##### 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 1934For the fiscal year ended
    December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    000-25955
  Waste Services, Inc.
 (Successor registrant of Capital
    Environmental Resource Inc. now known as Waste Services (CA)
    Inc.)
 (Exact name of registrant as
    defined in its charter)
  Delaware

01-0780204State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization

Identification No.)1122 International
    Blvd.

L7L 6Z8Suite 601, Burlington,
    Ontario

(Zip Code)(Address of principal executive
    offices)   Registrants telephone number, including area code:
 (905) 319-1237
  Securities registered pursuant to Section 12(b) of the
    Act:
 Common Stock, par value $0.01 per share
  Securities registered pursuant to Section 12(g) of the
    Act:
 None
 (Title of Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ




---



##### 



INDEX TO
    FORM 10-K
    FOR THE YEAR ENDED DECEMBER 31, 2006
  
  PagePART IItem 1.


Business


1Item 1A.


Risk
    Factors


9Item 1B.


Unresolved Staff
    Comments


14Item 2.


Properties


14Item 3.


Legal
    Proceedings


14Item 4.


Submission of
    Matters to a Vote of Security Holders


15PART IIItem 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


15Item 6.


Selected Financial
    Data


17Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


18Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


41Item 8.


Financial
    Statements and Supplementary Data


41Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


41Item 9A.


Controls and
    Procedures


41Item 9B.


Other
    Information


42PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance


42Item 11.


Executive
    Compensation


42Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


42Item 13.


Certain
    Relationships and Related Transactions and Director
    Independence


43Item 14.


Principal
    Accounting Fees and Services


43PART IVItem 15.


Exhibits and
    Financial Statement Schedules


43EX-4.16 Supplemental IndentureEX-21.1 Subsidiaries of the RegistrantEX-23.1 Consent of BDO Seidman, LLPEX-31.1 Section 302 Certification of Chief Executive OfficerEX-31.2 Section 302 Certification of Principal Financial OfficerEX-32.1 Section 906 Certification of CEO and PFO




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##### Table of Contents



PART I  CAUTIONARY
    STATEMENT REGARDING
    FORWARD-LOOKING STATEMENTS
  Form 10-K
    
    our substantial indebtedness and the significant restrictive
    covenants in our various credit facilities and our ability to
    finance acquisitions with cash on hand, debt or equity offerings;
    our business is capital intensive and may consume cash in excess
    of cash flow from operations and borrowings;
    our ability to vertically integrate our operations;
    our ability to maintain and perform our financial assurance
    obligations;
    changes in regulations affecting our business and costs of
    compliance;
    revocation of existing permits and licenses or the refusal to
    renew or grant new permits and licenses, which are required to
    enable us to operate our business or implement our growth
    strategy;
    our ability to successfully implement our corporate strategy and
    integrate any acquisitions we undertake;
    our ability to negotiate renewals of existing service agreements
    at favorable rates;
    our ability to enhance profitability of certain aspects of our
    operations in markets where we are not internalized through
    either divestiture or asset swaps;
    costs and risks associated with litigation;
    changes in general business and economic conditions, exchange
    rates and the financial markets and accounting standards or
    pronouncements; and
    construction, equipment delivery or permitting delays for our
    transfer stations or landfills.  Form 10-K
  Item 1.
    Business  Overview
   1




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##### Table of Contents



(905) 319-1237.
  Form 10-K, Form 10-Q, Form 8-K 1-800-SEC-0330. http://www.sec.gov.
  Form 10-K, Form 10-Q, Form 8-K
  Our
    Business Strategy
    Maximize Density and Vertical Integration of
    Operations.
  Provide Consistent, Superior Customer
    Service.
 2




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##### Table of Contents



Maintain a Decentralized Operating Management Structure with
    Centralized Controls and Information Systems.
    Execute a Disciplined, Disposal-Based Growth
    Strategy. tuck-in
  tuck-in
  
    are complementary to our existing infrastructure, allowing us to
    increase the density of our collection routes or enhance asset
    utilization; or
    increase the waste volume that can be internalized into our
    landfills.    
    benefit from (i) above-average underlying economic or
    population growth, or (ii) a changing competitive or
    regulatory environment that could lead to above-average growth
    for non-hazardous solid waste services;
    over time establish a leading market position; and
    secure a disposal facility and subsequently become vertically
    integrated through
    tuck-in
    acquisitions (with ultimately the ability to secure significant
    internalized waste volumes).  Operations
   3




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##### Table of Contents



Total


East


West


TotalFlorida


Arizona


Texas


U.S.


Canada


Canada


Canada


TotalCollection operations and other
    specialized services


11



1



1



13



14



9



23



36Transfer stations


6



2



1



9



9



2



11



20Recycling facilities


7











7



5



1



6



13Landfills


4



1



1



6



1



2



3



9   Collection
    Services
    Commercial and Industrial Collection.
    Residential Collection.
      Transfer
    Station Services
   4




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##### Table of Contents



Commercial
    and Residential Recycling Services
    Landfill
    Disposal Services
      Other
    Specialized Services
    Local/
    Regional Operating Structure
    day-to-day
 5




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##### Table of Contents



Sales and
    Marketing
      Competition
          Government
    Regulation
       6




---



##### Table of Contents



7




---



##### Table of Contents



Employees
    Executive
    Officers
    Name

Age


Position

SinceDavid Sutherland-Yoest


50


Chairman and Chief Executive
    Officer

September 6, 2001Charles A. Wilcox


54


President and Chief Operating
    Officer

July 14, 2004Ivan R. Cairns


61


Executive Vice President, General
    Counsel and Secretary

January 5, 2004Brian A. Goebel


39


Vice President, Corporate
    Controller and Acting Chief Financial Officer

October 1, 2003Bradford J. Helgeson


30


Vice President, Finance and
    Treasurer

June 1, 2004     David Sutherland-Yoest 2 2
  Charles A. Wilcox
  Ivan R. Cairns
 8




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##### Table of Contents



Brian A. Goebel
  Bradford J. Helgeson
  Item 1A.
    Risk
    Factors  Our
    indebtedness may make us more vulnerable to unfavorable economic
    conditions and competitive pressures, limit our ability to
    borrow additional funds, require us to dedicate or reserve a
    large portion of cash flow from operations to service debt, and
    limit our ability to take actions that would increase our
    revenue and execute our growth strategy
  1 2
      Our
    business is capital intensive and may consume cash in excess of
    cash flow from our operations and borrowings
   9




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##### Table of Contents



We may
    be unable to obtain or maintain the environmental and other
    permits, licenses and approvals we need to operate our business,
    which could adversely affect our earnings and cash
    flow
           10




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##### Table of Contents



Our
    acquisition strategy may be unsuccessful if we are unable to
    identify and complete future acquisitions and integrate acquired
    assets or businesses and this subjects us to risks that may have
    a material adverse effect on our results of
    operations
      Our
    business strategy depends in part upon vertically integrating
    our operations. If we are unable to permit, expand or renew
    permits for our existing landfill sites or enter into agreements
    that provide us with access to landfill sites and acquire, lease
    or otherwise secure access to transfer stations, this may reduce
    our profitability and cash flow
      Any
    exposure to environmental liabilities, to the extent not
    adequately covered by insurance, could result in significant
    expenses, which would reduce the funds we have available for
    other purposes, including debt service and reduction and
    acquisitions
   11




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##### Table of Contents



We
    face competition from large and small solid waste services
    companies and may be unable to successfully compete with other
    solid waste companies reducing our operating
    margins
      The
    termination or non-renewal of existing customer contracts, or
    the failure to obtain new customer contracts, could result in
    declining revenue
         12




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##### Table of Contents



Labor
    unions may attempt to organize our non-unionized employees,
    which may result in increased operating expenses
    Our
    operating margins and profitability may be negatively impacted
    by increased fuel and energy costs
    The
    industry in which we operate is seasonal and decreases in
    revenue during winter months may have an adverse effect on our
    results of operations, particularly for our Canadian
    operations
    Our
    Canadian operations subject us to currency translation risk,
    which could cause our results to fluctuate significantly from
    period to period
    Changes
    to patterns regarding disposal of waste could adversely affect
    our results of operations by reducing the volume of waste
    available for collection and disposal and thus reducing our
    earnings
   13




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##### Table of Contents



Limits
    on export of waste and any disruptions to the cross-border flow
    of waste may adversely affect our results of operations by
    increasing our costs of disposal
    Item 1B.
    Unresolved
    Staff Comments     Item 2.
    Properties      Collection


Transfer


RecyclingAdministrative


Operations


Stations


Facilities


LandfillsOwned






15



6



6



9Leased


4



21



14



7



Total


4



36



20



13



9      Item 3.
    Legal
    Proceedings     14




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##### Table of Contents



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

Against


Abstain24,770,898


215,463



11,596  PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information
   15




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##### Table of Contents



High


LowYear ended December 31,
    2006First Quarter

$
10.53


$
8.70Second Quarter


9.93



8.25Third Quarter


10.05



8.61Fourth Quarter


10.81



8.90Year ended December 31,
    2005First Quarter

$
11.46


$
9.39Second Quarter


12.99



9.96Third Quarter


12.12



9.75Fourth Quarter


11.28



9.81   Holders
    Dividends
      Repurchases
    of Securities
   16




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##### Table of Contents



Item 6.
    Selected
    Financial Data    For Each of the Years Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share amounts)Statement of Operations and
    Cash Flow Data:Revenue

$
396,123


$
356,056


$
287,105


$
124,985


$
98,846Income (loss) from operations


16,310



10,892



8,140



(4,888
)


9,567Net income (loss) from continuing
    operations


(47,068
)


(50,424
)


(47,761
)


(22,740
)


2,127Net income (loss) from
    discontinued operations


(1,463
)


134



(618
)


(158
)


Income (loss) before cumulative
    effect of change in accounting principle


(48,531
)


(50,290
)


(48,379
)


(22,898
)


2,127Cumulative effect of change in
    accounting principle










225



518



Net income (loss)


(48,531
)


(50,290
)


(48,154
)


(22,380
)


2,127Net loss attributable to common
    shareholders


(48,531
)


(50,290
)


(48,154
)


(76,952
)


(12,590
)Loss per share, basic and
    diluted  continuing operations


(1.33
)


(1.53
)


(1.62
)


(5.97
)


(1.17
)Loss per share, basic and
    diluted discontinued operations


(0.04
)






(0.02
)


(0.02
)


Basic and diluted loss per share
    before cumulative effect of change in accounting principle


(1.37
)


(1.53
)


(1.64
)


(5.99
)


(1.17
)Cumulative effect of change in
    accounting principle










0.01



0.04



Loss per share  basic
    and diluted


(1.37
)


(1.53
)


(1.63
)


(5.95
)


(1.17
)Weighted average common shares
    outstanding  basic and diluted


35,354



32,880



29,410



12,927



10,804Cash flows provided by operating
    activities of continuing operations


35,470



21,822



26,741



10,024



13,654Capital expenditures used in
    continuing operations


47,285



28,893



37,823



22,106



12,157   As of December 31,2006


2005


2004


2003


2002(In thousands)Balance Sheet Data:Cash and cash equivalents

$
8,532


$
8,886


$
8,476


$
21,048


$
1,775Property, equipment and landfill
    sites, net


382,656



275,983



277,767



178,148



58,994Goodwill and other intangible
    assets, net


350,035



307,869



305,994



160,296



66,596Total assets


865,063



728,389



720,583



470,998



149,022Total debt and capital lease
    obligations (exclusive of cumulative mandatorily redeemable
    Preferred Stock)


410,353



286,669



278,363



177,449



53,645Cumulative mandatorily redeemable
    Preferred Stock






84,971



64,971



48,205



Total shareholders equity


339,357



264,491



298,776



201,117



77,817  17




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
    Sources
    of Revenue
              Expense
    Structure
   18




---



##### Table of Contents



units-of-consumption not-to-compete,
    Acquisitions
    and Recent Developments
     19




---



##### Table of Contents



Critical
    Accounting Estimates
  General
   20




---



##### Table of Contents



Revenue
    Recognition
    Accounts
    Receivable and Allowance for Doubtful Accounts
    Business
    Acquisitions and Goodwill
       21




---



##### Table of Contents



Long-Lived
    Assets
        Landfill
    Sites
    units-of-consumption
   22




---



##### Table of Contents



units-of-consumption
         23




---



##### Table of Contents



December 31, 2006Balance,











Changes in





Balance,Beginning


Landfills


Landfills


Landfills


Engineering


Airspace


Endof Year


Acquired


Expanded


Divested


Estimates


Consumed


of YearUnited StatesPermitted capacity


70,840



32,635











(359
)


(2,154
)


100,962Probable expansion capacity


18,300























18,300Total available airspace


89,140



32,635











(359
)


(2,154
)


119,262Number of sites


3



2



















5CanadaPermitted capacity


11,878















73



(307
)


11,644Probable expansion capacity










4,970















4,970Total available airspace


11,878







4,970







73



(307
)


16,614Number of sites


3























3TotalPermitted capacity


82,718



32,635











(286
)


(2,461
)


112,606Probable expansion capacity


18,300







4,970















23,270Total available airspace


101,018



32,635



4,970







(286
)


(2,461
)


135,876Number of sites


6



2



















8   December 31, 2005Balance,











Changes in





Balance,Beginning


Landfills


Landfills


Landfills


Engineering


Airspace


Endof Year


Acquired


Expanded


Divested


Estimates


Consumed


of YearUnited StatesPermitted capacity


73,038















(414
)


(1,784
)


70,840Probable expansion capacity


18,300























18,300Total available airspace


91,338















(414
)


(1,784
)


89,140Number of sites


3























3CanadaPermitted capacity


11,642















1,115



(879
)


11,878Probable expansion capacity


























Total available airspace


11,642















1,115



(879
)


11,878Number of sites


3























3TotalPermitted capacity


84,680















701



(2,663
)


82,718Probable expansion capacity


18,300























18,300Total available airspace


102,980















701



(2,663
)


101,018Number of sites


6























6   24




---



##### Table of Contents



December 31, 2004Balance,











Changes in





Balance,Beginning


Landfills


Landfills


Landfills


Engineering


Airspace


Endof Year


Acquired


Expanded


Divested


Estimates


Consumed


of YearUnited StatesPermitted capacity


26,084



48,000







(94
)






(952
)


73,038Probable expansion capacity


18,300























18,300Total available airspace


44,384



48,000







(94
)






(952
)


91,338Number of sites


3



1







(1
)










3CanadaPermitted capacity


10,871



1,430















(659
)


11,642Probable expansion capacity


























Total available airspace


10,871



1,430















(659
)


11,642Number of sites


2



1



















3TotalPermitted capacity


36,955



49,430







(94
)






(1,611
)


84,680Probable expansion capacity


18,300























18,300Total available airspace


55,255



49,430







(94
)






(1,611
)


102,980Number of sites


5



2







(1
)










6   Accrued
    Closure and Post-Closure Obligations
      Accounting
    for Income Taxes
   25




---



##### Table of Contents




    an allocation or a shift of income between taxing jurisdictions,
    the characterization of income or a decision to exclude
    reporting taxable income in a tax return, or
    a decision to classify a transaction, entity, or other position
    in a tax return as tax exempt.        Risk
    Management
  U.S.-based
  Stock-Based
    Compensation
  share-based
 26




---



##### Table of Contents



96-18, (EITF 96-18),
  Translation
    and Re-Measurement of Foreign Currency
   27




---



##### Table of Contents



Operating
    Results
  Results
    of Operations for each of the Three Years Ended
    December 31, 2006, 2005 and 2004
    2006US





Canada





TotalRevenue

$
208,095



100.0
%

$
188,028



100.0
%

$
396,123



100.0
%Operating expenses:Cost of operations


142,278



68.4
%


128,176



68.2
%


270,454



68.3
%Selling, general and
    administrative expense


35,525



17.1
%


23,416



12.5
%


58,941



14.9
%Deferred acquisition costs


439



0.2
%


5,173



2.8
%


5,612



1.4
%Depreciation, depletion and
    amortization


25,431



12.2
%


17,382



9.1
%


42,813



10.8
%Foreign exchange loss and other


494



0.2
%


1,499



0.8
%


1,993



0.5
%Income from operations

$
3,928



1.9
%

$
12,382



6.6
%

$
16,310



4.1
%   2005US





Canada





TotalRevenue

$
189,725



100.0
%

$
166,331



100.0
%

$
356,056



100.0
%Operating expenses:Cost of operations


144,662



76.2
%


111,013



66.8
%


255,675



71.8
%Selling, general and
    administrative expense


29,926



15.8
%


23,197



14.0
%


53,123



14.9
%Settlement with sellers of Florida
    Recycling


(4,120
)


(2.2
)%






0.0
%


(4,120
)


(1.2
)%Depreciation, depletion and
    amortization


21,305



11.2
%


19,356



11.6
%


40,661



11.4
%Foreign exchange loss and other


(746
)


(0.3
)%


571



0.3
%


(175
)


0.0
%Income (loss) from operations

$
(1,302
)


(0.7
)%

$
12,194



7.3
%

$
10,892



3.1
%   2004US





Canada





TotalRevenue

$
144,387



100.0
%

$
142,718



100.0
%

$
287,105



100.0
%Operating expenses:Cost of operations


108,521



75.2
%


96,991



68.0
%


205,512



71.6
%Selling, general and
    administrative expense


28,535



19.8
%


21,796



15.3
%


50,331



17.5
%Settlement with sellers of Florida
    Recycling


(8,635
)


(6.0
)%






0.0
%


(8,635
)


(3.0
)%Depreciation, depletion and
    amortization


15,841



10.9
%


16,316



11.4
%


32,157



11.2
%Foreign exchange loss and other


(23
)


0.0
%


(377
)


(0.3
)%


(400
)


(0.1
)%Income from operations

$
148



0.1
%

$
7,992



5.6
%

$
8,140



2.8
%  28




---



##### Table of Contents



Revenue
    2006


2005


2004Collection

$
321,760



75.0
%

$
295,183



78.0
%

$
240,504



78.9
%Landfill disposal


52,857



12.3
%


40,748



10.8
%


25,801



8.5
%Transfer station


42,279



9.9
%


30,081



8.0
%


25,413



8.3
%Material recovery facilities


10,931



2.5
%


10,306



2.7
%


10,531



3.5
%Other specialized services


1,108



0.3
%


1,966



0.5
%


2,426



0.8
%428,935



100.0
%


378,284



100.0
%


304,675



100.0
%Intercompany elimination


(32,812
)






(22,228
)






(17,570
)$
396,123






$
356,056






$
287,105     All Other


TotalFlorida


Canada


Operations


Revenue2006

$
203,381


$
188,028


$
4,714


$
396,1232005


187,041



166,331



2,684



356,0562004


144,089



142,718



298



287,105            29




---



##### Table of Contents



Cost
    of Operations
      sub-contractor
      sub-contractor
  Selling,
    General and Administrative Expense
   30




---



##### Table of Contents



Deferred
    Acquisition Costs
    Settlement
    with sellers of Florida Recycling
    Depreciation,
    Depletion and Amortization
   31




---



##### Table of Contents



Foreign
    Exchange Loss (Gain) and Other
    Interest
    Expense
    2006


2005


2004Preferred Stock dividends and
    amortization of issue costs

$
18,466


$
20,984


$
17,582Loss on exchange of cumulative
    mandatorily redeemable Preferred Stock


1,187







Credit Facility and Senior
    Subordinated Note interest


27,704



25,374



19,858Amortization of debt issue costs


1,569



1,408



10,294Capitalized interest










(178
)Other interest expense


1,632



1,414



869$
50,558


$
49,180


$
48,425      32




---



##### Table of Contents



Changes
    in fair value of warrants pending registration
    Income
    Tax Provision
    start-up
  Liquidity
    and Capital Resources
    Senior
    Secured Credit Facilities
   33




---



##### Table of Contents



Maximum


MinimumMaximum


Consolidated


ConsolidatedConsolidated


Senior Secured


Interest CoverageFiscal Quarter

Leverage Ratio


Leverage Ratio


RatioFQ1 2007


4.75:1.00



3.00:1.00



2.25:1.00FQ2 2007


4.50:1.00



3.00:1.00



2.25:1.00FQ3 2007


4.25:1.00



3.00:1.00



2.25:1.00FQ4 2007


4.00:1.00



2.50:1.00



2.50:1.00     Senior
    Subordinated Notes
  1 2
     34




---



##### Table of Contents



Equity
    Placements
        Cumulative
    Mandatory Redeemable Preferred Stock
    and/or
 35




---



##### Table of Contents



Migration
    Transaction
    non-U.S. residents
      Surety
    Bonds and Letters of Credit
    Cash
    Flows
    Cash
    Flows from Operating Activities
      Cash flows from discontinued operations
 36




---



##### Table of Contents



Cash
    Flows used in Investing Activities
      Cash
    Flows from Financing Activities
        New
    Accounting Pronouncements
  EITF 00-19-2, 00-19-2). 00-19-2 00-19-2 00-19-2
 37




---



##### Table of Contents



00-19-2, 00-19-2
        
    an allocation or a shift of income between taxing jurisdictions,
    the characterization of income or a decision to exclude
    reporting taxable income in a tax return, or
    a decision to classify a transaction, entity, or other position
    in a tax return as tax exempt.        Seasonality
   38




---



##### Table of Contents



Off-Balance
    Sheet Financing
  and/or
  Tabular
    Disclosure of Contractual Obligations
    Beyond 52007


2008


2009


2010


2011


Years


TotalContractual cash
    obligations:Senior secured credit facilities(1)

$
2,453


$
2,453


$
2,453


$
178,580


$
59,321


$



$
245,260Senior subordinated notes
    payable(1)






















160,000



160,000Other secured notes payable(1)


1,332



117



123



128



26



315



2,041Capital lease obligations


93



71



132















296Other subordinated notes payable(1)


190



202



216



232



248



1,699



2,787Operating lease commitments,
    continuing operations


4,203



3,686



2,613



2,204



2,141



8,189



23,036Operating lease commitments,
    discontinued operations


1,142



1,002



770



780



802



338



4,834Construction commitments


10,509























10,509Closure and post-closure
    obligations, continuing operations(2)


6,258



387



4,961



3,119



6,657



175,009



196,391Closure and post-closure
    obligations, discontinued operations(2)






















54,083



54,083$
26,180


$
7,918


$
11,268


$
185,043


$
69,195


$
399,633


$
699,237     (1)
    
    Refer to the Notes to our Consolidated Financial Statements
    included elsewhere in this annual report for information
    relative to interest repayment provisions. 39




---



##### Table of Contents



(2)
    
    Future payments on closure and post-closure obligations are not
    discounted and contemplate full utilization of current and
    probable expansion airspace.  Other
    Contractual Arrangements
          Registration
    Rights Agreements
       40




---



##### Table of Contents



Form S-3
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk      Item 8.
    Financial
    Statements and Supplementary Data  Page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15).
  Changes
    in Internal Control Over Financial Reporting
   41




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##### Table of Contents



Managements
    Report on Internal Control Over Financial Reporting
    Attestation
    Report of Independent Registered Public Accounting
    Firm
    Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters      (c)Number of SecuritiesRemaining Available forFuture Issuance Under Equity(a)


(b)


Compensation PlansNumber of Securities to be


Weighted-Average


(Excluding Securities to beIssued upon Exercise of


Exercise Price of


Issued upon Exercise ofOutstanding Options,


Outstanding Options,


Outstanding Options,Plan Category

Warrants and Rights


Warrants and Rights


Warrants or Rights)Equity compensation plans approved
    by security holders


3,115,500


$
14.98



5,619,195
(1)Equity compensation plans not
    approved by security holders


333,333
(2)

$
8.10



Total


3,448,833


$
14.32



5,619,195
(1)     (1)
    
    Under our 1999 Stock Option Plan, we may grant options to a
    maximum of 19% of our issued common shares and common share
    equivalents outstanding from time to time.(2)
    
    Warrants to purchase 333,333 shares of our common stock, at
    an exercise price of $8.10 per share, were granted to David
    Sutherland-Yoest in September 2001 as a term of the commencement
    of his employment. All of the warrants have vested and will
    expire in September 2011. The warrants are exercisable until
    their expiration so long as Mr. Sutherland-Yoest is an
    employee. In the event of a change of control, or if
    Mr. Sutherland-Yoests employment is terminated by
    reason of death, disability or by us without cause, the warrants
    continue to be 42




---



##### Table of Contents



exercisable as if Mr. Sutherland-Yoest had remained an
    employee. If Mr. Sutherland-Yoests employment is
    terminated by his voluntary resignation or by us for cause, all
    vested warrants may be exercised within 180 days of the
    date of such termination.  Item 13.
    Certain
    Relationships, Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Consolidated
    Financial Statements
  Consolidated Financial Statements
          Financial Statement Schedules
      Exhibits
    2
.1

Plan of Arrangement under
    Section 182 of the Business Corporations Act (Ontario).
    (Incorporated by reference to Exhibit 2.1 to
    Form 10-K
    (No. 000-25955)
    filed March 16,2004).3
.1

Amended and Restated Certificate
    of Incorporation of Waste Services, Inc. (Incorporated by
    reference to Exhibit 3.1 to
    Form 8-K
    (No. 000-25955)
    filed August 2, 2004).3
.2

Certificate of Amendment of
    Amended and Restated Credit Certificate of Incorporation of
    Waste Services, Inc. effective June 30, 2006
    (Incorporated by reference to Exhibit 3.1 to
    Form 8-K
    (No. 000-25955)
    filed July 5, 2006).3
.3

Provisions for Exchangeable Shares
    of Waste Services (CA) Inc. (Incorporated by reference to
    Exhibit 3.2 to
    Form 10-K
    (No. 000-25955)
    filed March 16, 2004).3
.4

Amendment to Provisions for
    Exchangeable Shares of Waste Services (CA) Inc. (Incorporated by
    reference to Exhibit 3.3 to
    Form 8-K
    (No. 000-25955)
    filed July 5, 2006).3
.5

Certificate of Designation of
    Special Voting Preferred Stock of Waste Services, Inc.
    (Incorporated by reference to Exhibit 3.2 to
    Form 8-K
    (No. 000-25955)
    filed August 2,2004).3
.6

Amended Certificate of
    Designations of Special Voting Preferred Stock of Waste
    Services, Inc. (Incorporated by reference to Exhibit 3.2 to
    Form 8-K
    (No. 000-25955)
    filed July 5, 2006).3
.7

By-law No. 1 of Waste
    Services, Inc. (Incorporated by reference to Exhibit 3.3 to
    Form 8-K
    (No. 000-25955)
    filed August 2, 2004). 43




---



##### Table of Contents



3
.8

Certificate of Designations of
    Waste Services, Inc.(Incorporated by reference to
    Exhibit 1.3 to
    Form 20-F
    (No. 000-25955)
    filed July 15, 2003).3
.9

Amended Certificate of
    Designations of Waste Services, Inc.(Incorporated by reference
    to Exhibit 4.1 to
    Form 8-K
    (No. 000-25955)
    filed May 10, 2004).4
.1

Preferred Subscription Agreement
    dated as of May 6, 2003,among Waste Services, Inc., Capital
    Environmental Resource Inc., Kelso Investment Associates VI,
    L.P. and KEP VI LLC (Incorporated by reference to
    Exhibit 4.4 to
    Form 20-F
    (No. 000-25955)
    filed July 15, 2003).4
.2

Amending Agreement No. 1 to
    Preferred Subscription Agreement dated as of February 13,
    2003, among Waste Services, Inc., Capital Environmental Resource
    Inc., Kelso Investment Associates VI, L.P. and KEP VI, LLC
    (Incorporated by reference to Exhibit 4.1 to
    Form 6-K
    (No. 000-25955)
    filed February 26, 2004).4
.3

Amending Agreement No. 2 to
    Preferred Subscription Agreement dated June 8, 2004
    (Incorporated by reference to Exhibit 4.1 to
    Form 8-K
    (No. 000-25955)
    filed June 9, 2004).4
.4

Agreement effective as of
    December 28, 2005 between Waste Services, Inc. and Kelso
    Investment Associates VI, L.P. and KEP VI, LLC. (Incorporated by
    reference to Exhibit 4.4 to
    Form 10-K
    (No. 000-25955)
    filed March 14, 2006).4
.5

Agreement effective as of
    March 30, 2006 among Waste Service, Inc. and Kelso
    Investment Associates VI, L.P. and KEP VI, LLC (Incorporated by
    reference to Exhibit 20.3 to
    Form 8-K
    ((No. 000-25955)
    filed on April 5, 2006).4
.6

Form of Warrants to Purchase
    Common Stock by and between the Company and certain investors
    (Incorporated by reference to Exhibit 4.2 to
    Form 20-F
    (No. 000-25955)
    filed July 15,2003).4
.7

Warrant Agreement dated as of
    May 6, 2003, between Waste Service Inc., and certain
    holders of the Preferred Stock (Incorporated by reference to
    Exhibit 4.6 to
    Form 20-F
    (No. 000-25955)
    filed July 15, 2003).4
.8

Warrant, dated July 27, 2001
    issued by us to David Sutherland-Yoest (Incorporated by
    reference to Exhibit 4.8 to
    Form 20-F
    (No. 000-25955)
    filed July 12, 2002).4
.9

Form of Warrant to Purchase Common
    Shares by and between Capital Environmental Resource Inc. and
    certain investors.(Incorporated by reference to Exhibit 4.4
    to
    Form 8-K
    (No. 000-25955)
    filed May 10, 2004).4
.10

Indenture regarding
    91/2% Senior
    Subordinated Notes among Waste Services, Inc., the Guarantors
    and Wells Fargo Bank, National Association, as trustee, dated as
    of April 30, 2004 (Incorporated by reference to
    Exhibit 4.3 to
    Form 8-K
    (No. 000-25955)
    filed May 10, 2004).4
.11

Supplemental Indenture dated as of
    August 8, 2005 to the Notes Indenture among Sanford
    Recycling and Transfer, Inc., Waste Services, Inc., the other
    guarantors and Wells Fargo Bank, National Association, as
    Trustee (Incorporated by reference to Exhibit 4.2 to
    Form S-4
    (No. 333-127444)
    filed August 11, 2005).4
.12

Supplemental Indenture dated as of
    November 29, 2005 to the Notes Indenture among WSI
    Waste Services of Texas, LP., Waste Services, Inc., the other
    guarantors and Wells Fargo Bank, National Association, as
    Trustee. (Incorporated by reference to Exhibit 4.11 to
    Form 10-K
    (No. 000-25955)
    filed March 14, 2006).4
.13

Supplemental Indenture dated as of
    May 12, 2006 to the Notes Indenture among Liberty
    Waste, LLC., Waste Services, Inc., the other guarantors and
    Wells Fargo Bank, National Association, as Trustee.
    (Incorporated by reference to Exhibit 4.16 to
    Form 10-Q
    (No. 000-25955)
    filed August 1, 2006).4
.14

Supplemental Indenture dated as of
    June 30, 2006 to the Notes Indenture among Sun Country
    Materials, LLC., Waste Services, Inc., the other guarantors and
    Wells Fargo Bank, National Association, as Trustee.
    (Incorporated by reference to Exhibit 4.18 to
    Form 10-Q
    (No. 000-25955)
    filed August 1, 2006).4
.15

Supplemental Indenture dated as of
    June 30, 2006, 2006 to the Notes Indenture among Taft
    Recycling, Inc., Waste Services, Inc., the other guarantors and
    Wells Fargo Bank, National Association, as Trustee.
    (Incorporated by reference to Exhibit 4.17 to
    Form 10-Q
    (No. 000-25955)
    filed August 1, 2006).4
.16

Supplemental Indenture dated as of
    January 5, 2007 to the Notes Indenture among Pro
    Disposal, Inc., SLD Landfill, Inc., Waste Services, Inc.,
    the other guarantors and Wells Fargo Bank, National Association,
    as Trustee.4
.17

Support Agreement among Waste
    Services, Inc. Capital Environmental Resource Inc. (Incorporated
    by reference to Exhibit 4.9 to
    Form 10-K
    (No. 000-25955)
    filed March 16,2004). 44




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##### Table of Contents



4
.18

Support Agreement dated
    July 31, 2004, among Waste Services, Inc. and Michael
    DeGroote (Incorporated by reference to Exhibit 10 to
    Form 8-K
    (No. 000-25955)
    filed March 16,2004).4
.19

Standby Purchase Agreement dated
    as of September 30, 2004 between Waste Services, Inc. and
    Michael DeGroote (Incorporated by reference to
    Exhibit 10.2 to
    Form 8-K
    (No. 000-25955)
    filed on October 5, 2004).10
.1

Capital Environmental Resource
    Inc. 1999 Stock Option Plan (Incorporated by reference to
    Exhibit 4 to Schedule 13D
    (No. 005-57445)
    dated February 5, 2002 and filed by certain holders of the
    Companys Common Shares with the Commission on
    February 15,2002).10
.2

Amended and Restated Stock
    Purchase Agreement dated as of March 11, 2004, by and among
    Waste Services, Inc., certain affiliates of Waste Services,
    Inc., Capital Environmental Resource Inc., Florida Recycling
    Services, Inc. and certain affiliates thereof (Incorporated by
    reference to Exhibit 10.5 to
    Form 8-K
    (No. 000-25955)
    filed May 10, 2004).10
.3

First Amendment to Amended and
    Restated Stock Purchase Agreement and Settlement Agreement dated
    September 24, 2004 (Incorporated by Reference to
    Exhibit 10.2 to
    Form 8-K
    (No. 000-25955)
    filed September 24, 2004).10
.4

Form of Subscription Agreement
    dated as of April 30, 2004,between Capital Environmental
    Resource Inc. and certain investors. (Incorporated by reference
    to Exhibit 10.1 to
    Form 8-K
    (No. 000-25955)
    filed May 10, 2004).10
.5

Form of Registration Rights
    Agreement dated as of April 30,2004, among us and certain
    investors. (Incorporated by Reference to Exhibit 10.2 to
    Form 8-K
    (No. 000-25955)
    filed May 10, 2004)10
.6

91/2% Senior
    Subordinated Notes Registration Rights Agreement dated
    April 20, 2004. (Incorporated by reference to
    Exhibit 10.3 to
    Form 8-K
    (No. 000-25955)
    filed May 10,2004).10
.7

Second Amended and Restated Credit
    Agreement dated as of December 28,2006 among Waste
    Services, Inc., Waste Services (CA) Inc., the several lenders
    from time to time parties thereto, Lehman Brothers Inc., as
    Arranger, CIBC World Markets Corp., as Syndication Agent, Bank
    of America, N.A., as Documentation Agent, Canadian Imperial Bank
    of Commerce, as Canadian Agent, and Lehman Commercial Paper
    Inc., as Administrative Agent. (Incorporated by reference to
    Exhibit 20.1 to Form 8-K (No. 000-25955) filed
    January 3, 2007).10
.8

Employment Agreement dated as of
    October 26, 2005 between Waste Services, Inc. and David
    Sutherland-Yoest (Incorporated by reference to Exhibit 10.1
    to
    Form 10-Q
    (No. 000-25955)
    filed October 31, 2005).10
.9

Employment Agreement dated as of
    July 1, 2004 between Waste Services, Inc. and Charles A.
    Wilcox (Incorporated by reference to Exhibit 10.13 to
    Form 10-K
    (No. 000-25955)
    filed March 16, 2004).10
.10

Employment Agreement dated
    January 5, 2004, between Capital Environmental Resource
    Inc., Waste Services, Inc. and Ivan R. Cairns. (Incorporated by
    reference to Exhibit 10.1 to
    Form 10-Q
    (No. 000-25955),
    filed May 17, 2004).10
.11

Employment Agreement dated as of
    February 23, 2004 between Capital Environmental Resource
    Inc., Waste Services, Inc. and Mark A. Pytosh (Incorporated by
    reference to Exhibit 10.2 to
    Form 10-Q
    (No. 000-25955)
    filed on May 17, 2004).10
.12

Employment Agreement dated
    October 1, 2003, between Capital Environmental Resource
    Inc. and Brian A. Goebel (Incorporated by reference to
    Exhibit 4.27 to
    Form 20-F
    for the year ended December 31, 2003
    (No. 000-25955),
    filed March 31, 2004).10
.13

Subscription Agreement dated as of
    November 8, 2006 by and among Waste Services, Inc. ,
    Westbury (Bermuda) Limited and Prides Capital Fund, LP.
    (Incorporated by reference to Exhibit 20.1 to
    Form 8-K
    (No. 000-25955)
    filed on November 9, 2006).10
.14

Exchange and
    Redemption Agreement dated as of November 8, 2006 by
    and among Waste Services, Inc. and Kelso Investment Associates
    VI, L.P. and KEP VI, LLC. (Incorporated by reference to
    Exhibit No. 20.2 to
    Form 8-K
    (No. 000-25955)
    filed on November 9, 2006).10
.15

Form of Registration Rights
    Agreement dated as of November 8, 2006 by and among Waste
    Services, Inc., Westbury (Bermuda) Limited and Prides Capital
    Fund, LP. (Incorporated by reference to
    Exhibit No. 20.3 to
    Form 8-K
    (No. 000-25955)
    filed on November 9, 2006).10
.16

Form of Registration Rights
    Agreement dated as of November 8, 2006 by and among Waste
    Services, Inc. and Kelso Investment Associates VI, L.P. and KEP
    VI, LLC. (Incorporated by reference to
    Exhibit No. 20.3 to
    Form 8-K
    (No. 000-25955)
    filed on November 9, 2006). 45




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##### Table of Contents



14
.1

Code of Ethics (Incorporated by
    reference to Exhibit 14.1 to
    Form 10-K
    for the year ended December 31, 2003
    (No. 000-25955),
    filed June 9, 2004).16
.1

Letter from BDO Dunwoody LLP to
    the Securities and Exchange Commission dated July 27, 2004
    (Incorporated by reference to Exhibit 16.1 to
    Form 8-K
    (No. 000-25955),
    filed July 27,2004).18
.1

Letter regarding change in
    accounting principle executed by BDO Dunwoody LLP on
    May 12, 2004 (Incorporated by reference to
    Exhibit 18.1 to
    Form 10-Q
    for the quarterly period ended March 31, 2004
    (No. 000-25955)
    filed May 17, 2004).21
.1

List of Subsidiaries.23
.1

Consent of BDO Seidman, LLP.31
.1

Certification pursuant to
    Rule 15d-14(a)
    under the Securities Exchange Act of 1934 as amended of David
    Sutherland-Yoest, Chief Executive Officer.31
.2

Certification pursuant to
    Rule 15d-14(a)
    under the Securities Exchange Act of 1934 as amended of Brian A.
    Goebel, Principal Financial Officer.32
.1

Certification of Chief Executive
    Officer and Principal Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the U.S. Sarbanes-Oxley Act of 2002  46




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##### Table of Contents



SIGNATURES
      /s/  David
    Sutherland-Yoest   Chairman of the Board,
 Chief Executive Officer and Director
      Signature

Title

Date/s/  DAVID
    SUTHERLAND-YOESTDavid
    Sutherland-Yoest

Chairman of the Board,
    Chief Executive Officer Director

March 5, 2007/s/  BRIAN
    A. GOEBELBrian
    A. Goebel

Vice President, Corporate
    Controller and Acting Chief Financial Officer, (Principal
    Accounting Officer and Principal Financial Officer)

March 5, 2007/s/  GARY
    W. DEGROOTEGary
    W. DeGroote

Director

March 5, 2007/s/  MICHAEL
    B. LAZARMichael
    B. Lazar

Director

March 5, 2007/s/  GEORGE
    E. MATELICHGeorge
    E. Matelich

Director

March 5, 2007/s/  CHARLES
    E. MCCARTHYCharles
    E. McCarthy

Director

March 5, 2007/s/  LUCIEN
    RÉMILLARDLucien
    Rémillard

Director

March 5, 2007/s/  JACK
    E. SHORTJack
    E. Short

Director

March 5, 2007/s/  WALLACE
    L. TIMMENYWallace
    L. Timmeny

Director

March 5, 2007/s/  MICHAEL
    J. VERROCHIMichael
    J. Verrochi

Director

March 5, 2007  47




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##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Managements
    Report on Internal Control Over Financial Reporting


F-2Reports of
    Independent Registered Public Accounting Firm


F-3Consolidated
    Balance Sheets


F-5Consolidated
    Statements of Operations and Comprehensive Loss


F-6Consolidated
    Statements of Shareholders Equity


F-7Consolidated
    Statements of Cash Flows


F-8Notes to
    Consolidated Financial Statements


F-9  F-1




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##### Table of Contents



MANAGEMENTS
    REPORT ON INTERNAL CONTROL
    OVER FINANCIAL REPORTING  Rules 13a-15(f) 15d-15(f)
  Internal Control-Integrated
    Framework
   F-2




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm on
    Internal Control over Financial Reporting
     Form 10-K,
            
    F-3




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm                 
    F-4




---



##### Table of Contents



WASTE
    SERVICES, INC.CONSOLIDATED BALANCE SHEETS
    (In thousands of U.S. dollars, except share amounts)
    As of December 31,
  2006


2005ASSETSCurrent assets:Cash and cash equivalents

$
8,532


$
8,886Accounts receivable (net of
    allowance for doubtful accounts of $574 and $672 as of
    December 31, 2006 and 2005, respectively)


52,461



45,381Prepaid expenses and other current
    assets


6,256



10,063Current assets of discontinued
    operations


3,870



5,252Total current assets


71,119



69,582Property and equipment,
    net


145,318



119,485Landfill sites, net


237,338



156,498Goodwill and other intangible
    assets, net


350,035



307,869Other assets


10,667



23,816Non-current assets of
    discontinued operations


50,586



51,139Total assets

$
865,063


$
728,389LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
24,033


$
25,959Accrued expenses and other current
    liabilities


54,476



39,065Short-term financing and current
    portion of long-term debt


3,975



1,365Current liabilities of discontinued
    operations


3,874



1,827Total current liabilities


86,358



68,216Long-term debt


406,113



284,850Accrued closure, post-closure
    and other obligations


32,899



25,651Cumulative mandatorily
    redeemable Preferred Stock (net of discount of $2,347 as of
    December 31, 2005)






84,971Non-current liabilities of
    discontinued operations


336



210Total liabilities


525,706



463,898Shareholders
    equity:Common stock $0.01 par value:
    166,666,666 and 500,000,000 (pre-reverse split) shares
    authorized at December 31, 2006 and December 31, 2005,
    respectively; 43,868,606 shares issued and outstanding at
    December 31, 2006; 93,685,889 (pre-reverse split) shares
    issued and 93,185,889 (pre-reverse split) shares outstanding at
    December 31, 2005


438



937Additional paid-in capital


506,751



383,618Treasury stock at cost: 500,000
    (pre-reverse split) shares






(1,235
)Accumulated other comprehensive
    income


35,201



35,673Accumulated deficit


(203,033
)


(154,502
)Total shareholders
    equity


339,357



264,491Total liabilities and
    shareholders equity

$
865,063


$
728,389    F-5




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##### Table of Contents



WASTE
    SERVICES, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND
    COMPREHENSIVE LOSS
    (In thousands of U.S. dollars, except per share amounts)
    For the Years Ended December 31,
  2006


2005


2004Revenue

$
396,123


$
356,056


$
287,105Operating and other
    expenses:Cost of operations (exclusive of
    depreciation, depletion and amortization)


270,454



255,675



205,512Selling, general and
    administrative expense (exclusive of depreciation, depletion and
    amortization)


58,941



53,123



50,331Deferred acquisition costs


5,612







Settlement with sellers of Florida
    Recycling






(4,120
)


(8,635
)Depreciation, depletion and
    amortization


42,813



40,661



32,157Foreign exchange loss (gain) and
    other


1,993



(175
)


(400
)Income from
    operations


16,310



10,892



8,140Interest expense


30,905



28,196



30,843Change in fair value of warrants










(111
)Cumulative mandatorily redeemable
    preferred stock dividends and amortization of issue costs


19,653



20,984



17,582Loss from continuing operations
    before income taxes


(34,248
)


(38,288
)


(40,174
)Income tax provision


12,820



12,136



7,587Net loss from continuing
    operations


(47,068
)


(50,424
)


(47,761
)Net income (loss) from
    discontinued operations


(1,463
)


134



(618
)Loss before cumulative effect
    of change in accounting principle


(48,531
)


(50,290
)


(48,379
)Cumulative effect of change in
    accounting principle, net of provision for income taxes of $132
    for the year ended December 31, 2004










225Net loss

$
(48,531
)

$
(50,290
)

$
(48,154
)Basic and diluted loss per
    share:Loss per share 
    continuing operations


(1.33
)


(1.53
)


(1.62
)Loss per share 
    discontinued operations


(0.04
)






(0.02
)Basic and diluted loss per share
    before cumulative effect of change in accounting principle


(1.37
)


(1.53
)


(1.64
)Cumulative affect of change in
    accounting principle










0.01Loss per share  basic
    and diluted

$
(1.37
)

$
(1.53
)

$
(1.63
)Weighted average common shares
    outstanding  basic and diluted


35,354



32,880



29,410Consolidated Statements of
    Comprehensive Loss:Net loss

$
(48,531
)

$
(50,290
)

$
(48,154
)Foreign currency translation
    adjustment gain (loss)


(472
)


6,540



13,181Comprehensive loss

$
(49,003
)

$
(43,750
)

$
(34,973
)    F-6




---



##### Table of Contents



WASTE
    SERVICES, INC.
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  AccumulatedWaste Services, (CA) Inc.


Waste Services, Inc.


Additional


Treasury


Other





TotalCommon Stock


Common Stock


Paid-in


Stock


Comprehensive


Accumulated


ShareholdersShares


Amount


Shares


Amount


Capital


at Cost


Income


Deficit


Equity(In thousands of U.S. dollars and share amounts)Balance, December 31,
    2003


68,339


$
215,395






$



$
25,828


$



$
15,952


$
(56,058
)

$
201,117Sale of common shares and warrants


13,400



49,126











2,552















51,678Common shares and warrants issued


14,837



80,856



40







215















81,071Exercise of options and warrants


311



1,253











(212
)














1,041Deferred stock-based compensation


















122















122Migration transaction


(96,887
)


(346,630
)


87,658



877



345,753















Conversion of exchangeable shares










2,660



27



(27
)














Settlement with sellers of Florida
    Recycling






















(1,235
)










(1,235
)Other paid-in capital


















(45
)














(45
)Foreign currency translation
    adjustment


























13,181







13,181Net loss






























(48,154
)


(48,154
)Balance, December 31,
    2004










90,358



904



374,186



(1,235
)


29,133



(104,212
)


298,776Common shares and warrants issued










2,926



29



7,881















7,910Exercise of options and warrants










162



2



519















521Stock-based compensation


















1,060















1,060Conversion of exchangeable shares










240



2



(2
)














Other paid-in capital


















(26
)














(26
)Foreign currency translation
    adjustment


























6,540







6,540Net loss






























(50,290
)


(50,290
)Balance, December 31,
    2005










93,686



937



383,618



(1,235
)


35,673



(154,502
)


264,491Common shares issued










8,154



81



25,265



1,235











26,581Exercise of warrants










28







86















86Stock-based compensation


















3,089















3,089Conversion of exchangeable shares










8























Share reimbursement agreement


















(929
)














(929
)Foreign currency translation
    adjustment


























(472
)






(472
)Effect of reverse stock split










(67,916
)


(679
)


679















Sale of common shares and
    retirement of cumulative mandatorily redeemable Preferred Stock










9,895



99



94,864















94,963Exercise of warrants










11







79















79Conversion of exchangeable shares










3























Net loss






























(48,531
)


(48,531
)Balance, December 31,
    2006





$




43,869


$
438


$
506,751


$



$
35,201


$
(203,033
)

$
339,357    F-7




---



##### Table of Contents



WASTE
    SERVICES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands of U.S. dollars)
    For the Years Ended December 31,
  2006


2005


2004Cash flows from operating
    activities:Net loss

$
(48,531
)

$
(50,290
)

$
(48,154
)Adjustments to reconcile net loss
    to net cash flows from operating activities:Net loss (income) from discontinued
    operations


1,463



(134
)


618Depreciation, depletion and
    amortization


42,813



40,661



32,157Non-cash component of settlement
    with sellers of Florida Recycling






(4,120
)


(1,235
)Cumulative mandatorily redeemable
    preferred stock dividends and amortization of issue costs


19,653



20,984



17,582Amortization of debt issue costs


1,569



1,408



10,294Deferred income tax provision


11,004



11,581



7,218Non-cash stock-based compensation
    expense (benefit)


3,089



1,060



(90
)Deferred acquisition costs expensed


5,173







Changes in fair value of warrants










(111
)Cumulative effect of change in
    accounting principle, net of tax










(225
)Foreign exchange loss (gain)


1,511



755



(90
)Other non-cash items


806



(412
)


86Changes in operating assets and
    liabilities (excluding the effects of acquisitions):Accounts receivable


(2,500
)


(1,385
)


(5,237
)Prepaid expenses and other current
    assets


(35
)


4,414



(1,405
)Accounts payable


(6,545
)


(1,776
)


3,799Accrued expenses and other current
    liabilities


6,000



(924
)


11,534Net cash provided by continuing
    operations


35,470



21,822



26,741Net cash provided by (used in)
    discontinued operations


3,466



2,831



(2,061
)Net cash provided by operating
    activities


38,936



24,653



24,680Cash flows from investing
    activities:Cash used in business combinations
    and significant asset acquisitions, net of cash acquired


(103,532
)


(4,465
)


(155,916
)Capital expenditures


(47,285
)


(28,893
)


(37,823
)Proceeds from asset sales and
    business divestitures


5,153



3,198



14,231Deposits for business acquisitions
    and other


(1,626
)


(1,046
)


(1,551
)Net cash used in continuing
    operations


(147,290
)


(31,206
)


(181,059
)Net cash used in discontinued
    operations


(1,717
)


(8,305
)


(17,149
)Net cash used in investing
    activities


(149,007
)


(39,511
)


(198,208
)Cash flows from financing
    activities:Proceeds from issuance of debt and
    draw on revolving credit facility


157,527



25,000



283,000Principal repayments of debt and
    capital lease obligations


(37,026
)


(16,704
)


(187,158
)Sale of common shares and warrants


66,500



7,125



53,600Proceeds from release of restricted
    cash and release of collateral supporting letters of credit










24,341Proceeds from the exercise of
    options and warrants


165



521



1,041Retirement of cumulative
    mandatorily redeemable Preferred Stock


(75,557
)






Fees paid for financing transactions


(1,805
)


(995
)


(14,141
)Net cash provided by financing
    activities  continuing operations


109,804



14,947



160,683Effect of exchange rate changes on
    cash and cash equivalents


(87
)


321



273Increase (decrease) in cash and
    cash equivalents


(354
)


410



(12,572
)Cash and cash equivalents at the
    beginning of the year


8,886



8,476



21,048Cash and cash equivalents at the
    end of the year

$
8,532


$
8,886


$
8,476    F-8




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Organization
    of Business and Basis of Presentation             F-9




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2.
    Summary
    of Significant Accounting Policies  Business
    Combinations and Acquisitions
  and/or
  Cash
    and Cash Equivalents and Restricted Cash
    Concentration
    of Credit Risk
    Allowance
    for Doubtful Accounts
   F-10




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005


2004Balance at the beginning of the
    year

$
672


$
545


$
445Provisions


695



953



1,305Bad debts charged to reserves, net
    of recoveries


(1,083
)


(831
)


(2,597
)Acquisitions


290







1,380Impact of foreign exchange rate
    fluctuations






5



12Balance at the end of the year

$
574


$
672


$
545   Property
    and Equipment
    Buildings

10 to 25 yearsVehicles

10 yearsContainers, compactors and
    landfill and recycling equipment

5 to 12 yearsFurniture, fixtures and other
    office equipment

3 to 5 yearsLeasehold improvements

Shorter of term of lease or
    estimated life   Long-Lived
    Assets
     F-11




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Landfill
    Sites
      units-of-consumption
          Goodwill
    and Other Intangible Assets
   F-12




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      not-to-compete.
  Other
    Non-Current Assets
      Fair
    Value of Financial Instruments
    Environmental
    Costs
   F-13




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Accrued
    Closure and Post-Closure Obligations
      Revenue
    Recognition
    Royalty
    Arrangements
    Advertising
    Costs
    Risk
    Management
  U.S.-based
 F-14




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2006


2005


2004Balance at the beginning of the
    year

$
4,356


$
2,426


$
Provisions


4,615



4,419



2,978Payments


(3,475
)


(2,210
)


(552
)Favorable claim development
    related to prior periods


(169
)


(279
)


Balance at the end of the year

$
5,327


$
4,356


$
2,426   Stock-Based
    Compensation
        96-18, (EITF 96-18),
 F-15




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Income
    Taxes
    Net
    Income (Loss) Per Share Information
    Change
    in Accounting Principle
       F-16




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Recently
    Issued Accounting Pronouncements
  00-19-2, 00-19-2). 00-19-2 00-19-2 00-19-2 00-19-2, 00-19-2
        
    an allocation or a shift of income between taxing jurisdictions,
    the characterization of income or a decision to exclude
    reporting taxable income in a tax return, or
    a decision to classify a transaction, entity, or other position
    in a tax return as tax exempt.   F-17




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        3.
    Discontinued
    Operations    December 31,2006


2005Accounts receivable

$
3,418


$
4,202Prepaid expenses and other current
    assets


452



1,050Current assets of discontinued
    operations


3,870



5,252Property and equipment


11,803



13,777Landfill sites


17,229



15,630Goodwill and other intangible
    assets


21,433



21,602Other assets


121



130Non-current assets of discontinued
    operations


50,586



51,139Total assets of discontinued
    operations

$
54,456


$
56,391Accounts payable

$
356


$
192Accrued expenses and other current
    liabilities


3,518



1,635Current liabilities of
    discontinued operations


3,874



1,827Accrued closure, post closure and
    other obligations


336



210Non-current liabilities of
    discontinued operations


336



210Total liabilities of discontinued
    operations

$
4,210


$
2,037Net assets of discontinued
    operations

$
50,246


$
54,354  F-18




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    800-acre
  tuck-in
  4.
    Business
    Combinations, Significant Asset Acquisitions and Disposals of
    Businesses       F-19




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       tuck-in
         F-20




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Liberty Waste


SLDTaft


and Sun Country


Landfill and


AllRecycling


Materials


Pro Disposal


Others


TotalPurchase price:Cash

$
13,300


$
20,653


$
75,674


$
3,949


$
113,576Common stock


7,645



18,936











26,581Total purchase price


20,945



39,589



75,674



3,949



140,157Allocated as follows:Working capital assumed:Cash and cash equivalents


125



488



187







800Accounts receivable


952



2,126



1,650







4,728Prepaid expenses and other current
    assets


10



591



70







671Accounts payable


(462
)


(2,724
)


(1,889
)






(5,075
)Accrued expenses and other current
    liabilities


(252
)


(787
)






(143
)


(1,182
)Net working capital


373



(306
)


18



(143
)


(58
)Property and equipment


3,237



10,272



9,779



1,257



24,545Landfill sites






23,290



49,834







73,124Other assets










110







110Debt






(396
)


(422
)






(818
)Accrued closure, post-closure and
    other obligations assumed


(73
)


(3,796
)


(1,459
)






(5,328
)Net book value of assets acquired
    and liabilities assumed


3,537



29,064



57,860



1,114



91,575Excess purchase price to be
    allocated

$
17,408


$
10,525


$
17,814


$
2,835


$
48,582Allocated as follows:Goodwill

$
17,408


$
6,043


$
12,474


$
2,242


$
38,167Other intangible assets






4,482



5,340



593



10,415Total allocated

$
17,408


$
10,525


$
17,814


$
2,835


$
48,582    F-21




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2004Allied


Florida


All2005


Assets


Recycling


Others


TotalPurchase price:Cash

$
1,122


$
45,988


$
104,234


$
18,350


$
168,572Common stock and warrants










51,357



36,721



88,078Seller financed note payable














5,000



5,000Total purchase price


1,122



45,988



155,591



60,071



261,650Allocated as follows:Working capital assumed:Accounts receivable






3,755



7,426



409



11,590Prepaid expenses and other current
    assets


25



182



935



69



1,186Accounts payable










(8,604
)


(738
)


(9,342
)Accrued expenses and other current
    liabilities


(8
)


(870
)


(4,410
)






(5,280
)Net working capital


17



3,067



(4,653
)


(260
)


(1,846
)Property and equipment


810



10,728



23,911



6,044



40,683Landfill sites














41,982



41,982Other assets










271







271Deferred taxes














(334
)


(334
)Accrued closure, post-closure and
    other obligations assumed














(52
)


(52
)Net book value of assets acquired
    and liabilities assumed


827



13,795



19,529



47,380



80,704Excess purchase price to be
    allocated

$
295


$
32,193


$
136,062


$
12,691


$
180,946Allocated as follows:Goodwill

$
172


$
23,201


$
108,906


$
12,667


$
144,774Other intangible assets


123



8,992



27,156



24



36,172Total allocated

$
295


$
32,193


$
136,062


$
12,691


$
180,946      F-22




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       2006


2005


2004Revenue

$
459,814


$
432,990


$
396,840Net loss attributable to common
    shareholders

$
(49,330
)

$
(52,097
)

$
(58,196
)Basic and diluted net loss per
    Common Share

$
(1.35
)

$
(1.46
)

$
(1.76
)Basic and diluted pro forma
    weighted average number of common shares outstanding


36,500



35,765



33,052     5.
    Prepaid
    Expenses and Other Current Assets    2006


2005Prepaid expenses

$
2,991


$
2,357Deferred income taxes






4,763Parts and supplies


1,720



1,673Other current assets


1,545



1,270$
6,256


$
10,063   6.
    Property
    and Equipment    2006


2005Land and buildings

$
35,275


$
24,596Vehicles


116,747



96,492Containers, compactors and
    landfill and recycling equipment


75,935



64,547Furniture, fixtures, other office
    equipment and leasehold improvements


10,288



9,393Total property and equipment


238,245



195,028Less: Accumulated depreciation


(92,927
)


(75,543
)Property and equipment, net

$
145,318


$
119,485  F-23




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    7.
    Landfill
    Sites, Accrued Closure, Post-Closure and Other
    Obligations  Landfill
    Sites
    2006


2005Landfill sites

$
284,315


$
189,280Less: Accumulated depletion


(46,977
)


(32,782
)Landfill sites, net

$
237,338


$
156,498       2006


2005


2004Balance at the beginning of the
    year

$
156,498


$
159,385


$
115,620Landfill site construction costs


16,329



8,072



9,912Landfill site expansion costs


3,162







Landfill purchase price


73,124







36,490Additional asset retirement
    obligations


2,287



1,753



857Purchase price allocation
    adjustments for prior acquisitions






99



5,907Depletion


(14,019
)


(13,106
)


(7,995
)Divestitures










(154
)Capitalized interest










178Effect of foreign exchange rate
    fluctuations


(43
)


295



1,044Change in accounting principle










(2,474
)Balance at the end of the year

$
237,338


$
156,498


$
159,385   Accrued
    Closure, Post-Closure and Other Obligations
    2006


2005Accrued closure and post-closure
    obligations

$
9,941


$
9,074Deferred income tax liability


22,322



16,206Capital lease obligations


186



Other obligations


450



371$
32,899


$
25,651  F-24




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2006


2005


2004Balance at the beginning of the
    year

$
9,074


$
6,385


$
7,737Additional asset retirement
    obligations


2,287



1,753



857Accretion


819



721



459Acquisitions


4,199







52Payments


(147
)






Divestitures










(146
)Purchase price allocation
    adjustments for prior acquisitions










(92
)Effect of foreign exchange rate
    fluctuations


(33
)


215



349Change in accounting principle










(2,831
)Balance at the end of the year


16,199



9,074



6,385Less: Current portion


(6,258
)






Long-term portion

$
9,941


$
9,074


$
6,385     Continuing


DiscontinuedOperations


Operations2007

$
6,258


$
2008


387



2009


4,961



2010


3,119



2011


6,657



Thereafter


175,009



54,083$
196,391


$
54,083    F-25




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Goodwill
    and Other Intangible Assets    2006


2005Other intangible assets subject to
    amortization:Customer relationships and
    contracts

$
43,964


$
34,768Non-competition agreements and
    other


3,694



2,74447,658



37,512Less: Accumulated amortization:Customer relationships and
    contracts


(17,080
)


(12,128
)Non-competition agreements and
    other


(2,435
)


(1,761
)Other intangible assets subject to
    amortization, net


28,143



23,623Goodwill


321,892



284,246Goodwill and other intangible
    assets, net

$
350,035


$
307,869     2006Florida


Canada


TotalBalance at the beginning of the
    year

$
199,377


$
84,869


$
284,246Acquisitions


35,925



2,242



38,167Purchase price allocation
    adjustments for prior acquisitions


(258
)






(258
)Effect of foreign exchange rate
    fluctuations






(263
)


(263
)Balance at the end of the year

$
235,044


$
86,848


$
321,892   2005Florida


Canada


TotalBalance at the beginning of the
    year

$
174,629


$
85,255


$
259,884Acquisitions






163



163Purchase price allocation
    adjustments for prior acquisitions


24,748



(3,279
)


21,469Effect of foreign exchange rate
    fluctuations






2,730



2,730Balance at the end of the year

$
199,377


$
84,869


$
284,246    F-26




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2007

$
5,3522008


4,0932009


3,2702010


2,8502011


2,357Thereafter


10,221$
28,143     Customer relationships and
    contracts


11.5 yearsNon-competition agreements and
    other


3.0 years   9.
    Other
    Assets    2006


2005Debt and redeemable Preferred
    Stock issue costs, net of accumulated amortization of $3,853 and
    $4,761 as of December 31, 2006 and 2005, respectively

$
9,060


$
9,428Acquisition deposits and deferred
    acquisition costs


1,048



13,815Other assets


559



573$
10,667


$
23,816   10.
    Accrued
    Expenses and Other Current Liabilities    2006


2005Deferred revenue

$
9,568


$
9,145Accrued compensation, benefits and
    subcontractor costs


9,670



7,849Accrued waste disposal costs


6,405



6,909Accrued insurance


5,327



4,360Accrued interest


3,557



4,207Accrued acquisition costs


3,651



1,637Accrued closure and post-closure
    obligations


6,258



Accrued professional fees


2,829



1,651Accrued royalties


1,150



161Current portion of capital lease
    obligations


79



454Other accrued expenses and current
    liabilities


5,982



2,692$
54,476


$
39,065  F-27




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Debt    2006


2005Senior Secured Credit Facilities:Revolving credit facility

$



$
Term loan facility, floating
    interest rate at 10.0% (adjusted to 8.1% in January
    2007) and 7.9% as of December 31, 2006 and 2005,
    respectively, due $613 per quarter to March 2010,
    $59,322 per quarter thereafter, due March 2011


245,260



123,250Senior Subordinated Notes, fixed
    interest rate at 9.5%, due 2014


160,000



160,000Other secured notes payable,
    interest at 4.3% to 4.5%, due through 2025


2,041



Other subordinated notes payable,
    interest at 6.7%, due through 2017


2,787



2,965410,088



286,215Less: Current portion


(3,975
)


(1,365
)Long-term portion

$
406,113


$
284,850     2007

$
3,9752008


2,7722009


2,7922010


178,9402011


59,595Thereafter


162,014$
410,088   Senior
    Secured Credit Facilities
     F-28




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Senior
    Subordinated Notes
  1 2
     F-29




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      12.
    Cumulative
    Mandatorily Redeemable Preferred Shares    and/or
 F-30




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    Commitments
    and Contingencies  Leases
    Operating LeasesCapital


Continuing


DiscontinuedLeases


Operations


Operations2007

$
93


$
4,203


$
1,1422008


71



3,686



1,0022009


132



2,613



7702010






2,204



7802011






2,141



802Thereafter






8,189



338296


$
23,036


$
4,834Less: Amount representing interest


(31
)265Less: Current portion of capital
    lease obligations


(79
)Long-term capital lease obligations

$
186     Surety
    Bonds and Letters of Credit
    Environmental
    Risks
     F-31




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Disposal
    Agreement
  and/or
    Collective
    Bargaining Agreements
    Legal
    Proceedings
       F-32




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Registration
    Rights Agreements
      Form S-3
  Other
    Commitments
   F-33




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     14.
    Capital
    Stock  Migration
    Transaction
    non-U.S. residents
      Equity
    Placements
       F-34




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock
    Option Plans
        2006


2005


2004Options outstanding at the
    beginning of the year


4,187,833



4,217,654



2,602,233Options granted


55,000



292,000



1,824,000Options exercised






(5,000
)


(64,167
)Options forfeited


(181,167
)


(277,833
)


(102,667
)Options expired


(946,166
)


(38,988
)


(41,745
)Options outstanding at the end of
    the year


3,115,500



4,187,833



4,217,654Weighted average exercise price:
    (US$ Options)Options granted

$
9.99


$
10.80


$
14.46Options exercised






10.59



11.19Options forfeited


13.35



15.15



14.82Options expired


13.02



12.00



34.71Weighted average exercise price:
    (C$ Options In C$)Options granted

$



$



$
22.11Options exercised










15.66Options forfeited


15.96



19.47



19.41Options expired


15.45



47.97



54.15    F-35




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2006


2005


2004Annual dividend yield










Weighted average expected life
    (years)


3.0



2.8



3.0Risk-free interest rate


4.83
%


2.57%  4.62
%


2.57%  3.25
%Expected volatility


38
%


39
%


84
%           Options


OptionsOutstanding


ExercisableNumber of U.S. dollar
    denominated options


1,962,833



1,693,833Number of Canadian dollar
    denominated options


1,152,667



1,152,667Total number of options


3,115,500



2,846,500Aggregate intrinsic value of
    options

$
46


$
42Weighted average remaining
    contractual term (years)


2.1



2.0Weighted average exercise
    price  U.S. dollar denominated options

$
13.35


$
13.80Weighted average exercise
    price  Canadian dollar denominated options

$
20.55


$
20.55   in-the-money
 F-36




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2005


2004Net loss as reported

$
(50,290
)

$
(48,154
)Add: Employee compensation expense
    (benefit) for equity awards included in the determination of net
    loss as reported


344



(1,420
)Less: Stock based employee
    compensation expense for equity awards determined by the fair
    value based method prescribed under SFAS 123


(9,994
)


(8,892
)Pro forma net loss

$
(59,940
)

$
(58,466
)Basic and diluted loss per share:As reported

$
(1.53
)

$
(1.63
)Pro forma

$
(1.82
)

$
(1.99
)     Warrants
    2006


2005


2004Number of


Warrant


Number of


Warrant


Number of


WarrantWarrants


Price Ranges


Warrants


Price Ranges


Warrants


Price RangesWarrants outstanding at the
    beginning of the year


5,064,850


$
8.10 - $17.25



5,076,705


$
8.10 - $17.25



4,603,505


$
8.10 - $14.10Warrants issued during the year










88,028


$
8.52



513,333


$
4.00 - $17.25Warrants exercised during the year


(20,444
)

$
9.00



(49,883
)

$
9.00 - $9.60



(40,133
)

$
9.00Warrants expired during the year










(50,000
)

$
11.82







Warrants outstanding at the end of
    the year


5,044,406


$
8.10 - $17.25



5,064,850


$
8.10 -$17.25



5,076,705


$
8.10 - $17.25Warrants exercisable at the end of
    the year


5,022,184


$
8.10 - $17.25



5,020,406


$
8.10 -$17.25



5,010,038


$
8.10 - $17.25    F-37




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Income
    Taxes    2006


2005


2004Current:Federal

$



$



$
State










Canada


1,816



555



369Current income tax provision


1,816



555



369Deferred:Federal and state deferred


6,436



5,452



3,983Foreign deferred


4,568



6,129



3,235Deferred income tax provision


11,004



11,581



7,218Provision for income taxes

$
12,820


$
12,136


$
7,587       2006


2005


2004Provision at statutory rate

$
(12,408
)

$
(13,263
)

$
(14,277
)State, net of federal benefit


(1,787
)


(1,912
)


(2,042
)Non-deductible stock based
    compensation


140



377



514Non-deductible interest expense
    and preferred stock dividends


7,919



7,490



6,921Non-deductible foreign exchange
    (gains) and loss


538



146



(16
)Other permanent differences


478



710



(601
)Distributed earnings in foreign
    subsidiary


3,033



2,430



1,866Valuation allowance


14,907



15,922



14,953Large corporations tax






236



269Income tax provision

$
12,820


$
12,136


$
7,587      F-38




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005


2004Deferred income tax assets:Tax loss carry forward 
    U.S.

$
43,675


$
31,922


$
18,237Foreign tax credit carry
    forward  U.S.


1,155







Tax loss carry forward 
    Canada






4,763



10,602Accruals not currently
    deductibles  U.S.


4,266



755



2,004Less: Valuation
    allowance  U.S.


(49,096
)


(32,677
)


(18,375
)Net deferred tax assets






4,763



12,468Deferred income tax liabilities:Book basis in property and
    goodwill in excess of tax basis  U.S.


(15,872
)


(9,436
)


(3,984
)Book basis in property and
    goodwill in excess of tax basis  Canada


(6,450
)


(6,770
)


(9,400
)Undistributed earnings in foreign
    subsidiary  U.S.










(1,866
)Net deferred income tax liability


(22,322
)


(11,443
)


(2,782
)Less: current portion of deferred
    taxes






(4,763
)


Net deferred income tax liability
    long-term

$
(22,322
)

$
(16,206
)

$
(2,782
)     15-year
    2006


2005


2004Balance at the beginning of the
    year

$
32,677


$
18,375


$
2,641Additions to valuation allowance


14,907



15,922



14,953Increase due to acquisitions


1,327







Increase due to foreign tax credit
    carry-forwards


1,155







Adjustments to valuation allowance


(970
)


(1,620
)


781Balance at the end of the year

$
49,096


$
32,677


$
18,375  F-39




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  16.
    Net Loss
    Per Share Information    2006


2005


2004Numerator:Net loss

$
(48,531
)

$
(50,290
)

$
(48,154
)Denominator:Basic and diluted weighted average
    number of common shares outstanding


35,354



32,880



29,410Antidilutive securities not
    included in the diluted earnings per share calculation:Options to purchase Common Shares


1



14



99Warrants to purchase Common Shares


245



719



729246



733



828   17.
    Retirement
    Plan      18.
    Segment
    Information     F-40




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2006All OtherFlorida


Canada


Operations


Corporate


TotalRevenue

$
203,381


$
188,028


$
4,714


$



$
396,123Depreciation, depletion and
    amortization


23,762



15,981



1,628



1,442



42,813Income (loss) from operations


26,081



29,332



(395
)


(38,708
)


16,310Capital expenditures


22,156



21,265



2,623



1,241



47,285Total assets


482,776



203,754



46,883



77,194



810,607   2005All OtherFlorida


Canada


Operations


Corporate


TotalRevenue

$
187,041


$
166,331


$
2,684


$



$
356,056Depreciation, depletion and
    amortization


20,044



18,045



992



1,580



40,661Income (loss) from operations


11,572



23,622



(1,082
)


(23,220
)


10,892Capital expenditures


16,581



9,670



923



1,719



28,893Total assets


398,255



191,108



44,970



37,665



671,998   2004All OtherFlorida


Canada


Operations


Corporate


TotalRevenue

$
144,089


$
142,718


$
298


$



$
287,105Depreciation, depletion and
    amortization


15,588



15,392



179



998



32,157Income (loss) from operations


8,170



16,550



(332
)


(16,248
)


8,140Capital expenditures


14,687



12,054



9,793



1,289



37,823Total assets


368,619



196,204



45,150



60,853



670,826   19.
    Related
    Party Transactions    father-in-law
 F-41




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       364-Day
      20.
    Supplementary
    Cash Flow Information    2006


2005


2004Common Shares issued relative to
    acquisitions

$
26,581


$
1,146


$
88,078Amounts accrued for capital
    expenditures


2,354



1,543



Capital expenditures financed with
    notes payable


1,202







Other cash flow information:Cash paid for interest

$
31,555


$
26,847


$
15,782Cash paid for income taxes


853



683



341   and/or
 F-42




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   21.
    Selected
    Quarterly Financial Data (unaudited)    2006First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterRevenue

$
88,560


$
101,587


$
104,932


$
101,044Income (loss) from operations


(4,304
)


4,824



8,106



7,684Net loss from continuing operations


(18,026
)


(11,212
)


(8,114
)


(9,716
)Net income (loss) from
    discontinued operations


(739
)


136



(479
)


(381
)Net loss


(18,765
)


(11,076
)


(8,593
)


(10,097
)Basic and diluted loss per share:Loss per share 
    continuing operations

$
(0.54
)

$
(0.33
)

$
(0.22
)

$
(0.26
)Income (loss) per
    share  discontinued operations


(0.02
)


0.01



(0.02
)


(0.01
)Loss per share  basic
    and diluted

$
(0.56
)

$
(0.32
)

$
(0.24
)

$
(0.27
)Shares used in computing per share
    amounts


33,377



34,130



36,066



37,788   2005First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterRevenue

$
82,907


$
88,853


$
94,535


$
89,761Income (loss) from operations


(437
)


921



6,239



4,169Net loss from continuing operations


(14,425
)


(14,374
)


(9,680
)


(11,945
)Net income (loss) from
    discontinued operations


158



(140
)


269



(153
)Net loss


(14,267
)


(14,514
)


(9,411
)


(12,098
)Basic and diluted loss per share:Loss per share 
    continuing operations

$
(0.44
)

$
(0.44
)

$
(0.29
)

$
(0.36
)Income (loss) per
    share  discontinued operations










0.01



Loss per share  basic
    and diluted

$
(0.44
)

$
(0.44
)

$
(0.28
)

$
(0.36
)Shares used in computing per share
    amounts


32,172



33,024



33,137



33,172   22.
    Condensed
    Consolidating Financial Statements   F-43




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2006Non-Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
2,753


$
5,779


$



$
8,532Accounts receivable, net


24,801



27,660







52,461Prepaid expenses and other current
    assets


2,894



3,362







6,256Current assets of discontinued
    operations


3,870











3,870Total current assets


34,318



36,801







71,119Property and equipment,
    net


76,117



69,201







145,318Landfill sites, net


223,507



13,831







237,338Goodwill and other intangible
    assets, net


262,056



87,979







350,035Other assets


10,667











10,667Due from affiliates






344



(344
)


Investment in
    subsidiary


167,448







(167,448
)


Non-current assets of
    discontinued operations


50,586











50,586Total assets

$
824,699


$
208,156


$
(167,792
)

$
865,063LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
12,600


$
11,433


$



$
24,033Accrued expenses and other current
    liabilities


39,013



15,463







54,476Short-term financing and current
    portion of long-term debt


3,975











3,975Current liabilities of
    discontinued operations


3,874











3,874Total current liabilities


59,462



26,896







86,358Long-term debt


406,113











406,113Accrued closure, post-closure
    and other obligations


19,087



13,812







32,899Cumulative mandatorily
    redeemable Preferred Stock














Due to affiliates


344







(344
)


Non-current liabilities of
    discontinued operations


336











336Total liabilities


485,342



40,708



(344
)


525,706Shareholders
    equity:Common stock of Waste Services, Inc


438











438Other equity


338,919



167,448



(167,448
)


338,919Total shareholders
    equity


339,357



167,448



(167,448
)


339,357Total liabilities and
    shareholders equity

$
824,699


$
208,156


$
(167,792
)

$
865,063  F-44




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2005Non-Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
3,680


$
5,206


$



$
8,886Accounts receivable, net


21,236



24,145







45,381Prepaid expenses and other current
    assets


1,969



8,094







10,063Current assets of discontinued
    operations


5,252











5,252Total current assets


32,137



37,445







69,582Property and equipment,
    net


53,576



65,909







119,485Landfill sites, net


146,398



10,100







156,498Goodwill and other intangible
    assets, net


221,674



86,195







307,869Other assets


10,262



13,554







23,816Due from affiliates






2,295



(2,295
)


Investment in
    subsidiary


177,883







(177,883
)


Non-current assets of
    discontinued operations


51,139











51,139Total assets

$
693,069


$
215,498


$
(180,178
)

$
728,389LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
14,472


$
11,487


$



$
25,959Accrued expenses and other current
    liabilities


26,276



12,789







39,065Short-term financing and current
    portion of long-term debt


1,365











1,365Current liabilities of
    discontinued operations


1,827











1,827Total current liabilities


43,940



24,276







68,216Long-term debt


284,850











284,850Accrued closure, post-closure
    and other obligations


12,312



13,339







25,651Cumulative mandatorily
    redeemable Preferred Stock


84,971











84,971Due to affiliates


2,295







(2,295
)


Non-current liabilities of
    discontinued operations


210











210Total liabilities


428,578



37,615



(2,295
)


463,898Shareholders
    equity:Common stock of Waste Services, Inc


937











937Other equity


263,554



177,883



(177,883
)


263,554Total shareholders
    equity


264,491



177,883



(177,883
)


264,491Total liabilities and
    shareholders equity

$
693,069


$
215,498


$
(180,178
)

$
728,389  F-45




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2006Non-Guarantors


Guarantors


Eliminations


ConsolidatedRevenue

$
208,095


$
188,028


$



$
396,123Operating and other
    expenses:Cost of operations (exclusive of
    depreciation, depletion and amortization)


142,278



128,176







270,454Selling, general and
    administrative expense (exclusive of depreciation, depletion and
    amortization)


35,525



23,416







58,941Deferred acquisition costs


439



5,173







5,612Depreciation, depletion and
    amortization


25,431



17,382







42,813Foreign exchange gain and other


494



1,499







1,993Equity earnings in investees


(5,598
)






5,598



Income from
    operations


9,526



12,382



(5,598
)


16,310Interest expense


30,506



399







30,905Cumulative mandatorily redeemable
    preferred stock dividends and amortization of issue costs


19,653











19,653Income (loss) from continuing
    operations before income taxes


(40,633
)


11,983



(5,598
)


(34,248
)Income tax provision


6,435



6,385







12,820Net income (loss) from
    continuing operations


(47,068
)


5,598



(5,598
)


(47,068
)Net loss from discontinued
    operations


(1,463
)










(1,463
)Net income (loss)

$
(48,531
)

$
5,598


$
(5,598
)

$
(48,531
)   F-46




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2005Non-Guarantors


Guarantors


Eliminations


ConsolidatedRevenue

$
189,725


$
166,331


$



$
356,056Operating and other
    expenses:Cost of operations (exclusive of
    depreciation, depletion and amortization)


144,662



111,013







255,675Selling, general and
    administrative expense (exclusive of depreciation, depletion and
    amortization)


29,926



23,197







53,123Settlement with sellers of Florida
    Recycling


(4,120
)










(4,120
)Depreciation, depletion and
    amortization


21,305



19,356







40,661Foreign exchange loss (gain) and
    other


(746
)


571







(175
)Equity earnings in investees


(5,264
)






5,264



Income from
    operations


3,962



12,194



(5,264
)


10,892Interest expense


27,950



246







28,196Cumulative mandatorily redeemable
    preferred stock dividends and amortization of issue costs


20,984











20,984Income (loss) from continuing
    operations before income taxes


(44,972
)


11,948



(5,264
)


(38,288
)Income tax provision


5,452



6,684







12,136Net income (loss) from
    continuing operations


(50,424
)


5,264



(5,264
)


(50,424
)Net income from discontinued
    operations


134











134Net income (loss)

$
(50,290
)

$
5,264


$
(5,264
)

$
(50,290
)   F-47




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2004Non-Guarantors


Guarantors


Eliminations


ConsolidatedRevenue

$
144,387


$
142,718


$



$
287,105Operating and other
    expenses:Cost of operations (exclusive of
    depreciation, depletion and amortization)


108,521



96,991







205,512Selling, general and
    administrative expense (exclusive of depreciation, depletion and
    amortization)


28,535



21,796







50,331Settlement with sellers of Florida
    Recycling


(8,635
)










(8,635
)Depreciation, depletion and
    amortization


15,841



16,316







32,157Foreign exchange gain and other


(23
)


(377
)






(400
)Equity earnings in investees


(4,403
)






4,403



Income from
    operations


4,551



7,992



(4,403
)


8,140Interest expense


30,522



321







30,843Change in fair value of warrants






(111
)






(111
)Cumulative mandatorily redeemable
    preferred stock dividends and amortization of issue costs


17,582











17,582Income (loss) from continuing
    operations before income taxes


(43,553
)


7,782



(4,403
)


(40,174
)Income tax provision


3,983



3,604







7,587Net income (loss) from
    continuing operations


(47,536
)


4,178



(4,403
)


(47,761
)Net loss from discontinued
    operations


(618
)










(618
)Income (loss) before cumulative
    effect of change in accounting principle


(48,154
)


4,178



(4,403
)


(48,379
)Cumulative effect of change in
    accounting principle, net of provision for income taxes of $132






225







225Net income (loss) attributable
    to common shareholders

$
(48,154
)

$
4,403


$
(4,403
)

$
(48,154
)   F-48




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2006Non-Guarantors


Guarantors


Eliminations


ConsolidatedCash flows from operating
    activities:Net cash provided by operating
    activities

$
2,213


$
36,723


$



$
38,936Cash flows from investing
    activities:Cash used in business combinations
    and significant asset acquisitions, net of cash acquired


(99,583
)


(3,949
)






(103,532
)Capital expenditures


(24,977
)


(22,308
)






(47,285
)Proceeds from asset sales and
    business divestitures


4,557



596







5,153Deposits for business acquisitions
    and other


(1,626
)










(1,626
)Intercompany






(9,936
)


9,936



Net cash used in continuing
    operations


(121,629
)


(35,597
)


9,936



(147,290
)Net cash used in discontinued
    operations


(1,717
)










(1,717
)Net cash used in investing
    activities


(123,346
)


(35,597
)


9,936



(149,007
)Cash flows from financing
    activities:Proceeds from issuance of debt and
    draws on revolving credit facility


154,000



3,527







157,527Principal repayments of debt and
    capital lease obligations


(33,033
)


(3,993
)






(37,026
)Sale of common shares and warrants


66,500











66,500Proceeds from the exercise of
    options and warrants


165











165Retirement of cumulative
    mandatorily redeemable Preferred Stock


(75,557
)










(75,557
)Fees paid for financing
    transactions


(1,805
)










(1,805
)Intercompany


9,936







(9,936
)


Net cash provided by (used in)
    financing activities


120,206



(466
)


(9,936
)


109,804Effect of exchange rate changes on
    cash and cash equivalents






(87
)






(87
)Increase (decrease) in cash and
    cash equivalents


(927
)


573







(354
)Cash and cash equivalents at the
    beginning of the year


3,680



5,206







8,886Cash and cash equivalents at the
    end of the year

$
2,753


$
5,779


$



$
8,532   F-49




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2005Non-Guarantors


Guarantors


Eliminations


ConsolidatedNet cash provided by (used in)
    operating activities

$
(13,912
)

$
38,565


$



$
24,653Cash flows from investing
    activities:Cash used in business combinations
    and significant asset acquisitions, net of cash acquired


(3,968
)


(497
)






(4,465
)Capital expenditures


(17,526
)


(11,367
)






(28,893
)Proceeds from asset sales and
    business divestitures


2,487



711







3,198Deposits for business acquisitions
    and other


(73
)


(973
)






(1,046
)Intercompany






(23,300
)


23,300



Net cash used in continuing
    operations


(19,080
)


(35,426
)


23,300



(31,206
)Net cash used in discontinued
    operations


(8,305
)










(8,305
)Net cash used in investing
    activities


(27,385
)


(35,426
)


23,300



(39,511
)Cash flows from financing
    activities:Proceeds from issuance of debt and
    draw on revolving credit facility


25,000











25,000Principal repayments of debt and
    capital lease obligations


(16,166
)


(538
)






(16,704
)Sale of common shares and warrants


7,125











7,125Proceeds from the exercise of
    options and warrants


521











521Fees paid for financing
    transactions


(995
)










(995
)Intercompany


23,300







(23,300
)


Net cash provided by (used in)
    financing activities  continuing operations


38,785



(538
)


(23,300
)


14,947Effect of exchange rate changes on
    cash and cash equivalents






321







321Increase (decrease) in cash and
    cash equivalents


(2,512
)


2,922







410Cash and cash equivalents at the
    beginning of the year


6,192



2,284







8,476Cash and cash equivalents at the
    end of the year

$
3,680


$
5,206


$



$
8,886   F-50




---



##### Table of Contents



WASTE
    SERVICES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2004Non-Guarantors


Guarantors


Eliminations


ConsolidatedNet cash provided by (used in)
    operating activities

$
(682
)

$
25,362


$



$
24,680Cash flows from investing
    activities:Cash used in business combinations
    and significant asset acquisitions, net of cash acquired


(154,792
)


(1,124
)






(155,916
)Capital expenditures


(24,773
)


(13,050
)






(37,823
)Proceeds from asset sales and
    business divestitures


14,231











14,231Deposits for business acquisitions
    and other


1,359



(2,910
)






(1,551
)Intercompany






(78,985
)


78,985



Net cash used in continuing
    operations


(163,975
)


(96,069
)


78,985



(181,059
)Net cash used in discontinued
    operations


(17,149
)










(17,149
)Net cash used in investing
    activities


(181,124
)


(96,069
)


78,985



(198,208
)Cash flows from financing
    activities:Proceeds from issuance of debt and
    draw on revolving credit facility


283,000











283,000Principal repayments of debt and
    capital lease obligations


(186,031
)


(1,127
)






(187,158
)Sale of common shares and warrants






53,600







53,600Proceeds from release of
    restricted cash and release of (deposits on) collateral
    supporting letters of credit


14,433



9,908







24,341Proceeds from the exercise of
    options and warrants






1,041







1,041Fees paid for financing
    transactions


(11,218
)


(2,923
)






(14,141
)Intercompany


78,985







(78,985
)


Net cash provided by financing
    activities  continuing operations


179,169



60,499



(78,985
)


160,683Effect of exchange rate changes on
    cash and cash equivalents






273







273Decrease in cash and cash
    equivalents


(2,637
)


(9,935
)






(12,572
)Cash and cash equivalents at the
    beginning of the year


8,829



12,219







21,048Cash and cash equivalents at the
    end of the year

$
6,192


$
2,284


$



$
8,476  F-51