No.
    
    Description2.9
    *
    
    Asset Purchase Agreement, dated November 20, 2007, by and among PEI Disposal Group,
Inc., Richard Rivkin, Soil Disposal Group, Inc., Aaron Environmental Group, Inc.,
Stephen F. Shapiro, Jeffrey Berger and James Case (1)2.10
    *
    
    Asset Purchase Agreement, dated April 1, 2008, by and among Nycon, Inc., Robert Cruso,
Frank Gencarelli, New Nycon, Inc. and Paul Bracegirdle (1)3.1
    
    
    Second Amended and Restated Certificate of Incorporation of Pure Earth, Inc. (2) (3)3.2
    
    
    Second Amended and Restated Bylaws of Pure Earth, Inc. (2) (3)4.1
    
    
    Specimen Common Stock Certificate (1)4.2
    
    
    Specimen Series B Preferred Stock Certificate (1)4.3
    
    
    Form of Common Stock Purchase Warrant issued to DD Growth Premium pursuant to the
Securities Purchase Agreement, dated as of June 30, 2006 (1)4.4
    
    
    Form of Registration Rights Agreement, dated June 30, 2006, by and between Pure Earth,
Inc. and DD Growth Premium (1)4.5
    
    
    Form of Common Stock Purchase Warrant issued to Charles Hallinan and Black Creek
Capital Corp. pursuant to the Subscription Agreement, dated as of May 22, 2007 (1)4.6
    
    
    Debenture Redemption Agreement, dated as of August 17, 2007, by and among Pure Earth,
Inc. and Dynamic Decisions Strategic Opportunities (1)4.6.1
    
    
    First Amendment to Debenture Redemption Agreement, dated as of October 2, 2007, by and
among Pure Earth, Inc. and Dynamic Decisions Strategic Opportunities (1)4.7
    
    
    Stock Purchase Agreement, dated August 17, 2007, by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc. (1)4.7.1
    
    
    Joinder Agreement to the Stock Purchase Agreement by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc., dated as of September 18, 2007, by Kim
C. Tucker Living Trust (1)4.7.2
    
    
    Joinder Agreement to the Stock Purchase Agreement by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc., dated as of August 30, 2007, by Brent
Kopenhaver and Emilie Kopenhaver
(1)4.7.3
    
    
    Joinder Agreement to the Stock Purchase Agreement by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc., dated as of August 30, 2007, by Mark
Alsentzer (1)4.7.4
    
    
    Joinder Agreement to the Stock Purchase Agreement by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc., dated as of September 20, 2007, by
Charles Hallinan (1)4.8
    
    
    Investment Agreement, dated as of March 4, 2008, among Pure Earth, Inc. and Fidus
Mezzanine Capital, L.P. (1)4.9
    
    
    Warrant, dated March 4, 2008, to purchase Common Stock of Pure Earth, Inc. issued to
Fidus Mezzanine Capital, L.P. (1)4.10
    
    
    Registration Rights Agreement, dated as of March 4, 2008, between Pure Earth, Inc. and
certain holders (1)4.11
    
    
    Securityholders Agreement, dated as of March 4, 2008, by and among Pure Earth, Inc.,
Brent Kopenhaver, Mark Alsentzer, Fidus Mezzanine Capital, L.P. and holders of the
Warrants and Warrant Shares, as defined therein (1)4.12
    
    
    Guaranty Agreement, dated as of March 4, 2008, by certain subsidiaries of Pure Earth,
Inc. in favor of Fidus Mezzanine Capital, L.P. and any other Investors party thereto
(1)4.13
    
    
    Investment Agreement, effective June 29, 2008, by and among Pure Earth, Inc., Black
Creek Capital Corp. and Charles M. Hallinan (3)10.1
    
    
    Employment Agreement, dated as of June 1, 2008, by and between Pure Earth, Inc. and
Mark Alsentzer (1)10.2
    
    
    Employment Agreement, dated as of June 1, 2008, by and between Pure Earth, Inc. and
Brent Kopenhaver (1)10.3
    
    
    Pure Earth, Inc. 2007 Stock Incentive Plan (1)10.4
    
    
    Form of Restricted Stock Agreement for awards under the Pure Earth, Inc. 2007 Stock
Incentive Plan (1)
  104




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Exhibit No.
    
    Description10.5
    
    
    Loan and Security Agreement, dated October 5, 2005, by and among Casie Ecology Oil
Salvage, Inc., MidAtlantic Recycling Technologies, Inc., Rezultz, Incorporated,
Gregory Call and Parke Bank (1)10.5.1
    
    
    Change in Terms Agreement, dated November 2, 2007, between Casie Ecology Oil Salvage,
Inc., MidAtlantic Recycling Technologies, Inc., Rezultz, Incorporated, Gregory Call
and Parke Bank (1)10.6
    
    
    Credit and Security Agreement, dated as of October 24, 2006, between Pure Earth, Inc.,
South Jersey Development, Inc., American Transportation & Disposal Systems, Ltd., Juda
Construction, Ltd. and Wells Fargo Bank, National Association (1)10.6.1
    
    
    First Amendment to Credit and Security Agreement, dated December 29, 2006, by and
between Pure Earth, Inc., South Jersey Development, Inc., American Transportation &
Disposal Systems, Ltd., Juda Construction, Ltd. and Wells Fargo Bank, National
Association (1)10.6.2
    
    
    Second Amendment to Credit and Security Agreement and Waiver of Defaults, dated May
16, 2007, by and between Pure Earth, Inc., Pure Earth Transportation and Disposal,
Inc., Pure Earth Materials, Inc., Juda Construction, Ltd. and Wells Fargo Bank,
National Association (1)10.6.3
    
    
    Third Amendment to Credit and Security Agreement, dated November 13, 2007, by and
between Pure Earth, Inc., Pure Earth Transportation and Disposal, Inc., Pure Earth
Materials, Inc., Juda Construction, Ltd. and Wells Fargo Bank, National Association
(1)10.6.4
    
    
    Fourth Amendment to Credit and Security Agreement, effective April 28, 2008, by and
between Pure Earth, Inc., Pure Earth Transportation & Disposal, Inc., Pure Earth
Materials, Inc., Juda Construction, Ltd. and Wells Fargo Bank, National Association
(3)10.6.5
    
    
    Fifth Amendment to Credit and Security Agreement, portions effective as of October 21,
2008 and March 13, 2009, by and among Pure Earth, Inc., each of its subsidiaries, and
Wells Fargo Bank, National Association10.7
    
    
    Sales Representative Agreement, dated November 20, 2007, by and between PEI Disposal
Group, Inc., Soil Disposal Group, Inc., Richard Rivkin, Stephen Shapiro, James Case,
Jeffrey Berger and Aaron Environmental Group, Inc. (1)10.8
    
    
    Form of Confidentiality, Non-Competition and Non-Solicitation Agreement, dated
November 20, 2007, by and among Soil Disposal Group, Inc., PEI Disposal Group, Inc.,
Pure Earth, Inc., any and all subsidiaries of PEI Disposal Group, Inc. and Pure Earth,
Inc., and certain employees of Soil Disposal Group, Inc. signatory thereto (1)10.9
    
    
    Commercial Lease, dated October 26, 2007, between Red Rock Land Development, LLC and
Pure Earth Materials (NJ) Inc.(1)10.10
    
    
    Subordinated Promissory Note, dated November 15, 2007, by Casie Ecology Oil Salvage,
Inc., MidAtlantic Recycling Technologies, Inc. and Rezultz, Incorporated in the
principal amount of $1,000,000 in favor of Gregory W. Call (1)10.11
    
    
    Promissory Note, dated November 20, 2007, by PEI Disposal Group, Inc., as maker, in
the principal amount of $640,000, in favor of Soil Disposal Group, Inc.(1)10.12
    
    
    Promissory Note, dated November 28, 2007, by Pure Earth, Inc., Juda Construction, Ltd.
and Pure Earth Materials, Inc., as makers, in the principal amount of $2,265,000, in
favor of CoActiv Capital Partners LLC (1)10.13
    
    
    Exclusive License, dated April 30, 2008, by and between New Nycon, Inc. and Paul E.
Bracegirdle (1)10.14
    
    
    Memorandum of Understanding, dated September 25, 2008, between Red Rock Land
Development, LLC and Pure Earth Materials (NJ) Inc., amending Commercial Lease dated
October 26, 2007 (4)10.15
    
    
    Term Loan Agreement, dated November 12, 2008, by and among Casie Group and Susquehanna
Bank10.16
    
    

Guaranty,
dated November 12, 2008, of Pure Earth, Inc. in favor of Susquehanna Bank10.17.1
    
    
    ISDA® Master Agreement, dated November 12, 2008, by and among Susquehanna Bank, Casie
Ecology Oil Salvage, Inc., MidAtlantic Recycling Technologies, Inc. and Rezultz,
Incorporated
  105




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##### Table of Contents



Exhibit No.
    
    Description10.17.2
    
    
    Schedule to the Master Agreement, dated November 12, 2008, by and among Susquehanna
Bank, Casie Ecology Oil Salvage, Inc., MidAtlantic Recycling Technologies, Inc. and
Rezultz, Incorporated10.17.3
    
    
    Confirmation, dated November 12, 2008, by and among Susquehanna Bank, Casie Ecology
Oil Salvage, Inc., MidAtlantic Recycling Technologies, Inc. and Rezultz, Incorporated21.1
    
    
    Subsidiaries of the Registrant31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) promulgated under
the Securities Exchange Act of 1934, as amended (the Exchange Act)31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under
the Exchange Act32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    The schedules to this agreement have been omitted in accordance with the rules of
the SEC. A list of omitted schedules has been included in this exhibit and will be
provided supplementally to the SEC upon request.(1)
    
    Previously filed as an exhibit to our registration statement on Form 10 (File No.
0-53287), as filed with the SEC on June 20, 2008.(2)
    
    Included is the revised version of this exhibit, redlined to show the new
amendments. The redlined version is being provided pursuant to SEC staff Compliance &
Disclosure Interpretation 246.01.(3)
    
    Previously filed as an exhibit to Pre-Effective Amendment No. 1 to our registration
statement on Form 10/A (File No. 0-53287), as filed with the SEC on August 8, 2008.(4)
    
    Previously filed as an exhibit to Post-Effective Amendment No. 2 to our
registration statement on Form 10/A (File No. 0-53287), as filed with the SEC on November
4, 2008.  106




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SIGNATURES
  PURE EARTH, INC.Date: March 30, 2009
    By:
    /s/ Mark AlsentzerMark AlsentzerPresident and Chief Executive Officer  Name and Signature
    
    Capacity
    
    Date/s/ Mark Alsentzer

Mark Alsentzer
    
    President, Chief Executive Officer and Class I Director(Principal
Executive Officer)
    
    March 30, 2009/s/ Brent Kopenhaver

Brent Kopenhaver
    
    Chairman (Class III Director), Executive Vice President,Chief
Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
    
    March 30, 2009/s/ Charles M. Hallinan

Charles M. Hallinan
    
    Class II Director
    
    March 30, 2009
  107




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PURE EARTH, INC. AND SUBSIDIARIES
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    F-3Consolidated Statements of Operations For the Years Ended
December 31, 2008 and 2007
    
    
    F-5Consolidated Statements of Stockholders Equity For the Years Ended
December 31, 2008 and 2007
    
    
    F-6Consolidated Statements of Cash Flows For the Years Ended
December 31, 2008 and 2007
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-9
  F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
  F-2




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 ASSETS
 December 31,2008
    
    
    2007CURRENT ASSETSCash and cash equivalents
    
    $
    900,744
    
    
    $
    1,885,014Accounts receivable, less allowance for doubtful
accounts of $986,324 and $431,664
    
    
    11,034,564
    
    
    
    12,622,714Restricted cash
    
    
    813,164
    
    
    
    Due from joint venture
    
    
    342,552
    
    
    
    Inventories
    
    
    538,943
    
    
    
    269,585Prepaid expenses
    
    
    798,629
    
    
    
    987,378Other current assets
    
    
    1,069,892
    
    
    
    918,185Deferred income tax asset
    
    
    306,073
    
    
    
    223,912Total Current Assets
    
    
    15,804,561
    
    
    
    16,906,788PROPERTY AND EQUIPMENTLand
    
    
    1,085,940
    
    
    
    745,500Buildings and improvements
    
    
    7,125,309
    
    
    
    6,789,683Leasehold improvements
    
    
    211,875
    
    
    
    148,482Machinery and equipment
    
    
    8,078,035
    
    
    
    8,612,385Trucks and automobiles
    
    
    1,922,246
    
    
    
    2,230,598Office furniture, fixtures and computer software
    
    
    323,160
    
    
    
    271,293Construction-in-process
    
    
    
    
    
    
    13,02318,746,565
    
    
    
    18,810,964Less: accumulated depreciation and amortization
    
    
    (4,435,569
    )
    
    
    (2,623,352
    )Property and Equipment, Net
    
    
    14,310,996
    
    
    
    16,187,612OTHER ASSETSDeposits and other assets
    
    
    923,335
    
    
    
    1,333,990Deferred financing costs, net of accumulated
amortization of $199,663 and $79,014
    
    
    747,989
    
    
    
    127,787Goodwill
    
    
    759,694
    
    
    
    759,694Permits
    
    
    2,200,000
    
    
    
    2,200,000Other intangible assets, net of accumulated amortization
    
    
    3,587,210
    
    
    
    2,388,753Idle machinery
    
    
    7,176,850
    
    
    
    8,450,000Pending acquisitions
    
    
    
    
    
    
    161,302Total Other Assets
    
    
    15,395,078
    
    
    
    15,421,526TOTAL ASSETS
    
    $
    45,510,635
    
    
    $
    48,515,926
 The accompanying notes are an integral part of these consolidated financial statements.
  F-3




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 LIABILITIES AND STOCKHOLDERS EQUITY
 December 31,2008
    
    
    2007CURRENT LIABILITIESLine of credit
    
    $
    407,822
    
    
    $
    2,389,493Notes payable
    
    
    25,068
    
    
    
    708,006Note payable  related party
    
    
    333,000
    
    
    
    Current portion of long-term debt
    
    
    1,556,494
    
    
    
    1,240,547Accounts payable
    
    
    5,615,708
    
    
    
    5,807,026Accrued expenses
    
    
    907,428
    
    
    
    1,274,004Accrued payroll and payroll taxes
    
    
    297,039
    
    
    
    619,906Other current liabilities
    
    
    1,323,452
    
    
    
    2,116,828Accrued disposal costs
    
    
    262,815
    
    
    
    278,432Contingent consideration
    
    
    
    
    
    
    176,435Income taxes payable
    
    
    
    
    
    
    1,024,603Total Current Liabilities
    
    
    10,728,826
    
    
    
    15,635,280LONG-TERM LIABILITIESLong-term debt, net of current portion
    
    
    8,426,740
    
    
    
    4,513,526Line of credit
    
    
    
    
    
    
    4,011,104Mandatorily redeemable Series B preferred
stock, $.001 par value; authorized 20,000 and
0 shares; issued and outstanding 6,300 and 0
shares
    
    
    4,447,437
    
    
    
    Note payable  related party
    
    
    650,296
    
    
    
    1,008,463Accrued disposal costs
    
    
    78,023
    
    
    
    1,093,796Contingent consideration
    
    
    2,683,991
    
    
    
    1,176,235Warrants with contingent redemption provisions
    
    
    1,112,164
    
    
    
    Deferred income taxes
    
    
    4,047,236
    
    
    
    5,273,840Deferred income tax liabilities  permits
    
    
    880,000
    
    
    
    880,000Total Long-Term Liabilities
    
    
    22,325,887
    
    
    
    17,956,964TOTAL LIABILITIES
    
    
    33,054,713
    
    
    
    33,592,244REDEEMABLE PREFERRED STOCK,$.001 par
value; Series A convertible preferred
stock: authorized
0 and 50,000 shares; issued and outstanding 0 and
20,000 shares
    
    
    
    
    
    
    930,190COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYCommon stock, $.001 par value; authorized
25,000,000 shares; issued and outstanding 17,626,799 and 17,218,465 shares
    
    
    17,627
    
    
    
    17,218Additional paid-in capital
    
    
    13,803,474
    
    
    
    12,323,847Retained earnings (accumulated deficit)
    
    
    (1,365,179
    )
    
    
    1,652,427TOTAL STOCKHOLDERS EQUITY
    
    
    12,455,922
    
    
    
    13,993,492TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS EQUITY
    
    $
    45,510,635
    
    
    $
    48,515,926
 The accompanying notes are an integral part of these consolidated financial statements.
  F-4




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Years Ended December 31,2008
    
    
    2007REVENUES
    
    $
    62,738,161
    
    
    $
    59,398,879COST OF REVENUES (including $2,473,177 and $2,153,754 of depreciation
and amortization expense)
    
    
    51,636,084
    
    
    
    46,149,312GROSS PROFIT
    
    
    11,102,077
    
    
    
    13,249,567OPERATING EXPENSESSalaries and related expenses
    
    
    6,219,352
    
    
    
    4,449,991Occupancy and other office expenses
    
    
    1,167,104
    
    
    
    1,349,927Professional fees
    
    
    2,029,396
    
    
    
    1,000,358Other operating expenses
    
    
    2,188,281
    
    
    
    903,210Insurance
    
    
    1,057,965
    
    
    
    861,178Depreciation and amortization
    
    
    554,612
    
    
    
    325,528Impairment of idle machinery
    
    
    1,618,125
    
    
    
    (Gain) loss on sale of equipment
    
    
    (245,424
    )
    
    
    11,239TOTAL OPERATING EXPENSES
    
    
    14,589,411
    
    
    
    8,901,431INCOME (LOSS) FROM OPERATIONS
    
    
    (3,487,334
    )
    
    
    4,348,136OTHER INCOME (EXPENSES)Interest income
    
    
    82,821
    
    
    
    111,494Interest expense
    
    
    (1,980,691
    )
    
    
    (1,044,242
    )Income (loss) from equity investment
    
    
    (310,678
    )
    
    
    89,868Expenses for unrealized acquisitions
    
    
    (271,081
    )
    
    
    Change in fair value of warrants with contingent redemption provisions
    
    
    1,151,266
    
    
    
    Other income
    
    
    218,352
    
    
    
    88,053TOTAL OTHER INCOME (EXPENSES)
    
    
    (1,110,011
    )
    
    
    (754,827
    )INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (4,597,345
    )
    
    
    3,593,309PROVISION FOR (BENEFIT FROM) INCOME TAXESCurrent
    
    
    (748,820
    )
    
    
    939,086Deferred
    
    
    (1,308,765
    )
    
    
    625,193TOTAL PROVISION FOR (BENEFIT FROM)
INCOME TAXES
    
    
    (2,057,585
    )
    
    
    1,564,279NET INCOME (LOSS)
    
    
    (2,539,760
    )
    
    
    2,029,030Less: preferred stock dividends
    
    
    477,846
    
    
    
    75,277NET INCOME (LOSS) AVAILABLE FOR
COMMON STOCKHOLDERS
    
    $
    (3,017,606
    )
    
    $
    1,953,753NET INCOME (LOSS) PER SHAREBasic
    
    $
    (0.17
    )
    
    $
    0.12Diluted
    
    $
    (0.17
    )
    
    $
    0.12WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDINGBasic
    
    
    17,427,847
    
    
    
    16,428,969Diluted
    
    
    17,427,847
    
    
    
    16,662,029
 The accompanying notes are an integral part of these consolidated financial statements
  F-5




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 For the Years Ended December 31, 2008 and 2007
 RetainedAdditional
    
    
    Earnings
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    (Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    EquityBALANCE  January 1, 2007
    
    
    15,368,972
    
    
    $
    15,369
    
    
    $
    6,547,814
    
    
    $
    (301,326
    )
    
    $
    6,261,857Private placement stock offering
    
    
    1,000,000
    
    
    
    1,000
    
    
    
    2,999,000
    
    
    
    
    
    
    
    3,000,000Issuance of common stock for
acquisition of companies and
specific assets
    
    
    428,494
    
    
    
    428
    
    
    
    1,360,054
    
    
    
    
    
    
    
    1,360,482Conversion of debt into common stock
    
    
    373,615
    
    
    
    374
    
    
    
    1,215,066
    
    
    
    
    
    
    
    1,215,440Issuance and conversion of warrants
    
    
    3,334
    
    
    
    3
    
    
    
    69,807
    
    
    
    
    
    
    
    69,810Restricted stock grant to employees
    
    
    44,050
    
    
    
    44
    
    
    
    132,106
    
    
    
    
    
    
    
    132,050Dividends declared on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75,277
    )
    
    
    (75,277
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,029,030
    
    
    
    2,029,030BALANCE  December 31, 2007
    
    
    17,218,465
    
    
    
    17,218
    
    
    
    12,323,847
    
    
    
    1,652,427
    
    
    
    13,993,492Restricted stock issued to customer
    
    
    5,000
    
    
    
    5
    
    
    
    14,995
    
    
    
    
    
    
    
    15,000Issuance of common stock for
acquisition of companies and
specific assets
    
    
    25,000
    
    
    
    25
    
    
    
    74,475
    
    
    
    
    
    
    
    74,500Issuance of common stock to
employees and consultants
    
    
    45,000
    
    
    
    45
    
    
    
    132,705
    
    
    
    
    
    
    
    132,750Issuance of common stock to Series A
preferred stockholders
    
    
    111,134
    
    
    
    111
    
    
    
    327,485
    
    
    
    
    
    
    
    327,596Conversion of Series A preferred
stock into common stock
    
    
    222,200
    
    
    
    223
    
    
    
    929,967
    
    
    
    
    
    
    
    930,190Dividends declared on Series A
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (477,846
    )
    
    
    (477,846
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,539,760
    )
    
    
    (2,539,760
    )BALANCE  December 31, 2008
    
    
    17,626,799
    
    
    $
    17,627
    
    
    $
    13,803,474
    
    
    $
    (1,365,179
    )
    
    $
    12,455,922
 The accompanying notes are an integral part of these consolidated financial statements
  F-6




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years EndedDecember 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    (2,539,760
    )
    
    $
    2,029,030Adjustments to reconcile net income (loss) to net cash used in
operating activitiesDepreciation and amortization
    
    
    2,535,693
    
    
    
    2,174,181Other intangible assets amortization
    
    
    492,096
    
    
    
    174,628Deferred financing cost amortization
    
    
    120,649
    
    
    
    62,973Interest expense for accretion of warrant and debt discount
    
    
    200,291
    
    
    
    Interest expense for Series B preferred stock payment-in-kind
    
    
    210,369
    
    
    
    Impairment of intangible assets
    
    
    
    
    
    
    67,500Impairment of idle equipment
    
    
    1,618,125
    
    
    
    Provision for doubtful accounts
    
    
    750,020
    
    
    
    28,927(Gain) loss on sale of property and equipment
    
    
    (245,424
    )
    
    
    11,239Stock issued for accrued interest on note payable  related party
    
    
    
    
    
    
    91,292Stock-based payments
    
    
    88,750
    
    
    
    132,150Gain on convertible debt buy-back
    
    
    
    
    
    
    (88,053
    )Write-off of expenses for unrealized acquisitions
    
    
    271,081
    
    
    
    Change in fair value of warrants with contingent redemption
provisions
    
    
    (1,151,059
    )
    
    
    Deferred income taxes
    
    
    (1,308,765
    )
    
    
    625,193Changes in operating assets and liabilitiesAccounts receivable
    
    
    919,312
    
    
    
    (4,460,114
    )Inventories
    
    
    (119,606
    )
    
    
    27,082Prepaid expenses and other current assets
    
    
    44,485
    
    
    
    (1,402,635
    )Deposits and other assets
    
    
    194,745
    
    
    
    (108,622
    )Restricted cash
    
    
    (813,164
    )
    
    
    Accounts payable
    
    
    (375,313
    )
    
    
    (177,815
    )Accrued expenses and other current liabilities
    
    
    (1,573,434
    )
    
    
    1,329,111Accrued disposal costs
    
    
    (1,031,390
    )
    
    
    (3,392,961
    )Contingent consideration
    
    
    (33,215
    )
    
    
    Due from joint venture
    
    
    (342,552
    )
    
    
    Income taxes payable
    
    
    (1,024,603
    )
    
    
    913,578TOTAL ADJUSTMENTS
    
    
    (572,009
    )
    
    
    (3,992,346
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (3,112,669
    )
    
    
    (1,963,316
    )CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of business and assets  net of cash of $911,405 for the
year ended December 31, 2007
    
    
    (44,803
    )
    
    
    (3,167,743
    )Payments for pending acquisitions
    
    
    (198,779
    )
    
    
    (115,326
    )Acquisitions of property and equipment
    
    
    (952,155
    )
    
    
    (1,132,245
    )Proceeds from sale of property and equipment
    
    
    707,105
    
    
    
    338,739NET CASH USED IN INVESTING ACTIVITIES
    
    
    (488,632
    )
    
    
    (4,076,575
    )CASH FLOWS FROM FINANCING ACTIVITIESRepayments of (advances for) related party loans
    
    
    (25,167
    )
    
    
    67,775Net (repayments) borrowings on line of credit
    
    
    (5,992,775
    )
    
    
    2,006,772Repayments of notes payable
    
    
    (682,938
    )
    
    
    (207,736
    )
  F-7




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS, Continued
 For the Years EndedDecember 31,2008
    
    
    2007Repayment of long-term debt
    
    
    (4,341,238
    )
    
    
    (2,680,005
    )Proceeds from equipment financing
    
    
    8,200,000
    
    
    
    2,865,713Repayments of convertible debt
    
    
    
    
    
    
    (550,000
    )Financing fees incurred
    
    
    (740,851
    )
    
    
    (44,059
    )Private placement of common and preferred stock
    
    
    6,300,000
    
    
    
    4,000,000Dividends paid on Series A preferred stock
    
    
    (100,000
    )
    
    
    (50,277
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    2,617,031
    
    
    
    5,408,183NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (984,270
    )
    
    
    (631,708
    )CASH AND CASH EQUIVALENTS   BEGINNING OF YEAR
    
    
    1,885,014
    
    
    
    2,516,722CASH AND CASH EQUIVALENTS  END OF YEAR
    
    $
    900,744
    
    
    $
    1,885,014SUPPLEMENTARY INFORMATIONCash paid during the periods for:Interest
    
    $
    1,326,766
    
    
    $
    948,530Income taxes
    
    $
    1,131,985
    
    
    $
    25,508Non-cash investing and financing activities:Debt and other liabilities incurred in acquisition of businesses and
asset purchases
    
    $
    1,906,229
    
    
    $
    29,804,979Acquisition of businesses and assets in exchange for shares of common
stock
    
    $
    74,500
    
    
    $
    1,360,482Conversion of debt to equity
    
    $
    
    
    
    $
    1,215,440Direct financing of property and equipment
    
    $
    145,049
    
    
    $
    480,454
 The accompanying notes are an integral part of these consolidated financial statements
  F-8




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Company Overview
   Transportation and Disposal
  Treatment and Recycling
   Environmental Services
   F-9




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Materials
  Concrete Fibers
  Summary of Significant Accounting Policies
 Basis of Presentation
  Use of Estimates
  Cash and Cash Equivalents
  Restricted Cash
   F-10




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Accounts Receivable and Allowance for Doubtful Accounts
  Inventories
  December 31,2008
    
    
    2007Recycled oil
    
    $
    248,151
    
    
    $
    248,483Crushed rock
    
    
    64,500
    
    
    
    21,102Concrete fibers
    
    
    226,292
    
    
    
    Total
    
    $
    538,943
    
    
    $
    269,585
 Property and Equipment
   Range of EstimatedAsset Classification
    
    Useful LifeBuildings and improvements
    
    25 yearsMachinery and equipment
    
    3-10 yearsTrucks and automobiles
    
    4-7 yearsOffice furniture and fixtures
    
    2-4 yearsComputer software
    
    3 yearsLeasehold improvements
    
    Lesser of useful life of asset or life of lease
  F-11




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Revenue Recognition
   Accrued Disposal Costs
  Goodwill and Intangible Assets  Indefinite Lives
    F-12




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
     Intangible Assets  Finite Lives
  Long-Lived Assets
  Earnings (Loss) Per Share
   F-13




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   December 31,2008
    
    
    2007Weighted average common shares outstanding used
in computing basic EPS
    
    
    17,427,847
    
    
    
    16,428,969Effect of dilutive securities:Convertible notes
    
    
    
    
    
    
    233,060Adjusted weighted average common shares used in
computing diluted EPS
    
    
    17,427,847
    
    
    
    16,662,029
  Stock Based Compensation
  Income Taxes
    F-14




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Preferred Stock
  Convertible Instruments
     F-15




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Common Stock Purchase Warrants and Other Derivative Financial Instruments
   Derivative Financial Instruments
   F-16




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Fair Value
      F-17




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Fair Value of Financial Instruments
   Advertising
  Recently Issued Accounting Pronouncements
 Business Combinations
 Noncontrolling Interests
  F-18




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Derivative Instruments
 Hierarchy of GAAP
 Intangible Assets
 Convertible Debt Instruments
 Instruments Indexed to Stock.
  F-19




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Conforming Changes to EITF 98-5
 Share Based Payments
  Casie Group Acquisition
   F-20




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      Casie
    
    
    Rezultz
    
    
    MART
    
    
    Eliminations
    
    
    TotalCurrent assets(1)
    
    $
    14,847,846
    
    
    $
    2,788,413
    
    
    $
    8,078,974
    
    
    $
    (21,396,045
    )
    
    $
    4,319,188Deferred income tax
asset  current
    
    
    51,800
    
    
    
    
    
    
    
    726,400
    
    
    
    
    
    
    
    778,200Property and equipment
    
    
    2,674,225
    
    
    
    4,316,860
    
    
    
    6,347,084
    
    
    
    
    
    
    
    13,338,169Non-current assets
    
    
    1,834,742
    
    
    
    10,162
    
    
    
    9,900,000
    
    
    
    
    
    
    
    11,744,904Total assets acquired
    
    
    19,408,613
    
    
    
    7,115,435
    
    
    
    25,052,458
    
    
    
    (21,396,045
    )
    
    
    30,180,461Current liabilities
    
    $
    13,970,858
    
    
    $
    1,800,788
    
    
    $
    16,551,339
    
    
    $
    (21,396,045
    )
    
    $
    10,926,940Long-term liabilities
    
    
    4,056,889
    (2)
    
    
    4,316,197
    
    
    
    2,964,283
    
    
    
    
    
    
    
    11,337,369
  F-21




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Casie
    
    
    Rezultz
    
    
    MART
    
    
    Eliminations
    
    
    TotalContingent consideration
    
    
    
    
    
    
    
    
    
    
    1,352,670
    
    
    
    
    
    
    
    1,352,670Deferred income tax
liability
    
    
    1,373,600
    
    
    
    728,300
    
    
    
    3,446,100
    
    
    
    
    
    
    
    5,548,000Total liabilities assumed
    
    
    19,401,347
    
    
    
    6,845,285
    
    
    
    24,314,392
    
    
    
    (21,396,045
    )
    
    
    29,164,979Purchase Price
    
    $
    7,266
    
    
    $
    270,150
    
    
    $
    738,066
    
    
    
    
    
    
    $
    1,015,482
 (1)
    
    Includes cash and cash equivalents of $911,405.(2)
    
    Extinguished upon acquisition since it was payable to the Company. Nycon Acquisition
     F-22




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   New NyconAccounts receivable
    
    $
    81,182Inventory
    
    
    149,752Other current assets
    
    
    7,443Property and equipment
    
    
    52,352Patents
    
    
    10,000Trademarks
    
    
    180,000Licensing agreement
    
    
    730,000Customer list
    
    
    700,000Non-compete agreement
    
    
    70,000Total assets acquired
    
    
    1,980,729Accounts payable and accrued expenses
    
    
    206,972Other current liabilities
    
    
    64,918Long-term debt
    
    
    225,000Other long-term liabilities(1)
    
    
    44,803Contingent consideration
    
    
    1,364,536Total liabilities assumed
    
    
    1,906,229Net purchase price
    
    $
    74,500
 
 (1)
    
    Extinguished upon acquisition since it was payable to the Company. Pro Forma Results
    F-23




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 For the Year Ended December 31,2008 (unaudited)
    
    
    2007 (unaudited)Pro Forma
    
    
    Pro FormaCombined (a) (b) (e)
    
    
    Combined (c) (d) (e)Revenue
    
    $
    63,004,274
    
    
    $
    66,548,660Income (loss) from operations
    
    $
    (3,683,655
    )
    
    $
    3,218,724Income (loss) before income tax benefit
    
    $
    (4,763,742
    )
    
    $
    2,451,671Net income (loss)
    
    $
    (2,637,102
    )
    
    $
    1,044,346Per common share dataNet income (loss) from operations 
Basic
    
    $
    (0.18
    )
    
    $
    0.06Net income (loss from operations 
Diluted
    
    $
    (0.18
    )
    
    $
    0.06Weighted Average SharesBasic
    
    
    17,438,272
    
    
    
    16,536,506Diluted
    
    
    17,438,272
    
    
    
    16,769,566
 
 (a)
    
    Historical information includes the operating results of Pure Earth (including Casie
Group) for the year ended December 31, 2008 and the operating results of New Nycon for the
nine months ended December 31, 2008.(b)
    
    Pro forma information and the pro forma adjustments include the operating results of
Nycon for the three months ended March 31, 2008.(c)
    
    Historical information includes the operating results of Pure Earth for the year ended
December 31, 2007, and the operating results of Casie Group for the nine months ended
December 31, 2007.(d)
    
    Pro forma information and the pro forma adjustments include the operating results of
Casie Group for the three months ended March 31, 2007, and the operating results of Nycon
for the year ended December 31, 2007.(e)
    
    The pro forma adjustments consist of additional depreciation and amortization expense in
relation to the step-up in basis of the property and equipment and intangible assets of
Casie Group and Nycon and the corresponding adjustments to the income tax provisions or
benefits. Other Acquisitions, Assets Purchases and Joint Ventures
 Echo Lake
   F-24




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 PEI Disposal Group
   a.
    
    A non-interest bearing promissory note for a principal amount of $640,000 payable
in sixteen equal bi-monthly installments of $40,000;
 b.
    
    100,000 shares of unregistered restricted common stock valued at $3.00 per share,
the approximate fair value of the shares on the date of acquisition;
 c.
    
    The right to receive a maximum of 300,000 additional unregistered shares of Pure
Earth common stock contingent upon the buyers net sales attaining certain thresholds, as
defined, during the 36 month period following the closing date.
  Advanced Catalyst Recycling, LLC (ACR)
  Concentrations of Credit Risk
   F-25




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Year ended December 31,
    
    
    Percentage of
    
    
    Year
endedDecember 31,
    
    
    Percentage of2008
    
    
    Revenue
    
    
    2007
    
    
    RevenueCustomer A
    
    $
    2,994,589
    
    
    
    5
    %
    
    $
    9,382,449
    
    
    
    16
    %Customer B
    
    
    4,235,925
    
    
    
    7
    %
    
    
    15,217,777
    
    
    
    25
    %Customer C
    
    
    4,465,826
    
    
    
    7
    %
    
    
    
    
    
    
    Total
    
    $
    11,696,340
    
    
    
    19
    %
    
    $
    24,600,226
    
    
    
    41
    %
 Idle Machinery
   Intangible Assets
   F-26




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Balance as of December 31, 2008
    
    
    Balance as of December 31, 2007Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Net
    
    
    Cost
    
    
    Amortization
    
    
    NetFinite Lives:Customer lists
    
    $
    2,117,552
    
    
    $
    (490,683
    )
    
    $
    1,626,869
    
    
    $
    1,417,552
    
    
    $
    (278,926
    )
    
    $
    1,138,626Other intangible
assets
    
    
    2,273,001
    
    
    
    (312,660
    )
    
    
    1,960,341
    
    
    
    1,283,001
    
    
    
    (32,874
    )
    
    
    1,250,1274,390,553
    
    
    
    (803,343
    )
    
    
    3,587,210
    
    
    
    2,700,553
    
    
    
    (311,800
    )
    
    
    2,388,753Indefinite Lives:Permits
    
    
    2,200,000
    
    
    
    
    
    
    
    2,200,000
    
    
    
    2,200,000
    
    
    
    
    
    
    
    2,200,000Total
    
    $
    6,590,553
    
    
    $
    (803,343
    )
    
    $
    5,787,210
    
    
    $
    4,900,553
    
    
    $
    (311,800
    )
    
    $
    4,588,753
  Twelve months ending December 31,2009
    
    $
    531,7972010
    
    
    531,7972011
    
    
    531,7972012
    
    
    515,0102013
    
    
    330,346Thereafter
    
    
    1,146,463$
    3,587,210
   F-27




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Casie Group Refinancing
    Lines of Credit
   F-28




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  a.
    
    The October 21, 2008 amendment required the Company to apply approximately $1.9 million
in net proceeds from the Casie Group refinancing (after the repayment of outstanding
borrowings and other amounts under the existing Casie Group $2,500,000 line of credit and
the creation of a $720,000 principal and interest payment reserve under Casie Group term
loan) to the repayment of the Companys outstanding indebtedness under this line of credit.
 b.
    
    Effective October 21, 2008, the rate of interest under our floating rate borrowings was
changed to mean the greater of 5.0% or the lenders prime rate, plus 2.75%, and the rate of
interest to be charged under a LIBOR Advance shall be equal to the LIBOR rate, as specified
in the credit agreement, plus 3.00%.
 c.
    
    Effective October 21, 2008, the Company established an additional permanent reserve in
the amount of $900,000, which reduced the Companys borrowing availability.
   Notes Payable and Long-Term Debt
  December 31,2008
    
    
    2007Note payable to Soil Disposal Group
    
    $
    
    
    
    $
    520,000Note payable for Casie Group for covenant not to compete
    
    
    25,068
    
    
    
    188,006Total
    
    $
    25,068
    
    
    $
    708,006
   F-29




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   December 31,2008
    
    
    2007Casie Group term loan
    
    $
    7,927,349
    
    
    $
    Equipment term loan
    
    
    1,603,204
    
    
    
    2,225,215Various equipment notes payable
    
    
    50,062
    
    
    
    70,208Casie Group notes payable
    
    
    327,619
    
    
    
    3,458,650Nycon assumed liabilities
    
    
    75,000
    
    
    
    Total
    
    
    9,983,234
    
    
    
    5,754,073Less current portion
    
    
    (1,556,494
    )
    
    
    (1,240,547
    )Long-term portion
    
    $
    8,426,740
    
    
    $
    4,513,526
 Equipment Term Loan
  Casie Group Notes Payable
  Equipment note payable to an equipment lender in monthly
installments of $3,534, including interest at 6.95%, through
September 2012, collateralized by specific equipment.
    
    $
    138,785Equipment note payable to an equipment lender in monthly
installments of $1,809, including interest at 4.99%, through
September 2012, collateralized by specific equipment.
    
    
    73,793
  F-30




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Equipment note payable to and equipment lender in monthly
installments of $3,815, including interest at 6.50%, through
September 2011, collateralized by specific equipment.
    
    
    115,041Total
    
    $
    327,619
  Note payable to a bank in monthly installments of
$14,460, including interest at 7.25%, through
November 2015, collateralized by specific buildings
and land with a net book value of $4,316,860.
    
    $
    1,039,035Note payable to a bank in monthly installments of
$9,585, including interest at 6.50%, through March
2010, at which point the interest rate is variable
through March 2015; collateralized by specific
buildings and land with a net book value of $3,123,634.
    
    
    695,694Equipment loans payable to various lenders with
aggregate monthly payments of $13,133; interest
rates ranging from 0.00% to 6.95%; and maturities
through September 2012.
    
    
    488,049Note payable to a bank in monthly installment of
$8,037, including interest at 7.50%, through August
2012, at which point a balloon payment of the entire
principal balance and any unpaid interest is due;
collateralized by substantially all assets of the
Company.
    
    
    377,843Note payable to a bank in monthly installments of
$8,155, including interest at 8.125%, through
February 2012; collateralized by equipment with a
net book value of $2,844,450.
    
    
    339,581Note payable to a bank in monthly installments of
$9,585, including interest at 7.25%, through
November 2010; collateralized by specific buildings
and land with a net book value of $4,316,860.
    
    
    300,737Equipment line from a bank up to $500,000 through
October 10, 2008 at which point it converts to a
term loan; bearing interest at Prime rate + 0.50%.
    
    
    217,711Total
    
    $
    3,458,650
  Year ending December 31,2009
    
    $
    1,556,4942010
    
    
    1,738,0092011
    
    
    1,722,5052012
    
    
    1,209,787
  F-31




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Year ending December 31,2013
    
    
    1,212,910Thereafter
    
    
    2,543,529$
    9,983,234
 Officer Loans
  Twelve Months Ending December 31,2009
    
    
    333,0002010
    
    
    650,296$
    983,296
 Convertible Debt
   Fair Value Measurements
   F-32




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   
    
    Level 1  Inputs to the valuation are unadjusted quoted prices in active markets for
identical assets or liabilities.
 
    
    Level 2  Inputs to the valuation may include quoted prices for similar assets and
liabilities in active or inactive markets, and inputs other than quoted prices, such as
interest rates and yield curves, that are observable for the asset or liability for
substantially the full term of the financial instrument.
 
    
    Level 3  Inputs to the valuation are unobservable and significant to the fair value
measurement. Level 3 inputs shall be used to measure fair value only to the extent that
observable inputs are not available.
     Fair Value Measurements Using:
    
    
    Assets / LiabilitiesLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    at Fair ValueAssets:
    
    
    
    
    
    
    
    
    
    
    
    Liabilities:Interest-rate swaps
    
    
    
    
    
    $
    466,897
    
    
    
    
    
    
    $
    466,897Susquehanna term loan
    
    
    
    
    
    
    
    
    
    
    7,460,450
    
    
    
    7,460,450
  F-33




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Stockholders Equity
 Common Stock
       Series A Preferred Stock and Warrants
   F-34




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Series B Preferred Stock and Warrants
    F-35




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      Warrants
   F-36




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
     Weighted AverageWarrant Shares
    
    
    Exercise PriceBalance, January 1, 2007
    
    
    293,333
    
    
    $
    4.50Issuance of common stock warrants
    
    
    44,444
    
    
    
    4.50Warrants converted into shares upon cashless
exercise
    
    
    (3,334
    )
    
    
    4.50Warrants canceled upon cashless exercise
    
    
    (10,000
    )
    
    
    4.50Balance, December 31, 2007
    
    
    324,443
    
    
    $
    4.50Issuance of common stock warrants  Series B
    
    
    767,375
    
    
    
    0.001Revaluation of common stock warrants  Series B
    
    
    
    
    
    
    Balance, December 31, 2008
    
    
    1,091,818
    
    
    $
    1.34
  2008
    
    
    2007Expected volatility
    
    
    75.00
    %
    
    
    75.00
    %Expected life
    
    Indeterminate
    
    
    5 yearsExpected dividends
    
    
    0.00
    %
    
    
    0.00
    %Risk-free rate
    
    
    3.71
    %
    
    
    4.68
    %Weighted-average stock price
    
    $
    2.95
    
    
    $
    3.00Weighted-average exercise price
    
    $
    0.001
    
    
    $
    4.50
  F-37




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Stock-Based Compensation
  Restricted Stock Awards
    F-38




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Income Taxes
  Years Ended December 31,2008
    
    
    2007Current tax expense/(benefit)Federal
    
    $
    (436,835
    )
    
    $
    436,569State
    
    
    (311,985
    )
    
    
    502,517Total current tax expense/(benefit)
    
    
    (748,820
    )
    
    
    939,086Deferred tax expense/(benefit)Federal
    
    
    (553,280
    )
    
    
    725,056State
    
    
    (755,485
    )
    
    
    (99,863
    )Total deferred tax expense/(benefit)
    
    
    (1,308,765
    )
    
    
    625,193Income tax expense/(benefit)
    
    $
    (2,057,585
    )
    
    $
    1,564,279
  December 31,2008
    
    
    2007Percentage of
    
    
    
    
    
    
    Percentage ofPre-Tax
    
    
    
    
    
    
    Pre-TaxAmount
    
    
    Earnings
    
    
    Amount
    
    
    EarningsTax at statutory rate of 34%
    
    $
    (1,563,097
    )
    
    
    34.0
    %
    
    $
    1,221,725
    
    
    
    34.0
    %State taxes, net of Federal benefit
    
    
    (961,394
    )
    
    
    20.9
    %
    
    
    231,798
    
    
    
    6.5
    %Change in valuation allowance
    
    
    434,299
    
    
    
    (9.5
    )%
    
    
    
    
    
    
    Permanent differences
    
    
    80,363
    
    
    
    (1.7
    )%
    
    
    91,075
    
    
    
    2.5
    %Other expense (benefit)
    
    
    (47,756
    )
    
    
    1.1
    %
    
    
    19,681
    
    
    
    0.5
    %Income tax expense (benefit)
    
    $
    (2,057,585
    )
    
    
    44.8
    %
    
    $
    1,564,279
    
    
    
    43.5
    %
   F-39




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 December 31,2008
    
    
    2007Deferred tax assets:Intangible assets
    
    $
    133,225
    
    
    $
    Allowance for doubtful accounts
    
    
    394,530
    
    
    
    210,097Accrued disposal costs
    
    
    136,335
    
    
    
    548,891Net operating loss carryforwards
    
    
    1,953,219
    
    
    
    769,193Accrued expenses
    
    
    41,110
    
    
    
    39,054Other
    
    
    29,315
    
    
    
    58,102Total deferred tax assets
    
    
    2,687,734
    
    
    
    1,625,337Less valuation allowance
    
    
    (861,145
    )
    
    
    (426,846
    )Net deferred tax asset
    
    
    1,826,589
    
    
    
    1,198,491Deferred tax liabilities:Property and equipment basis difference
    
    
    (5,061,556
    )
    
    
    (6,079,497
    )Change in accounting method
    
    
    
    
    
    
    (86,773
    )Series B preferred stock difference
    
    
    (437,522
    )
    
    
    Customer List basis difference
    
    
    (43,386
    )
    
    
    27,325Permit basis difference
    
    
    (880,000
    )
    
    
    (880,000
    )Other
    
    
    (25,289
    )
    
    
    (109,474
    )Total deferred tax liabilities
    
    
    (6,447,753
    )
    
    
    (7,128,419
    )Deferred tax asset (liability), net
    
    $
    (4,621,164
    )
    
    $
    (5,929,928
    )
    F-40




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Commitments and Contingencies
 Collective Bargaining Agreements
  Leases
   Twelve months ending December 31,2009
    
    $
    1,355,5192010
    
    
    1,198,2302011
    
    
    449,4832012
    
    
    391,9142013
    
    
    309,685Thereafter
    
    
    $
    3,704,831
  Government Regulation, State and Local Compliance
   F-41




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Employment Agreements
   Twelve Months Ending December 31,2009
    
    $
    2,062,5982010
    
    
    1,940,1002011
    
    
    941,3082012
    
    
    632,0972013
    
    
    291,722Total
    
    $
    5,867,825
 New Jersey Sales and Use Tax Audit
   Litigation
    F-42




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
       F-43




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Related Party Transactions
      F-44




---



##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 December 31,2008
    
    
    2007Due from related party (included in accounts receivable)
    
    $
    
    
    
    $
    3,291Due to related parties (included in accounts payable and
other current liabilities)
    
    $
    
    
    
    $
    5,258Due from
joint venture
    
    $
    342,552
    
    
    $
    Notes payable to related party (including accrued interest)
    
    $
    983,296
    
    
    $
    1,008,463Revenue from related party
    
    $
    
    
    
    $
    Cost reimbursement to related parties
    
    $
    
    
    
    $
    78,524
 Segment Reporting
   TreatmentAs of and for the Year Ended
    
    Transportation
    
    
    
    
    
    
    Environmental
    
    
    and
    
    
    Concrete
    
    
    Corporate andDecember 31, 2008
    
    and Disposal
    
    
    Materials
    
    
    Services
    
    
    Recycling
    
    
    Fibers
    
    
    Other (a), (b)
    
    
    Total (d)Third Party Revenues
    
    $
    32,454,300
    
    
    $
    1,826,218
    
    
    $
    2,008,337
    
    
    $
    24,878,077
    
    
    $
    1,571,229
    
    
    $
    
    
    
    $
    62,738,161Intercompany Revenues (b)
    
    
    305,242
    
    
    
    1,068,914
    
    
    
    5,239
    
    
    
    1,897,384
    
    
    
    
    
    
    
    (3,276,779
    )
    
    
    Total Revenues
    
    
    32,759,542
    
    
    
    2,895,132
    
    
    
    2,013,576
    
    
    
    26,775,461
    
    
    
    1,571,229
    
    
    
    (3,276,779
    )
    
    
    62,738,161Third Party Cost of Revenues
    
    
    22,627,637
    
    
    
    3,827,104
    
    
    
    1,685,418
    
    
    
    22,233,599
    
    
    
    1,262,326
    
    
    
    
    
    
    
    51,636,084Intercompany Cost of
Revenues
    
    
    3,069,474
    
    
    
    11,158
    
    
    
    141,984
    
    
    
    54,163
    
    
    
    
    
    
    
    (3,276,779
    )
    
    
    Total Cost of Revenues
    
    
    25,697,111
    
    
    
    3,838,262
    
    
    
    1,827,402
    
    
    
    22,287,762
    
    
    
    1,262,326
    
    
    
    (3,276,779
    )
    
    
    51,636,084Gross Profit (Loss)
    
    
    7,062,431
    
    
    
    (943,130
    )
    
    
    186,174
    
    
    
    4,487,699
    
    
    
    308,903
    
    
    
    
    
    
    
    11,102,077Operating Expenses
    
    
    3,719,205
    
    
    
    659,648
    
    
    
    519,474
    
    
    
    5,571,897
    
    
    
    642,804
    
    
    
    3,476,383
    
    
    
    14,589,411Income (Loss) from
Operations
    
    
    3,343,226
    
    
    
    (1,602,778
    )
    
    
    (333,300
    )
    
    
    (1,084,198
    )
    
    
    (333,901
    )
    
    
    (3,476,383
    )
    
    
    (3,487,334
    )Adjusted EBITDA
    
    
    4,047,005
    
    
    
    (1,282,924
    )
    
    
    (261,938
    )
    
    
    520,200
    
    
    
    (170,674
    )
    
    
    (2,523,355
    )
    
    
    328,314Reconciliation to
Consolidated Statement of
Operations:Depreciation and
Amortization (c)
    
    
    703,778
    
    
    
    319,854
    
    
    
    71,362
    
    
    
    1,754,656
    
    
    
    133,225
    
    
    
    44,914
    
    
    
    3,027,789Interest Expense (Income),
Net
    
    
    
    
    
    
    
    
    
    
    5,221
    
    
    
    530,261
    
    
    
    8,595
    
    
    
    1,353,793
    
    
    
    1,897,870Income
(Loss) Before Provision for Income Taxes
    
    
    3,343,227
    
    
    
    (1,602,778
    )
    
    
    (338,521
    )
    
    
    (1,764,717
    )
    
    
    (312,494
    )
    
    
    (3,922,062
    )
    
    
    (4,597,345
    )Capital Expenditures (e)
    
    $
    3,293
    
    
    $
    150,638
    
    
    $
    347,623
    
    
    $
    827,287
    
    
    $
    52,353
    
    
    $
    51,360
    
    
    $
    1,432,554Total Assets (d)
    
    $
    10,611,588
    
    
    $
    1,300,782
    
    
    $
    1,787,476
    
    
    $
    27,284,204
    
    
    $
    2,014,312
    
    
    $
    2,512,273
    
    
    $
    45,510,635Goodwill
    
    
    
    
    
    
    
    
    
    $
    759,694
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    759,964
  F-45




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (a)
    
    Corporate operating results reflect the costs incurred for various support services that are
not allocated to our five operating segments. These support services include, among other
things, treasury, legal, information technology, tax, insurance, and other administrative
functions. It also includes eliminations of intersegment revenues and costs of sales.(b)
    
    Intercompany operating revenues reflect each segments total intercompany sales, including
intercompany sales within a segment and between segments. Transactions within and between
segments are generally made on a basis intended to reflect the market value of the service.(c)
    
    Includes depreciation and amortization expense classified above as a component of cost of
sales and operating expenses.(d)
    
    The Consolidated Total Assets above reflects the elimination of $5,152,431 of the Companys
investment in subsidiaries and intersegment receivables.(e)
    
    Includes non-cash items and assets acquired through acquisition. Capital expenditures are
reported in the Companys operating segments at the time they are recorded within the
segments property, plant and equipment balances and, therefore, may include amounts that have
been accrued but not yet paid. As of and for the Year Ended
    
    Transportation
    
    
    
    
    
    
    
    
    
    
    Treatment and
    
    
    Corporate andDecember 31, 2007
    
    and Disposal
    
    
    Materials
    
    
    Environmental
    
    
    Recycling
    
    
    Other (f), (g)
    
    
    Total (i)Third Party Revenues
    
    $
    41,025,552
    
    
    $
    1,712,150
    
    
    $
    1,841,821
    
    
    $
    14,819,356
    
    
    $
    
    
    
    $
    59,398,879Intercompany Revenues (g)
    
    
    8,971,467
    
    
    
    601,404
    
    
    
    30,545
    
    
    
    3,763,989
    
    
    
    (13,367,405
    )
    
    
    Total Revenues
    
    
    49,997,019
    
    
    
    2,313,554
    
    
    
    1,872,366
    
    
    
    18,583,345
    
    
    
    (13,367,405
    )
    
    
    59,398,879Third Party Cost of Revenues
    
    
    27,910,023
    
    
    
    2,336,346
    
    
    
    1,410,801
    
    
    
    14,492,142
    
    
    
    
    
    
    
    46,149,312Intercompany Cost of Revenues
    
    
    13,063,412
    
    
    
    50,298
    
    
    
    239,987
    
    
    
    13,708
    
    
    
    (13,367,405
    )
    
    
    Total Cost of Revenues
    
    
    40,973,435
    
    
    
    2,386,644
    
    
    
    1,650,788
    
    
    
    14,505,850
    
    
    
    (13,367,405
    )
    
    
    46,149,312Gross Profit (Loss)
    
    
    9,023,584
    
    
    
    (73,090
    )
    
    
    221,578
    
    
    
    4,077,495
    
    
    $
    
    
    
    
    13,249,567Operating Expenses
    
    
    3,525,561
    
    
    
    454,253
    
    
    
    361,259
    
    
    
    2,317,013
    
    
    
    2,243,345
    
    
    
    8,901,431Income (Loss) from Operations
    
    
    5,498,023
    
    
    
    (527,343
    )
    
    
    (139,681
    )
    
    
    1,760,482
    
    
    
    (2,243,345
    )
    
    
    4,348,136Adjusted EBITDA
    
    
    6,425,510
    
    
    
    (182,138
    )
    
    
    (83,048
    )
    
    
    2,917,755
    
    
    
    (2,163,564
    )
    
    
    6,914,515Reconciliation to Consolidated
Statement of Operations:Depreciation and Amortization (h)
    
    
    927,487
    
    
    
    345,204
    
    
    
    56,633
    
    
    
    1,067,405
    
    
    
    79,782
    
    
    
    2,476,511Interest Expense (Income), Net
    
    
    155,443
    
    
    
    316
    
    
    
    8,737
    
    
    
    398,694
    
    
    
    281,506
    
    
    
    844,695Income (Loss) Before Provision
for Income Taxes
    
    
    5,342,581
    
    
    
    (527,658
    )
    
    
    (148,419
    )
    
    
    1,451,656
    
    
    
    (2,524,851
    )
    
    
    3,593,309Capital Expenditures (j)
    
    $
    247,779
    
    
    $
    90,607
    
    
    $
    103,662
    
    
    $
    22,967,754
    
    
    $
    39,653
    
    
    $
    23,449,455Total Assets (i) (k)
    
    $
    13,387,977
    
    
    $
    1,126,380
    
    
    $
    1,442,042
    
    
    $
    30,159,762
    
    
    $
    2,399,765
    
    
    $
    48,515,926Goodwill
    
    
    
    
    
    
    
    
    
    $
    759,694
    
    
    
    
    
    
    
    
    
    
    $
    759,964
 (f)
    
    Corporate operating results reflect the costs incurred for various support services that are
not allocated to the four operating Groups. These support services include, among other
things, treasury, legal, information technology, tax, insurance, and other administrative
functions. It also includes eliminations of intersegment revenues and costs of sales.(g)
    
    Intercompany operating revenues reflect each segments total intercompany sales, including
intercompany sales within a segment and between segments. Transactions within and between
segments are generally made on a basis intended to reflect the market value of the service.(h)
    
    Includes depreciation expense classified above as a component of cost of sales and operating
expenses.(i)
    
    The Consolidated Total Assets above reflects the elimination of $4,924,672 of the Parents
investment in subsidiaries and intersegment receivables.(j)
    
    Includes non-cash items and assets acquired through acquisition. Capital expenditures are
reported in our operating segments at the time they are recorded within the segments
property, plant and equipment balances and, therefore, may include amounts that have been
accrued but not yet paid. (k)
    
    The investment in joint venture of $90,868 is included in the Treatment and Recycling Segment.  F-46




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Subsequent Events
   F-47




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description2.1
    *
    
    Stock Purchase Agreement, dated as of January 19, 2006, by and between South Jersey
Development, Inc., and its shareholders, and Info Investors, Inc. (1)2.2
    *
    
    Asset Purchase Agreement, dated as of January 19, 2006, by and between Whitney
Contracting, Inc. and South Jersey Development, Inc. (1)2.3
    *
    
    Stock Purchase Agreement, dated as of January 19, 2006, by and between American
Transport and Disposal Services Ltd. and South Jersey Development, Inc. (1)2.4
    *
    
    Stock Purchase Agreement, dated as of January 19, 2006, by and between Juda
Construction, Ltd. and South Jersey Development, Inc. (1)2.5
    *
    
    Asset Purchase Agreement, dated as of January 5, 2006, by and between Alchemy
Development, LLC and South Jersey Development, Inc. (1)2.6
    *
    
    Stock Acquisition Agreement, dated as of November 30, 2006, by and among Shari L.
Mahan, as sole shareholder of Terrasyn Environmental Corp., and Pure Earth, Inc. (1)2.7
    *
    
    Membership Interests Purchase Agreement, dated as of November 30, 2006, by and among
Shari L. Mahan, as sole member of Environmental Venture Partners, LLC, Bio Methods LLC
and Geo Methods, LLC, and Pure Earth, Inc. (1)2.8
    *
    
    Stock Purchase Agreement, dated as of February 13, 2007, by and among Pure Earth,
Inc., Gregory W. Call, Casie Ecology Oil Salvage, inc., MidAtlantic Recycling
Technologies, Inc. and Rezultz, Incorporated (1)2.8.1
    
    
    First Amendment to Stock Purchase Agreement, dated as of February 28, 2007, by and
among Pure Earth, Inc. and Casie Ecology Oil Salvage, Inc., Rezultz, Incorporated,
MidAtlantic Recycling Technologies, Inc. and Gregory W. Call (1)2.8.2
    *
    
    Second Amendment to Stock Purchase Agreement, dated as of March 26, 2007, by and among
Pure Earth, Inc. and Casie Ecology Oil Salvage, Inc., Rezultz, Incorporated,
MidAtlantic Recycling Technologies, Inc., Rex Mouser and Gregory W. Call (1)2.8.3
    
    
    Third Amendment to Stock Purchase Agreement, dated as of May 7, 2007, by and among
Pure Earth Inc. and Casie Ecology Oil Salvage, Inc., Rezultz, Incorporated,
MidAtlantic Recycling Technologies, Inc., Rex Mouser and Gregory W. Call (1)2.8.4
    
    
    Fourth Amendment to Stock Purchase Agreement, dated as of August 6, 2007, by and among
Pure Earth Inc. and Casie Ecology Oil Salvage, Inc., Rezultz, Incorporated,
MidAtlantic Recycling Technologies, Inc., Rex Mouser, Brian Horne and Gregory W. Call
(1)2.8.5
    *
    
    Letter, dated December 21, 2007, from Pure Earth, Inc. to Gregory W. Call regarding
Final Purchase Price with respect to the Stock Purchase Agreement, dated as of
February 13, 2007, among Pure Earth, Inc., Casie Ecology Oil Salvage, Inc.,
MidAtlantic Recycling Technologies, Inc., Rezultz, Incorporated, Rex Mouser, Brian
Horne and Gregory W. Call, as amended (1)2.8.5
    (a)
    
    Letter, dated January 7, 2008, from Pure Earth, Inc. to Gregory W. Call, dated
December 21, 2007 (1)2.8.6
    
    
    Joinder Agreement, dated March 21, 2007, of Rex Mouser to the Stock Purchase Agreement
by and among Pure Earth, Inc., Casie Ecology Oil Salvage, Inc., MidAtlantic Recycling
Technologies, Inc., Rezultz, Incorporated, Rex Mouser, Brian Horne and Gregory W. Call
(1)2.8.7
    
    
    Joinder Agreement, dated May 30, 2007, of Brian Horne to the Stock Purchase Agreement
by and among Pure Earth, Inc., Casie Ecology Oil Salvage, Inc., MidAtlantic Recycling
Technologies, Inc., Rezultz, Incorporated, Rex Mouser and Gregory W. Call (1)2.9
    *
    
    Asset Purchase Agreement, dated November 20, 2007, by and among PEI Disposal Group,
Inc., Richard Rivkin, Soil Disposal Group, Inc., Aaron Environmental Group, Inc.,
Stephen F. Shapiro, Jeffrey Berger and James Case (1)2.10
    *
    
    Asset Purchase Agreement, dated April 1, 2008, by and among Nycon, Inc., Robert Cruso,
Frank Gencarelli, New Nycon, Inc. and Paul Bracegirdle (1)3.1
    
    
    Second Amended and Restated Certificate of Incorporation of Pure Earth, Inc. (2) (3)3.2
    
    
    Second Amended and Restated Bylaws of Pure Earth, Inc. (2) (3)
  E-1




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##### Table of Contents



Exhibit No.
    
    Description4.1
    
    
    Specimen Common Stock Certificate (1)4.2
    
    
    Specimen Series B Preferred Stock Certificate (1)4.3
    
    
    Form of Common Stock Purchase Warrant issued to DD Growth Premium pursuant to the
Securities Purchase Agreement, dated as of June 30, 2006 (1)4.4
    
    
    Form of Registration Rights Agreement, dated June 30, 2006, by and between Pure Earth,
Inc. and DD Growth Premium (1)4.5
    
    
    Form of Common Stock Purchase Warrant issued to Charles Hallinan and Black Creek
Capital Corp. pursuant to the Subscription Agreement, dated as of May 22, 2007 (1)4.6
    
    
    Debenture Redemption Agreement, dated as of August 17, 2007, by and among Pure Earth,
Inc. and Dynamic Decisions Strategic Opportunities (1)4.6.1
    
    
    First Amendment to Debenture Redemption Agreement, dated as of October 2, 2007, by and
among Pure Earth, Inc. and Dynamic Decisions Strategic Opportunities (1)4.7
    
    
    Stock Purchase Agreement, dated August 17, 2007, by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc. (1)4.7.1
    
    
    Joinder Agreement to the Stock Purchase Agreement by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc., dated as of September 18, 2007, by Kim
C. Tucker Living Trust (1)4.7.2
    
    
    Joinder Agreement to the Stock Purchase Agreement by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc., dated as of August 30, 2007, by Brent
Kopenhaver and Emilie Kopenhaver
(1)4.7.3
    
    
    Joinder Agreement to the Stock Purchase Agreement by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc., dated as of August 30, 2007, by Mark
Alsentzer (1)4.7.4
    
    
    Joinder Agreement to the Stock Purchase Agreement by and among Dynamic Decisions
Strategic Opportunities and Pure Earth, Inc., dated as of September 20, 2007, by
Charles Hallinan (1)4.8
    
    
    Investment Agreement, dated as of March 4, 2008, among Pure Earth, Inc. and Fidus
Mezzanine Capital, L.P. (1)4.9
    
    
    Warrant, dated March 4, 2008, to purchase Common Stock of Pure Earth, Inc. issued to
Fidus Mezzanine Capital, L.P. (1)4.10
    
    
    Registration Rights Agreement, dated as of March 4, 2008, between Pure Earth, Inc. and
certain holders (1)4.11
    
    
    Securityholders Agreement, dated as of March 4, 2008, by and among Pure Earth, Inc.,
Brent Kopenhaver, Mark Alsentzer, Fidus Mezzanine Capital, L.P. and holders of the
Warrants and Warrant Shares, as defined therein (1)4.12
    
    
    Guaranty Agreement, dated as of March 4, 2008, by certain subsidiaries of Pure Earth,
Inc. in favor of Fidus Mezzanine Capital, L.P. and any other Investors party thereto
(1)4.13
    
    
    Investment Agreement, effective June 29, 2008, by and among Pure Earth, Inc., Black
Creek Capital Corp. and Charles M. Hallinan (3)10.1
    
    
    Employment Agreement, dated as of June 1, 2008, by and between Pure Earth, Inc. and
Mark Alsentzer (1)10.2
    
    
    Employment Agreement, dated as of June 1, 2008, by and between Pure Earth, Inc. and
Brent Kopenhaver (1)10.3
    
    
    Pure Earth, Inc. 2007 Stock Incentive Plan (1)10.4
    
    
    Form of Restricted Stock Agreement for awards under the Pure Earth, Inc. 2007 Stock
Incentive Plan (1)10.5
    
    
    Loan and Security Agreement, dated October 5, 2005, by and among Casie Ecology Oil
Salvage, Inc., MidAtlantic Recycling Technologies, Inc., Rezultz, Incorporated,
Gregory Call and Parke Bank (1)10.5.1
    
    
    Change in Terms Agreement, dated November 2, 2007, between Casie Ecology Oil Salvage,
Inc., MidAtlantic Recycling Technologies, Inc., Rezultz, Incorporated, Gregory Call
and Parke Bank (1)
  E-2




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##### Table of Contents



Exhibit No.
    
    Description10.6
    
    
    Credit and Security Agreement, dated as of October 24, 2006, between Pure Earth, Inc.,
South Jersey Development, Inc., American Transportation & Disposal Systems, Ltd., Juda
Construction, Ltd. and Wells Fargo Bank, National Association (1)10.6.1
    
    
    First Amendment to Credit and Security Agreement, dated December 29, 2006, by and
between Pure Earth, Inc., South Jersey Development, Inc., American Transportation &
Disposal Systems, Ltd., Juda Construction, Ltd. and Wells Fargo Bank, National
Association (1)10.6.2
    
    
    Second Amendment to Credit and Security Agreement and Waiver of Defaults, dated May
16, 2007, by and between Pure Earth, Inc., Pure Earth Transportation and Disposal,
Inc., Pure Earth Materials, Inc., Juda Construction, Ltd. and Wells Fargo Bank,
National Association (1)10.6.3
    
    
    Third Amendment to Credit and Security Agreement, dated November 13, 2007, by and
between Pure Earth, Inc., Pure Earth Transportation and Disposal, Inc., Pure Earth
Materials, Inc., Juda Construction, Ltd. and Wells Fargo Bank, National Association
(1)10.6.4
    
    
    Fourth Amendment to Credit and Security Agreement, effective April 28, 2008, by and
between Pure Earth, Inc., Pure Earth Transportation & Disposal, Inc., Pure Earth
Materials, Inc., Juda Construction, Ltd. and Wells Fargo Bank, National Association
(3)10.6.5
    
    
    Fifth Amendment to Credit and Security Agreement, portions effective as of October 21,
2008 and March 13, 2009, by and among Pure Earth, Inc., each of its subsidiaries, and
Wells Fargo Bank, National Association10.7
    
    
    Sales Representative Agreement, dated November 20, 2007, by and between PEI Disposal
Group, Inc., Soil Disposal Group, Inc., Richard Rivkin, Stephen Shapiro, James Case,
Jeffrey Berger and Aaron Environmental Group, Inc. (1)10.8
    
    
    Form of Confidentiality, Non-Competition and Non-Solicitation Agreement, dated
November 20, 2007, by and among Soil Disposal Group, Inc., PEI Disposal Group, Inc.,
Pure Earth, Inc., any and all subsidiaries of PEI Disposal Group, Inc. and Pure Earth,
Inc., and certain employees of Soil Disposal Group, Inc. signatory thereto (1)10.9
    
    
    Commercial Lease, dated October 26, 2007, between Red Rock Land Development, LLC and
Pure Earth Materials (NJ) Inc.(1)10.10
    
    
    Subordinated Promissory Note, dated November 15, 2007, by Casie Ecology Oil Salvage,
Inc., MidAtlantic Recycling Technologies, Inc. and Rezultz, Incorporated in the
principal amount of $1,000,000 in favor of Gregory W. Call (1)10.11
    
    
    Promissory Note, dated November 20, 2007, by PEI Disposal Group, Inc., as maker, in
the principal amount of $640,000, in favor of Soil Disposal Group, Inc.(1)10.12
    
    
    Promissory Note, dated November 28, 2007, by Pure Earth, Inc., Juda Construction, Ltd.
and Pure Earth Materials, Inc., as makers, in the principal amount of $2,265,000, in
favor of CoActiv Capital Partners LLC (1)10.13
    
    
    Exclusive License, dated April 30, 2008, by and between New Nycon, Inc. and Paul E.
Bracegirdle (1)10.14
    
    
    Memorandum of Understanding, dated September 25, 2008, between Red Rock Land
Development, LLC and Pure Earth Materials (NJ) Inc., amending Commercial Lease dated
October 26, 2007 (4)10.15
    
    
    Term Loan Agreement, dated November 12, 2008, by and among Casie Group and Susquehanna
Bank10.16
    
    
    Guaranty,
dated November 12, 2008, of Pure Earth, Inc. in favor of Susquehanna Bank10.17.1
    
    
    ISDA® Master Agreement, dated November 12, 2008, by and among Susquehanna Bank, Casie
Ecology Oil Salvage, Inc., MidAtlantic Recycling Technologies, Inc. and Rezultz,
Incorporated10.17.2
    
    
    Schedule to the Master Agreement, dated November 12, 2008, by and among Susquehanna
Bank, Casie Ecology Oil Salvage, Inc., MidAtlantic Recycling Technologies, Inc. and
Rezultz, Incorporated10.17.3
    
    
    Confirmation, dated November 12, 2008, by and among Susquehanna Bank, Casie Ecology
Oil Salvage, Inc., MidAtlantic Recycling Technologies, Inc. and Rezultz, Incorporated21.1
    
    
    Subsidiaries of the Registrant
  E-3




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##### Table of Contents



Exhibit No.
    
    Description31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) promulgated under
the Securities Exchange Act of 1934, as amended (the Exchange Act)31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under
the Exchange Act32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    The schedules to this agreement have been omitted in accordance with the rules of
the SEC. A list of omitted schedules has been included in this exhibit and will be
provided supplementally to the SEC upon request.(1)
    
    Previously filed as an exhibit to our registration statement on Form 10 (File No.
0-53287), as filed with the SEC on June 20, 2008.(2)
    
    Included is the revised version of this exhibit, redlined to show the new
amendments. The redlined version is being provided pursuant to SEC staff Compliance &
Disclosure Interpretation 246.01.(3)
    
    Previously filed as an exhibit to Pre-Effective Amendment No. 1 to our registration
statement on Form 10/A (File No. 0-53287), as filed with the SEC on August 8, 2008.(4)
    
    Previously filed as an exhibit to Post-Effective Amendment No. 2 to our
registration statement on Form 10/A (File No. 0-53287), as filed with the SEC on November
4, 2008.  E-4