##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2005                                                 
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file number
000-25955


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                                                                                            |  | 01-0780204                              
|(State or other jurisdiction of
    incorporation or organization)                                  |  | (I.R.S. Employer
    Identification No.)
|                                                                                                   
|1122 International Blvd.
    Suite 601, Burlington, Ontario(Address of principal executive offices) |  | L7L 6Z8(Zip Code)                       

Registrants telephone number, including area code:


(905) 319-1237


Securities registered pursuant to Section 12(b) of the
Act:


None


Securities registered pursuant to Section 12(g) of the
Act:


Common Stock, par value $0.01 per share


(Title of Class)


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o þ o


12b-2 o þ














---



##### 










INDEX TO
FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 2005


|                                                         |  |                                                                                                                      |  |      |    | 
|-------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                         |  |                                                                                                                      |  | Page |   
|                                                         |  |                                                                                                                      |  |      |   
|PART I                                                   |  |                                                                                                                      |  |     
|Item 1.                                                  |  | Business                                                                                                             |  |      | 1  | 
|Item 1A.                                                 |  | Risk Factors                                                                                                         |  |      | 9  | 
|Item 1B.                                                 |  | Unresolved Staff Comments                                                                                            |  |      | 14 | 
|Item 2.                                                  |  | Properties                                                                                                           |  |      | 14 | 
|Item 3.                                                  |  | Legal Proceedings                                                                                                    |  |      | 14 | 
|Item 4.                                                  |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 15 | 
|PART II                                                  |  |                                                                                                                      |  |     
|Item 5.                                                  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 16 | 
|Item 6.                                                  |  | Selected Financial Data                                                                                              |  |      | 17 | 
|Item 7.                                                  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 18 | 
|Item 7A.                                                 |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |      | 38 | 
|Item 8.                                                  |  | Financial Statements and Supplementary
    Data                                                                      |  |      | 39 | 
|Item 9.                                                  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |      | 39 | 
|Item 9A.                                                 |  | Controls and Procedures                                                                                              |  |      | 39 | 
|Item 9B.                                                 |  | Other Information                                                                                                    |  |      | 40 | 
|PART III                                                 |  |                                                                                                                      |  |     
|Item 10.                                                 |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 40 | 
|Item 11.                                                 |  | Executive Compensation                                                                                               |  |      | 43 | 
|Item 12.                                                 |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 47 | 
|Item 13.                                                 |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 49 | 
|Item 14.                                                 |  | Principal Accountant Fees and Services                                                                               |  |      | 51 | 
|PART IV                                                  |  |                                                                                                                      |  |     
|Item 15.                                                 |  | Exhibits and Financial Statement
    Schedules                                                                       |  |      | 51 | 
|Agreement between Waste Services, Inc. and Kelso and KEP
|Supplemental Indenture                                  
|List of Subsidiaries                                    
|Consent of BDO Seidman LLP                              
|Consent of Dunwoody                                     
|Rule 15d-14(a) Certification of the CEO                 
|Rule 15d-14(a) Certification of the CFO                 
|Section 906 CEO and CFO Certifications                  



i



---



##### Table of Contents






PART I


CAUTIONARY STATEMENT REGARDING


FORWARD-LOOKING STATEMENTS


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 ability to implement a refinancing plan for our mandatorily
    redeemable preferred stock and to achieve the expected benefits;                                                                        
|
| |  | 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, changes in
    exchange rates and in the financial markets;                                                                                            
|
| |  | changes in accounting standards or pronouncements; and                                                                                                                                                      
|
| |  | construction, equipment delivery or permitting delays for our
    transfer stations or landfills.                                                                                                           

10-K







|        |         
|------- | --------
|Item 1. | Business

Overview




1



---



##### Table of Contents







319-1237.


10-K, 10-Q, 8-K 1-800-SEC-0330.


10-K, 10-Q, 8-K


Our Business Strategy




Maximize Density and Vertical Integration of Operations.


Provide Consistent, Superior Customer Service.


2



---



##### Table of Contents



Maintain a Decentralized Operating Management Structure with
Centralized Controls and Information Systems.




Execute a Disciplined, Disposal-Based Growth Strategy.






| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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
    transfer stations and 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 solid waste services;
|
| |  | establish a leading market position over time in the local
    markets in which we operate; and                                                                                                                
|
| |  | initially secure a disposal facility and become vertically
    integrated with the ability to secure significant waste volume
    that we collect and transfer to our own landfill or transfer
    stations.   

Operations






|                                                     |  |         |   |  |         |  |   |       |  |  |      |  |  |        |    |  |        |  |    |        |  |  |       |  |  |  |    |  |  |  |    | 
|---------------------------------------------------- |  | ------- | - |  | ------- |  | - | ----- |  |  | ---- |  |  | ------ | -- |  | ------ |  | -- | ------ |  |  | ----- |  |  |  | -- |  |  |  | -- | 
|                                                     |  |         |   |  |         |  |   | Total |  |  | East |  |  | West   |    |  | Total  |  |    |       
|                                                     |  | Florida |   |  | Arizona |  |   | Texas |  |  | U.S. |  |  | Canada |    |  | Canada |  |    | Canada |  |  | Total | 
|                                                     |  |         |   |  |         |  |   |       |  |  |      |  |  |        |    |  |        |  |    |        |  |  |       | 
|Collection operations and other specialized services |  |         | 9 |  |         |  | 1 |       |  |  | 1    |  |  |        | 11 |  |        |  | 14 |        |  |  | 9     |  |  |  | 23 |  |  |  | 34 | 
|Transfer stations                                    |  |         | 3 |  |         |  | 2 |       |  |  | 1    |  |  |        | 6  |  |        |  | 8  |        |  |  | 2     |  |  |  | 10 |  |  |  | 16 | 
|Recycling facilities                                 |  |         | 4 |  |         |  |  |       |  |  |     |  |  |        | 4  |  |        |  | 5  |        |  |  |      |  |  |  | 5  |  |  |  | 9  | 
|Landfills                                            |  |         | 2 |  |         |  | 1 |       |  |  | 1    |  |  |        | 4  |  |        |  | 1  |        |  |  | 2     |  |  |  | 3  |  |  |  | 7  | 



3



---



##### Table of Contents





| |                    
| | -------------------
| | Collection Services



Commercial and Industrial Collection.




Residential Collection.








| |                          
| | -------------------------
| | Transfer Station Services





4



---



##### Table of Contents





| |                                              
| | ---------------------------------------------
| | Commercial and Residential Recycling Services





| |                           
| | --------------------------
| | Landfill Disposal Services







| |                           
| | --------------------------
| | Other Specialized Services



Local/ Regional Operating Structure




day-to


Sales and Marketing




5



---



##### Table of Contents





Competition










Government Regulation










6



---



##### Table of Contents

















7



---



##### Table of Contents







Employees




Executive Officers




|                       |  |     |    |  |          |                                                                   |       |                               
|---------------------- |  | --- | -- |  | -------- | ----------------------------------------------------------------- | ----- | ------------------------------
|Name                   |  | Age |    |  | Position |                                                                   | Since
|                       |  |     |    |  |          |                                                                   |      
|David Sutherland-Yoest |  |     | 49 |  |          | Chairman and Chief Executive Officer                              |       | September 6, 2001             
|Charles A. Wilcox      |  |     | 53 |  |          | President and Chief Operating Officer                             |       | July 14, 2004                 
|Ivan R. Cairns         |  |     | 60 |  |          | Executive Vice President, General Counsel and Secretary           |       | January 5, 2004               
|Mark A. Pytosh         |  |     | 41 |  |          | Executive Vice President
    Chief Financial Officer              |       | February 23, 2004 May 18, 2005
|Brian A. Goebel        |  |     | 38 |  |          | Vice President, Chief Accounting Officer and Corporate Controller |       | October 1, 2003               



David Sutherland-Yoest 2 2


Charles A. Wilcox


Ivan R. Cairns


8



---



##### Table of Contents





Mark A. Pytosh


Brian A. Goebel







|         |             
|-------- | ------------
|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









9



---



##### Table of Contents





| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | Our business is capital intensive and may consume cash in
    excess of cash flow from our operations and borrowings









| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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









| |                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Any failure to maintain the required financial assurance
    or insurance to support existing or future service contracts may
    prevent us from meeting our contractual obligations, and we may
    be unable to bid on new contracts or retain existing contracts
    resulting in reduced operating revenue and earnings



10



---



##### 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





11



---



##### Table of Contents







| |                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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





| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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



---



##### Table of Contents





| |                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on third parties for disposal of solid waste and
    if we cannot maintain disposal arrangements with them we could
    incur significant costs that would result in reduced operating
    margins and revenue





| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | 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



13



---



##### Table of Contents





| |                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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





| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 |          |  | Recycling |            |  | 
|       |  | Administrative |   |            | Operations |  |          | Stations |  |           | Facilities |  |  | Landfills |  
|       |  |                |   |            |            |  |          |          |  |           |            |  |  |           |  
|Owned  |  |                |  |            |            |  | 12       |          |  |           | 3          |  |  |           | 3 |  |  |  | 7 | 
|Leased |  |                | 4 |            |            |  | 21       |          |  |           | 13         |  |  |           | 6 |  |  |  |  | 
|       |  |                |   |            |            |  |          |          |  |           |            |  |  |           |  
|Total  |  |                | 4 |            |            |  | 33       |          |  |           | 16         |  |  |           | 9 |  |  |  | 7 | 
|       |  |                |   |            |            |  |          |          |  |           |            |  |  |           |  








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings



14



---



##### Table of Contents




















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





|                 |  |            |  |           
|---------------- |  | ---------- |  | ----------
|Director         |  | For        |  | Withheld  
|                 |  |            |  |           
|Lucien Rémillard |  | 73,787,206 |  | 11,776,106
|Jack E. Short    |  | 76,579,740 |  | 8,983,572 

15



---



##### Table of Contents








PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities

Market Information




|                             |                |      |   |      |     |  |   |      | 
|---------------------------- | -------------- | ---- | - | ---- | --- |  | - | ---- | 
|                             |                | High |   |      | Low | 
|                             |                |      |   |      |     | 
|Year ended December 31, 2005 |                |      |   |      |     |  |   |     
|                             | First Quarter  |      | $ | 3.82 |     |  | $ | 3.13 | 
|                             | Second Quarter |      |   | 4.33 |     |  |   | 3.32 | 
|                             | Third Quarter  |      |   | 4.04 |     |  |   | 3.25 | 
|                             | Fourth Quarter |      |   | 3.76 |     |  |   | 3.27 | 
|Year ended December 31, 2004 |                |      |   |      |     |  |   |     
|                             | First Quarter  |      | $ | 6.06 |     |  | $ | 5.11 | 
|                             | Second Quarter |      |   | 5.37 |     |  |   | 4.51 | 
|                             | Third Quarter  |      |   | 3.00 |     |  |   | 1.95 | 
|                             | Fourth Quarter |      |   | 3.91 |     |  |   | 2.41 | 

Holders




Dividends






Recent Sales of Unregistered Securities




16



---



##### Table of Contents





Repurchases of Securities






|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                                                                |  |                                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                                                |  | For Each of the Years Ended December 31, |        
|                                                                                                |  |                                          |        
|                                                                                                |  | 2005                                     |         |   | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001 |        
|                                                                                                |  |                                          |         |   |      |   |         |      |  |   |         |   |  |      |        
|                                                                                                |  | (In thousands, except per share amounts) |        
|Statement of Operations and Cash Flow Data:                                                     |  |                                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Revenue                                                                                         |  | $                                        | 382,446 |   |      | $ | 310,785 |      |  | $ | 126,750 |   |  | $    | 98,846  |   |  | $ | 93,241  |  
|Income (loss) from operations                                                                   |  |                                          | 11,026  |   |      |   | 7,517   |      |  |   | (5,046  | ) |  |      | 9,567   |   |  |   | (8,671  | )
|Income (loss) before cumulative effect of change in accounting
    principle                    |  |                                          | (50,290 | ) |      |   | (48,379 | )    |  |   | (22,898 | ) |  |      | 2,127   |   |  |   | (19,668 | )
|Cumulative effect of change in accounting principle                                             |  |                                          |        |   |      |   | 225     |      |  |   | 518     |   |  |      |        |   |  |   |        |  
|Net income (loss)                                                                               |  |                                          | (50,290 | ) |      |   | (48,154 | )    |  |   | (22,380 | ) |  |      | 2,127   |   |  |   | (19,668 | )
|Net loss attributable to common
    shareholders                                                |  |                                          | (50,290 | ) |      |   | (48,154 | )    |  |   | (76,952 | ) |  |      | (12,590 | ) |  |   | (19,668 | )
|Basic and diluted loss per share before cumulative effect of
    change in accounting principle |  |                                          | (0.51   | ) |      |   | (0.55   | )    |  |   | (1.99   | ) |  |      | (0.39   | ) |  |   | (1.60   | )
|Cumulative effect of change in accounting principle                                             |  |                                          |        |   |      |   |        |      |  |   | 0.01    |   |  |      |        |   |  |   |        |  
|Basic and diluted loss per share                                                                |  |                                          | (0.51   | ) |      |   | (0.55   | )    |  |   | (1.98   | ) |  |      | (0.39   | ) |  |   | (1.60   | )
|Weighted average common shares outstanding  basic and
    diluted                              |  |                                          | 98,640  |   |      |   | 88,232  |      |  |   | 38,782  |   |  |      | 32,414  |   |  |   | 12,260  |  
|Cash flows from operating activities                                                            |  |                                          | 24,623  |   |      |   | 24,697  |      |  |   | 9,446   |   |  |      | 13,654  |   |  |   | 6,685   |  
|Capital expenditures                                                                            |  |                                          | 33,573  |   |      |   | 46,209  |      |  |   | 24,438  |   |  |      | 12,157  |   |  |   | 3,778   |  

17



---



##### Table of Contents



|                                                                                                              |  |                    |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                                                                                                              |  | As of December 31, |        
|                                                                                                              |  |                    |        
|                                                                                                              |  | 2005               |         |  | 2004 |   |         | 2003 |  |   | 2002    |  |  | 2001 |        
|                                                                                                              |  |                    |         |  |      |   |         |      |  |   |         |  |  |      |        
|                                                                                                              |  | (In thousands)     |        
|Balance Sheet Data:                                                                                           |  |                    |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Cash and cash equivalents                                                                                     |  | $                  | 8,887   |  |      | $ | 8,507   |      |  | $ | 21,062  |  |  | $    | 1,775   |  |  | $ | 2,469   | 
|Property, equipment and landfill sites, net                                                                   |  |                    | 305,391 |  |      |   | 300,083 |      |  |   | 192,062 |  |  |      | 58,994  |  |  |   | 36,708  | 
|Goodwill and other intangible assets, net                                                                     |  |                    | 329,471 |  |      |   | 327,756 |      |  |   | 163,380 |  |  |      | 66,596  |  |  |   | 55,089  | 
|Total assets                                                                                                  |  |                    | 728,389 |  |      |   | 720,583 |      |  |   | 470,998 |  |  |      | 149,022 |  |  |   | 110,652 | 
|Total debt and capital lease obligations (exclusive of
    cumulative mandatorily redeemable Preferred Stock) |  |                    | 286,669 |  |      |   | 278,363 |      |  |   | 177,449 |  |  |      | 53,645  |  |  |   | 53,005  | 
|Cumulative mandatorily redeemable Preferred Stock                                                             |  |                    | 84,971  |  |      |   | 64,971  |      |  |   | 48,205  |  |  |      |        |  |  |   |        | 
|Total shareholders equity                                                                                    |  |                    | 264,491 |  |      |   | 298,776 |      |  |   | 201,117 |  |  |      | 77,817  |  |  |   | 45,913  | 






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Overview




Sources of Revenue










18



---



##### Table of Contents









Expense Structure










units-of not-to




19



---



##### Table of Contents





Recent Developments




Critical Accounting Estimates




| |        
| | -------
| | General







| |                    
| | -------------------
| | Revenue Recognition





| |                                                            
| | -----------------------------------------------------------
| | Accounts Receivable and Allowance for Doubtful
    Accounts



20



---



##### Table of Contents







| |                                   
| | ----------------------------------
| | Business Acquisitions and Goodwill











| |                  
| | -----------------
| | Long-Lived Assets



21



---



##### Table of Contents











| |               
| | --------------
| | Landfill Sites



units-of


units-of








22



---



##### Table of Contents









|              |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         |  |  |        |   |  |  |         | 
|------------- | --------------------------- | ----------------- |  | ------- | --------- |  | ---------- | --------- |  |  | ----------- | -------- |  | -------- |  | ----- | ------- |  |  | ------ | - |  |  | ------- | 
|              |                             | December 31, 2005 | 
|              |                             |                   | 
|              |                             | Balance,          |  |         |           |  | Changes in |           |  |  |             | Balance, | 
|              |                             | Beginning         |  |         | Landfills |  |            | Landfills |  |  | Engineering |          |  | Airspace |  |       | End     | 
|              |                             | of Year           |  |         | Acquired  |  |            | Divested  |  |  | Estimates   |          |  | Consumed |  |       | of Year | 
|              |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         | 
|United States |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         |  |  |        |   |  |  |        
|              | Permitted capacity          |                   |  | 268,883 |           |  |            |          |  |  |             |         |  |          |  | (414  | )       |  |  | (2,381 | ) |  |  | 266,088 | 
|              | Probable expansion capacity |                   |  | 18,300  |           |  |            |          |  |  |             |         |  |          |  |      |         |  |  |       |   |  |  | 18,300  | 
|              |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         | 
|              | Total available airspace    |                   |  | 287,183 |           |  |            |          |  |  |             |         |  |          |  | (414  | )       |  |  | (2,381 | ) |  |  | 284,388 | 
|              |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         | 
|              | Number of sites             |                   |  | 4       |           |  |            |          |  |  |             |         |  |          |  |      |         |  |  |       |   |  |  | 4       | 
|Canada        |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         |  |  |        |   |  |  |        
|              | Permitted capacity          |                   |  | 11,642  |           |  |            |          |  |  |             |         |  |          |  | 1,115 |         |  |  | (879   | ) |  |  | 11,878  | 
|              | Probable expansion capacity |                   |  |        |           |  |            |          |  |  |             |         |  |          |  |      |         |  |  |       |   |  |  |        | 
|              |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         | 
|              | Total available airspace    |                   |  | 11,642  |           |  |            |          |  |  |             |         |  |          |  | 1,115 |         |  |  | (879   | ) |  |  | 11,878  | 
|              |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         | 
|              | Number of sites             |                   |  | 3       |           |  |            |          |  |  |             |         |  |          |  |      |         |  |  |       |   |  |  | 3       | 
|Total         |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         |  |  |        |   |  |  |        
|              | Permitted capacity          |                   |  | 280,525 |           |  |            |          |  |  |             |         |  |          |  | 701   |         |  |  | (3,260 | ) |  |  | 277,966 | 
|              | Probable expansion capacity |                   |  | 18,300  |           |  |            |          |  |  |             |         |  |          |  |      |         |  |  |       |   |  |  | 18,300  | 
|              |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         | 
|              | Total available airspace    |                   |  | 298,825 |           |  |            |          |  |  |             |         |  |          |  | 701   |         |  |  | (3,260 | ) |  |  | 296,266 | 
|              |                             |                   |  |         |           |  |            |           |  |  |             |          |  |          |  |       |         | 
|              | Number of sites             |                   |  | 7       |           |  |            |          |  |  |             |         |  |          |  |      |         |  |  |       |   |  |  | 7       | 

23



---



##### Table of Contents



|              |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         |  |  |        |   |  |  |         | 
|------------- | --------------------------- | ----------------- |  | ------ | --------- |  | ---------- | --------- |  |  | ----------- | -------- | - | -------- |  | - | ------- |  |  | ------ | - |  |  | ------- | 
|              |                             | December 31, 2004 | 
|              |                             |                   | 
|              |                             | Balance,          |  |        |           |  | Changes in |           |  |  |             | Balance, |  
|              |                             | Beginning         |  |        | Landfills |  |            | Landfills |  |  | Engineering |          |   | Airspace |  |   | End     | 
|              |                             | of Year           |  |        | Acquired  |  |            | Divested  |  |  | Estimates   |          |   | Consumed |  |   | of Year | 
|              |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         | 
|United States |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         |  |  |        |   |  |  |        
|              | Permitted capacity          |                   |  | 26,084 |           |  |            | 244,000   |  |  |             | (94      | ) |          |  |  |         |  |  | (1,107 | ) |  |  | 268,883 | 
|              | Probable expansion capacity |                   |  | 18,300 |           |  |            |          |  |  |             |         |   |          |  |  |         |  |  |       |   |  |  | 18,300  | 
|              |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         | 
|              | Total available airspace    |                   |  | 44,384 |           |  |            | 244,000   |  |  |             | (94      | ) |          |  |  |         |  |  | (1,107 | ) |  |  | 287,183 | 
|              |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         | 
|              | Number of sites             |                   |  | 3      |           |  |            | 2         |  |  |             | (1       | ) |          |  |   |         |  |  |        |   |  |  | 4       | 
|Canada        |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         |  |  |        |   |  |  |        
|              | Permitted capacity          |                   |  | 10,871 |           |  |            | 1,430     |  |  |             |         |   |          |  |  |         |  |  | (659   | ) |  |  | 11,642  | 
|              | Probable expansion capacity |                   |  |       |           |  |            |          |  |  |             |         |   |          |  |  |         |  |  |       |   |  |  |        | 
|              |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         | 
|              | Total available airspace    |                   |  | 10,871 |           |  |            | 1,430     |  |  |             |         |   |          |  |  |         |  |  | (659   | ) |  |  | 11,642  | 
|              |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         | 
|              | Number of sites             |                   |  | 2      |           |  |            | 1         |  |  |             |         |   |          |  |  |         |  |  |       |   |  |  | 3       | 
|Total         |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         |  |  |        |   |  |  |        
|              | Permitted capacity          |                   |  | 36,955 |           |  |            | 245,430   |  |  |             | (94      | ) |          |  |  |         |  |  | (1,766 | ) |  |  | 280,525 | 
|              | Probable expansion capacity |                   |  | 18,300 |           |  |            |          |  |  |             |         |   |          |  |  |         |  |  |       |   |  |  | 18,300  | 
|              |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         | 
|              | Total available airspace    |                   |  | 55,255 |           |  |            | 245,430   |  |  |             | (94      | ) |          |  |  |         |  |  | (1,766 | ) |  |  | 298,825 | 
|              |                             |                   |  |        |           |  |            |           |  |  |             |          |   |          |  |   |         | 
|              | Number of sites             |                   |  | 5      |           |  |            | 3         |  |  |             | (1       | ) |          |  |  |         |  |  |       |   |  |  | 7       | 

|              |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         |  |  |      |   |  |  |        | 
|------------- | --------------------------- | ----------------- |  | ----- | --------- |  | ---------- | --------- |  |  | ----------- | -------- |  | -------- |  | - | ------- |  |  | ---- | - |  |  | ------ | 
|              |                             | December 31, 2003 | 
|              |                             |                   | 
|              |                             | Balance,          |  |       |           |  | Changes in |           |  |  |             | Balance, | 
|              |                             | Beginning         |  |       | Landfills |  |            | Landfills |  |  | Engineering |          |  | Airspace |  |   | End     | 
|              |                             | of Year           |  |       | Acquired  |  |            | Divested  |  |  | Estimates   |          |  | Consumed |  |   | of Year | 
|              |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         | 
|United States |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         |  |  |      |   |  |  |       
|              | Permitted capacity          |                   |  |      |           |  |            | 26,084    |  |  |             |         |  |          |  |  |         |  |  |     |   |  |  | 26,084 | 
|              | Probable expansion capacity |                   |  |      |           |  |            | 18,300    |  |  |             |         |  |          |  |  |         |  |  |     |   |  |  | 18,300 | 
|              |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         | 
|              | Total available airspace    |                   |  |      |           |  |            | 44,384    |  |  |             |         |  |          |  |  |         |  |  |     |   |  |  | 44,384 | 
|              |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         | 
|              | Number of sites             |                   |  |      |           |  |            | 3         |  |  |             |         |  |          |  |  |         |  |  |     |   |  |  | 3      | 
|Canada        |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         |  |  |      |   |  |  |       
|              | Permitted capacity          |                   |  | 7,618 |           |  |            | 3,863     |  |  |             |         |  |          |  |  |         |  |  | (610 | ) |  |  | 10,871 | 
|              | Probable expansion capacity |                   |  |      |           |  |            |          |  |  |             |         |  |          |  |  |         |  |  |     |   |  |  |       | 
|              |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         | 
|              | Total available airspace    |                   |  | 7,618 |           |  |            | 3,863     |  |  |             |         |  |          |  |  |         |  |  | (610 | ) |  |  | 10,871 | 
|              |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         | 
|              | Number of sites             |                   |  | 2     |           |  |            |          |  |  |             |         |  |          |  |  |         |  |  |     |   |  |  | 2      | 
|Total         |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         |  |  |      |   |  |  |       
|              | Permitted capacity          |                   |  | 7,618 |           |  |            | 29,947    |  |  |             |         |  |          |  |  |         |  |  | (610 | ) |  |  | 36,955 | 
|              | Probable expansion capacity |                   |  |      |           |  |            | 18,300    |  |  |             |         |  |          |  |  |         |  |  |     |   |  |  | 18,300 | 
|              |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         | 
|              | Total available airspace    |                   |  | 7,618 |           |  |            | 48,247    |  |  |             |         |  |          |  |  |         |  |  | (610 | ) |  |  | 55,255 | 
|              |                             |                   |  |       |           |  |            |           |  |  |             |          |  |          |  |   |         | 
|              | Number of sites             |                   |  | 2     |           |  |            | 3         |  |  |             |         |  |          |  |  |         |  |  |     |   |  |  | 5      | 



| |                                             
| | --------------------------------------------
| | Accrued Closure and Post-Closure Obligations



24



---



##### Table of Contents









| |                            
| | ---------------------------
| | Accounting for Income Taxes





| |                
| | ---------------
| | Risk Management

U.S.-based




| |                                                   
| | --------------------------------------------------
| | Translation and Re-Measurement of Foreign Currency



25



---



##### Table of Contents





Operating Results




| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | Results of Operations for each of the Three Years Ended
    December 31, 2005, 2004 and 2003



|                              |                                              |      |         |         |        |  |       |       |   |   |         |         |  |  |       |      |   |   |         |         |   |  |       |      |  
|----------------------------- | -------------------------------------------- | ---- | ------- | ------- | ------ |  | ----- | ----- | - | - | ------- | ------- |  |  | ----- | ---- | - | - | ------- | ------- | - |  | ----- | ---- | -
|                              |                                              | 2005 |        
|                              |                                              |      |        
|                              |                                              | U.S. |         |         | Canada |  |       | Total |  
|                              |                                              |      |         |         |        |  |       |       |  
|Revenue                       |                                              | $    | 216,115 |         |        |  | 100.0 | %     |   | $ | 166,331 |         |  |  | 100.0 | %    |   | $ | 382,446 |         |   |  | 100.0 | %   
|Operating expenses:           |                                              |      |         |         |        |  |       |       |   |   |         |         |  |  |       |      |   |   |         |         |   |  |       |     
|                              | Cost of operations                           |      |         | 165,316 |        |  |       | 76.5  | % |   |         | 111,013 |  |  |       | 66.8 | % |   |         | 276,329 |   |  |       | 72.3 | %
|                              | Selling, general and administrative expense  |      |         | 33,288  |        |  |       | 15.4  | % |   |         | 23,197  |  |  |       | 14.0 | % |   |         | 56,485  |   |  |       | 14.8 | %
|                              | Settlement with sellers of Florida Recycling |      |         | (4,120  | )      |  |       | -1.9  | % |   |         |        |  |  |       | 0.0  | % |   |         | (4,120  | ) |  |       | -1.1 | %
|                              | Depreciation, depletion and amortization     |      |         | 23,598  |        |  |       | 10.9  | % |   |         | 19,356  |  |  |       | 11.6 | % |   |         | 42,954  |   |  |       | 11.2 | %
|                              | Foreign exchange loss (gain) and other       |      |         | (799    | )      |  |       | -0.4  | % |   |         | 571     |  |  |       | 0.3  | % |   |         | (228    | ) |  |       | -0.1 | %
|                              |                                              |      |         |         |        |  |       |       |   |   |         |         |  |  |       |      |   |  
|Income (loss) from operations |                                              | $    | (1,168  | )       |        |  | -0.5  | %     |   | $ | 12,194  |         |  |  | 7.3   | %    |   | $ | 11,026  |         |   |  | 2.9   | %   
|                              |                                              |      |         |         |        |  |       |       |   |   |         |         |  |  |       |      |   |  

|                              |                                              |      |         |         |        |  |       |       |   |   |         |        |   |  |       |      |   |   |         |         |   |  |       |      |  
|----------------------------- | -------------------------------------------- | ---- | ------- | ------- | ------ |  | ----- | ----- | - | - | ------- | ------ | - |  | ----- | ---- | - | - | ------- | ------- | - |  | ----- | ---- | -
|                              |                                              | 2004 |        
|                              |                                              |      |        
|                              |                                              | U.S. |         |         | Canada |  |       | Total |  
|                              |                                              |      |         |         |        |  |       |       |  
|Revenue                       |                                              | $    | 168,067 |         |        |  | 100.0 | %     |   | $ | 142,718 |        |   |  | 100.0 | %    |   | $ | 310,785 |         |   |  | 100.0 | %   
|Operating expenses:           |                                              |      |         |         |        |  |       |       |   |   |         |        |   |  |       |      |   |   |         |         |   |  |       |     
|                              | Cost of operations                           |      |         | 126,406 |        |  |       | 75.2  | % |   |         | 96,991 |   |  |       | 68.0 | % |   |         | 223,397 |   |  |       | 71.9 | %
|                              | Selling, general and administrative expense  |      |         | 32,883  |        |  |       | 19.6  | % |   |         | 21,796 |   |  |       | 15.3 | % |   |         | 54,679  |   |  |       | 17.6 | %
|                              | Settlement with sellers of Florida Recycling |      |         | (8,635  | )      |  |       | -5.1  | % |   |         |       |   |  |       | 0.0  | % |   |         | (8,635  | ) |  |       | -2.8 | %
|                              | Depreciation, depletion and amortization     |      |         | 17,888  |        |  |       | 10.6  | % |   |         | 16,316 |   |  |       | 11.4 | % |   |         | 34,204  |   |  |       | 11.0 | %
|                              | Foreign exchange gain and other              |      |         |        |        |  |       | 0.0   | % |   |         | (377   | ) |  |       | -0.3 | % |   |         | (377    | ) |  |       | -0.1 | %
|                              |                                              |      |         |         |        |  |       |       |   |   |         |        |   |  |       |      |   |  
|Income (loss) from operations |                                              | $    | (475    | )       |        |  | -0.3  | %     |   | $ | 7,992   |        |   |  | 5.6   | %    |   | $ | 7,517   |         |   |  | 2.4   | %   
|                              |                                              |      |         |         |        |  |       |       |   |   |         |        |   |  |       |      |   |  

26



---



##### Table of Contents



|                     |                                             |      |        |       |        |  |        |       |   |   |         |        |  |  |       |      |   |   |         |        |  |  |       |      |  
|-------------------- | ------------------------------------------- | ---- | ------ | ----- | ------ |  | ------ | ----- | - | - | ------- | ------ |  |  | ----- | ---- | - | - | ------- | ------ |  |  | ----- | ---- | -
|                     |                                             | 2003 |       
|                     |                                             |      |       
|                     |                                             | U.S. |        |       | Canada |  |        | Total |  
|                     |                                             |      |        |       |        |  |        |       |  
|Revenue              |                                             | $    | 1,765  |       |        |  | 100.0  | %     |   | $ | 124,985 |        |  |  | 100.0 | %    |   | $ | 126,750 |        |  |  | 100.0 | %   
|Operating expenses:  |                                             |      |        |       |        |  |        |       |   |   |         |        |  |  |       |      |   |   |         |        |  |  |       |     
|                     | Cost of operations                          |      |        | 1,300 |        |  |        | 73.7  | % |   |         | 83,377 |  |  |       | 66.7 | % |   |         | 84,677 |  |  |       | 66.8 | %
|                     | Selling, general and administrative expense |      |        | 4,617 |        |  |        | 261.6 | % |   |         | 25,815 |  |  |       | 20.6 | % |   |         | 30,432 |  |  |       | 24.0 | %
|                     | Depreciation, depletion and amortization    |      |        | 200   |        |  |        | 11.3  | % |   |         | 14,727 |  |  |       | 11.8 | % |   |         | 14,927 |  |  |       | 11.8 | %
|                     | Foreign exchange loss and other             |      |        |      |        |  |        | 0.0   | % |   |         | 1,760  |  |  |       | 1.4  | % |   |         | 1,760  |  |  |       | 1.4  | %
|                     |                                             |      |        |       |        |  |        |       |   |   |         |        |  |  |       |      |   |  
|Loss from operations |                                             | $    | (4,352 | )     |        |  | -246.6 | %     |   | $ | (694    | )      |  |  | -0.5  | %    |   | $ | (5,046  | )      |  |  | -4.0  | %   
|                     |                                             |      |        |       |        |  |        |       |   |   |         |        |  |  |       |      |   |  



| |        
| | -------
| | Revenue



|                             |  |      |         |   |      |  |       |      |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|---------------------------- |  | ---- | ------- | - | ---- |  | ----- | ---- |  | - | ------- | - |  |  | ----- | - |  | - | ------- | - |  |  | ----- | -
|                             |  | 2005 |         |   | 2004 |  |       | 2003 | 
|                             |  |      |         |   |      |  |       |      | 
|Collection                   |  | $    | 317,687 |   |      |  | 76.6  | %    |  | $ | 259,983 |   |  |  | 78.3  | % |  | $ | 103,215 |   |  |  | 74.0  | %
|Landfill disposal            |  |      | 44,913  |   |      |  | 10.8  | %    |  |   | 27,101  |   |  |  | 8.2   | % |  |   | 13,173  |   |  |  | 9.4   | %
|Transfer station             |  |      | 38,055  |   |      |  | 9.2   | %    |  |   | 27,892  |   |  |  | 8.4   | % |  |   | 17,315  |   |  |  | 12.4  | %
|Material recovery facilities |  |      | 10,306  |   |      |  | 2.5   | %    |  |   | 10,531  |   |  |  | 3.2   | % |  |   | 4,859   |   |  |  | 3.5   | %
|Other specialized services   |  |      | 3,546   |   |      |  | 0.9   | %    |  |   | 6,402   |   |  |  | 1.9   | % |  |   | 955     |   |  |  | 0.7   | %
|                             |  |      |         |   |      |  |       |      |  |   |         |   |  |  |       |   |  |  
|                             |  |      | 414,507 |   |      |  | 100.0 | %    |  |   | 331,909 |   |  |  | 100.0 | % |  |   | 139,517 |   |  |  | 100.0 | %
|Intercompany elimination     |  |      | (32,061 | ) |      |  |       |      |  |   | (21,124 | ) |  |  |       |   |  |   | (12,767 | ) |  |  |       |  
|                             |  |      |         |   |      |  |       |      |  |   |         |   |  |  |       |   |  |  
|                             |  | $    | 382,446 |   |      |  |       |      |  | $ | 310,785 |   |  |  |       |   |  | $ | 126,750 |   |  |  |       |  
|                             |  |      |         |   |      |  |       |      |  |   |         |   |  |  |       |   |  |  



|     |  |         |         |  |        |           |         |            |  |   |               |  |  |   |         | 
|---- |  | ------- | ------- |  | ------ | --------- | ------- | ---------- |  | - | ------------- |  |  | - | ------- | 
|     |  |         |         |  |        | All Other |         |            | 
|     |  | Florida |         |  | Canada |           |         | Operations |  |   | Total Revenue | 
|     |  |         |         |  |        |           |         |            |  |   |               | 
|2005 |  | $       | 187,041 |  |        | $         | 166,331 |            |  | $ | 29,074        |  |  | $ | 382,446 | 
|2004 |  |         | 144,089 |  |        |           | 142,718 |            |  |   | 23,978        |  |  |   | 310,785 | 
|2003 |  |         |        |  |        |           | 124,985 |            |  |   | 1,765         |  |  |   | 126,750 | 





27



---



##### Table of Contents













| |                   
| | ------------------
| | Cost of Operations











28



---



##### Table of Contents







| |                                            
| | -------------------------------------------
| | Selling, General and Administrative Expense









| |                                             
| | --------------------------------------------
| | Settlement with sellers of Florida Recycling



29



---



##### Table of Contents







| |                                         
| | ----------------------------------------
| | Depreciation, Depletion and Amortization







| |                                       
| | --------------------------------------
| | Foreign Exchange Loss (Gain) and Other





| |                 
| | ----------------
| | Interest Expense



|                                                      |  |      |        |  |      |   |        |      |  |   |        | 
|----------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                      |  | 2005 |        |  | 2004 |   |        | 2003 | 
|                                                      |  |      |        |  |      |   |        |      | 
|Preferred Stock and amortization of issue costs       |  | $    | 20,984 |  |      | $ | 17,582 |      |  | $ | 10,161 | 
|Credit facility and Senior Subordinated Note interest |  |      | 25,374 |  |      |   | 19,858 |      |  |   | 4,011  | 
|Amortization of debt issue costs                      |  |      | 1,408  |  |      |   | 10,294 |      |  |   | 3,281  | 
|Capitalized interest                                  |  |      |       |  |      |   | (178   | )    |  |   |       | 
|Other interest expense                                |  |      | 1,414  |  |      |   | 864    |      |  |   | 986    | 
|                                                      |  |      |        |  |      |   |        |      | 
|                                                      |  | $    | 49,180 |  |      | $ | 48,420 |      |  | $ | 18,439 | 
|                                                      |  |      |        |  |      |   |        |      | 



30



---



##### Table of Contents





364-day




| |                                                           
| | ----------------------------------------------------------
| | Changes in fair value of warrants pending
    registration





| |                               
| | ------------------------------
| | Income Tax Provision (Benefit)



start-up


Liquidity and Capital Resources






| |                                 
| | --------------------------------
| | Senior Secured Credit Facilities



31



---



##### Table of Contents













|               |  |                      |           |                      |                         |  |           |                         |  |  |           | 
|-------------- |  | -------------------- | --------- | -------------------- | ----------------------- |  | --------- | ----------------------- |  |  | --------- | 
|               |  |                      |           | Maximum Consolidated |                         |  |          
|               |  | Maximum Consolidated |           |                      | Senior Secured Leverage |  |           | Minimum Consolidated    | 
|Fiscal Quarter |  | Leverage Ratio       |           |                      | Ratio                   |  |           | Interest Coverage Ratio | 
|               |  |                      |           |                      |                         |  |           |                         | 
|FQ1 2006       |  |                      | 5.25:1.00 |                      |                         |  | 2.25:1.00 |                         |  |  | 2.00:1.00 | 
|FQ2 2006       |  |                      | 5.25:1.00 |                      |                         |  | 2.25:1.00 |                         |  |  | 2.00:1.00 | 
|FQ3 2006       |  |                      | 5.00:1.00 |                      |                         |  | 2.25:1.00 |                         |  |  | 2.00:1.00 | 
|FQ4 2006       |  |                      | 4.75:1.00 |                      |                         |  | 2.25:1.00 |                         |  |  | 2.25:1.00 | 



32



---



##### Table of Contents





| |                          
| | -------------------------
| | Senior Subordinated Notes

1 2










| |                  
| | -----------------
| | Equity Placements





33



---



##### Table of Contents





| |                                                
| | -----------------------------------------------
| | Cumulative Mandatory Redeemable Preferred Stock









| |                      
| | ---------------------
| | Migration Transaction



34



---



##### Table of Contents













| |                                   
| | ----------------------------------
| | Surety Bonds and Letters of Credit





| |           
| | ----------
| | Cash Flows





| |                                     
| | ------------------------------------
| | Cash Flows from Operating Activities







| |                                        
| | ---------------------------------------
| | Cash Flows used in Investing Activities



35



---



##### Table of Contents









| |                                     
| | ------------------------------------
| | Cash Flows from Financing Activities







| |                              
| | -----------------------------
| | New Accounting Pronouncements







| |            
| | -----------
| | Seasonality



36



---



##### Table of Contents







| |                            
| | ---------------------------
| | Off-Balance Sheet Financing





| |                                              
| | ---------------------------------------------
| | Tabular Disclosure of Contractual Obligations



|                              |                                                      |      |        |       |      |   |       |       |  |   |       |          |  |      |         |         |       |   |        |        |  |   |         |         |  |   |         |         | 
|----------------------------- | ---------------------------------------------------- | ---- | ------ | ----- | ---- | - | ----- | ----- |  | - | ----- | -------- |  | ---- | ------- | ------- | ----- | - | ------ | ------ |  | - | ------- | ------- |  | - | ------- | ------- | 
|                              |                                                      |      |        |       |      |   |       |       |  |   |       | Beyond 5 |  |      |        
|                              |                                                      | 2006 |        |       | 2007 |   |       | 2008  |  |   | 2009  |          |  | 2010 |         |         | Years |   |        | Total  | 
|                              |                                                      |      |        |       |      |   |       |       |  |   |       |          |  |      |         |         |       |   |        |        | 
|Contractual cash obligations: |                                                      |      |        |       |      |   |       |       |  |   |       |          |  |      |         |         |       |   |        |        |  |   |         |         |  |   |         |        
|                              | Senior secured credit facilities(1)                  |      | $      | 1,188 |      |   | $     | 1,250 |  |   | $     | 1,250    |  |      | $       | 1,250   |       |   | $      | 88,812 |  |   | $       | 29,500  |  |   | $       | 123,250 | 
|                              | Senior subordinated
    notes payable(1)             |      |        |      |      |   |       |      |  |   |       |         |  |      |         |        |       |   |        |       |  |   |         | 160,000 |  |   |         | 160,000 | 
|                              | Capital lease obligations                            |      |        | 454   |      |   |       |      |  |   |       |         |  |      |         |        |       |   |        |       |  |   |         |        |  |   |         | 454     | 
|                              | Other subordinated promissory notes payable          |      |        | 177   |      |   |       | 190   |  |   |       | 203      |  |      |         | 217     |       |   |        | 232    |  |   |         | 1,946   |  |   |         | 2,965   | 
|                              | Operating lease commitments                          |      |        | 5,359 |      |   |       | 4,656 |  |   |       | 4,016    |  |      |         | 2,773   |       |   |        | 2,389  |  |   |         | 7,895   |  |   |         | 27,088  | 
|                              | Cumulative mandatorily redeemable Preferred Stock(2) |      |        |      |      |   |       |      |  |   |       |         |  |      |         | 156,142 |       |   |        |       |  |   |         |        |  |   |         | 156,142 | 
|                              | Construction commitments                             |      |        | 7,014 |      |   |       |      |  |   |       |         |  |      |         |        |       |   |        |       |  |   |         |        |  |   |         | 7,014   | 
|                              | Closure and post-closure obligations(3)              |      |        | 107   |      |   |       | 394   |  |   |       | 394      |  |      |         | 5,839   |       |   |        | 1,970  |  |   |         | 185,877 |  |   |         | 194,581 | 
|                              |                                                      |      |        |       |      |   |       |       |  |   |       |          |  |      |         |         |       |   |        |        | 
|                              |                                                      | $    | 14,299 |       |      | $ | 6,490 |       |  | $ | 5,863 |          |  | $    | 166,221 |         |       | $ | 93,403 |        |  | $ | 385,218 |         |  | $ | 671,494 |        
|                              |                                                      |      |        |       |      |   |       |       |  |   |       |          |  |      |         |         |       |   |        |        | 






|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Refer to the notes contained in our Consolidated Financial
    Statements included elsewhere in this annual report for
    information relative to interest repayment provisions.

37



---



##### Table of Contents





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | This table includes our cumulative mandatorily redeemable
    Preferred Stock, which must be redeemed in full no later than
    May 2015. The future payment of $156.1 million represents
    the principal, plus accrued dividends at 17.75% compounded
    quarterly to May 6, 2009, which is the earliest date Kelso
    may require us to repay the obligation. If we do not redeem by
    May 6, 2009, Kelso may require us to initiate a sale of our
    assets on terms acceptable to our Board of Directors.
|   
|(3) | Future payments on closure and post-closure obligations are not
    discounted and contemplate full utilization of current and
    probable expansion airspace.                                                                                                                                                                                                                                                                                                                                                     



| |                               
| | ------------------------------
| | Other Contractual Arrangements














|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk





38



---



##### Table of Contents








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures




Changes in Internal Control Over Financial Reporting




39



---



##### Table of Contents



Managements Report on Internal Control Over Financial
Reporting




Attestation Report of Registered Public Accounting Firm









|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III





Item 10. Directors and Executive Officers of the
Registrant


Directors




|                            |  |     |    |  |       |                   |          |                                               
|--------------------------- |  | --- | -- |  | ----- | ----------------- | -------- | ----------------------------------------------
|Name                        |  | Age |    |  | Since |                   | Position
|                            |  |     |    |  |       |                   |         
|David Sutherland-Yoest      |  |     | 49 |  |       | September 6, 2001 |          | Chairman, Chief Executive Officer and Director
|Gary W. DeGroote(3)         |  |     | 50 |  |       | September 6, 2001 |          | Director                                      
|Michael B. Lazar(3)         |  |     | 36 |  |       | May 6, 2003       |          | Director                                      
|George E. Matelich(2)       |  |     | 49 |  |       | May 6, 2003       |          | Director                                      
|Lucien Rémillard            |  |     | 58 |  |       | September 6, 2001 |          | Director                                      
|Jack E. Short(1)(2)         |  |     | 65 |  |       | July 28, 2004     |          | Director                                      
|Wallace L. Timmeny(1)(2)(3) |  |     | 68 |  |       | July 28, 2004     |          | Director                                      
|Michael J. Verrochi(1)(2)   |  |     | 66 |  |       | July 28, 2004     |          | Director                                      






|    |                                      
|--- | -------------------------------------
|(1) | Member of the Audit Committee.       
|   
|(2) | Member of the Governance Committee.  
|   
|(3) | Member of the Compensation Committee.



David Sutherland-Yoest


Gary W. DeGroote


40



---



##### Table of Contents



Michael B. Lazar


George E. Matelich


Lucien Rémillard


Jack E. Short


Wallace L. Timmeny


Michael J. Verrochi




Section 16(a) Beneficial Ownership Reporting
Compliance




41



---



##### Table of Contents





Code of Ethics




42



---



##### Table of Contents






Item 11.     Executive
Compensation


Compensation Paid to Named Executive Officers




Summary Compensation Table


|                            |                                                                   |                                            |      |                     |        |        |            |              |  |          |       |       |           |              |           |           |  |   |      |      | 
|--------------------------- | ----------------------------------------------------------------- | ------------------------------------------ | ---- | ------------------- | ------ | ------ | ---------- | ------------ |  | -------- | ----- | ----- | --------- | ------------ | --------- | --------- |  | - | ---- | ---- | 
|                            |                                                                   |                                            |      |                     |        |        |            | Long-Term    |  |          |      
|                            |                                                                   |                                            |      |                     |        |        |            | Compensation |  |          |      
|                            |                                                                   |                                            |      |                     |        | Awards |            |              | 
|                            |                                                                   |                                            |      | Annual Compensation |        |        | Securities |              |  |         
|                            |                                                                   |                                            |      |                     |        |        | Underlying |              |  |         
|                            |                                                                   |                                            |      | Salary              |        |        | Bonus      |              |  | Options/ |       |       | All Other |             
|Name and Principal Position |                                                                   | Year                                       |      |                     | ($)(1) |        |            | ($)          |  |          | SARS  |       |           | Compensation |          
|                            |                                                                   |                                            |      |                     |        |        |            |              |  |          |       |       |           |              |          
|                            |                                                                   | (In thousands of U.S. dollars,             |     
|                            |                                                                   | except securities underlying options/SARS) |     
|                            |                                                                   |                                            |      |                     |        |        |            |              |  |          |       |       |           |              |           |           |  |   |      |     
|David Sutherland-Yoest      |                                                                   |                                            | 2005 |                     |        | $      | 589.0      |              |  | $        | 224.0 |       |           |              |          |           |  | $ | 0.9  | (2) 
|                            | Chairman and Chief Executive Officer                              |                                            |      | 2004                |        |        |            | 476.7        |  |          |       |      |           |              |           |          |  |   |      |     | 
|                            |                                                                   |                                            | 2003 |                     |        |        | 223.1      |              |  |          | 428.3 |       |           |              | 1,000,000 |           |  |   |     |     
|Charles A. Wilcox           |                                                                   |                                            | 2005 |                     |        |        | 463.5      |              |  |          | 151.2 |       |           |              |          |           |  |   | 25.2 | (3) 
|                            | President and Chief Operating Officer                             |                                            |      | 2004                |        |        |            | 192.1        |  |          |       | 125.0 |           |              |           | 1,250,000 |  |   |      | 11.5 | 
|                            | Effective July 14, 2004                                           |                                            |      | 2003                |        |        |            |             |  |          |       |      |           |              |           |          |  |   |      |     | 
|Ivan R. Cairns              |                                                                   |                                            | 2005 |                     |        |        | 399.1      |              |  |          | 147.8 |       |           |              |          |           |  |   | 8.6  | (4) 
|                            | Executive Vice-President, General Counsel and Corporate Secretary |                                            |      | 2004                |        |        |            | 330.3        |  |          |       |      |           |              |           |          |  |   |      | 4.8  | 
|                            | Effective January 5, 2004                                         |                                            |      | 2003                |        |        |            |             |  |          |       |      |           |              |           | 600,000   |  |   |      |     | 
|Mark A. Pytosh              |                                                                   |                                            | 2005 |                     |        |        | 399.2      |              |  |          | 134.4 |       |           |              |          |           |  |   | 25.2 | (5) 
|                            | Executive Vice-President, Effective February 23, 2004             |                                            |      | 2004                |        |        |            | 312.3        |  |          |       |      |           |              |           | 1,500,000 |  |   |      | 18.9 | 
|                            | Chief Financial Officer, Effective May 18, 2005                   |                                            |      | 2003                |        |        |            |             |  |          |       |      |           |              |           |          |  |   |      |     | 
|Brian A. Goebel             |                                                                   |                                            | 2005 |                     |        |        | 207.4      |              |  |          | 75.0  |       |           |              | 30,000    |           |  |   | 25.2 | (6) 
|                            | Vice-President, Controller and Chief Accounting Officer           |                                            |      | 2004                |        |        |            | 194.4        |  |          |       | 25.0  |           |              |           | 75,000    |  |   |      | 22.4 | 
|                            | Effective October 1, 2003                                         |                                            |      | 2003                |        |        |            | 35.0         |  |          |       | 54.4  |           |              |           | 75,000    |  |   |      | 1.8  | 






|    |                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------
|(1) | All our named executive officers took a salary reduction of 20%
    of their base salary during the last 4 months of 2004.      
|   
|(2) | Consists of $900 in term life insurance premiums.                                                                               
|   
|(3) | Consists of $23,500 in health insurance premiums and $1,740 in
    term life insurance premiums.                                
|   
|(4) | Consists of $6,740 in contributions to our Canadian deferred
    profit sharing plan and $1,860 in term life insurance premiums.
|   
|(5) | Consists of $23,500 in health insurance premiums and $1,740 in
    term life insurance premiums.                                
|   
|(6) | Consists of $23,500 in health insurance premiums and $1,740 in
    term life insurance premiums.                                

43



---



##### Table of Contents



Year-End Option/ SAR Values




|                       |  |                        |           |  |                           |  |           |             |  |  |               |  |  |  |   | 
|---------------------- |  | ---------------------- | --------- |  | ------------------------- |  | --------- | ----------- |  |  | ------------- |  |  |  | - | 
|                       |  | Number of Securities   |           |  |                          
|                       |  | Underlying Unexercised |           |  | Value of Unexercised      | 
|                       |  | Options/SARs at        |           |  | In-the-Money Options/SARs | 
|                       |  | Year End (#)           |           |  | at Year End ($)           | 
|                       |  |                        |           |  |                           | 
|Name                   |  | Exercisable            |           |  | Unexercisable             |  |           | Exercisable |  |  | Unexercisable | 
|                       |  |                        |           |  |                           |  |           |             |  |  |               | 
|David Sutherland-Yoest |  |                        | 1,000,000 |  |                           |  |          |             |  |  |              |  |  |  |  | 
|Charles A. Wilcox      |  |                        |          |  |                           |  | 1,250,000 |             |  |  |              |  |  |  |  | 
|Ivan R. Cairns         |  |                        | 600,000   |  |                           |  |          |             |  |  |              |  |  |  |  | 
|Mark A. Pytosh         |  |                        |          |  |                           |  | 1,500,000 |             |  |  |              |  |  |  |  | 
|Brian A. Goebel        |  |                        | 75,000    |  |                           |  | 105,000   |             |  |  |              |  |  |  |  | 

Directors Compensation






| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | $15,000 as an annual retainer for each Director                                             
|
| |  | $20,000 as additional annual retainer for Chair of the Audit
    Committee                  
|
| |  | $15,000 as an additional retainer for members of the Audit
    Committee                    
|
| |  | $5,000 as an additional annual retainer for Chair of the
    Compensation Committee         
|
| |  | $5,000 as additional annual retainer for the Chair of the
    Corporate Governance Committee
|
| |  | $1,500 or $500 per meeting participation in person or by
    telephone, respectively.       

Employment Agreements


David Sutherland-Yoest.


Charles A. Wilcox.


44



---



##### Table of Contents





Ivan R. Cairns.


Mark A. Pytosh.


45



---



##### Table of Contents



Brian A. Goebel.


Compensation Committee Interlocks and Insider
Participation














46



---



##### Table of Contents








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



|                                |  |                           |            |               |                     |  |       | 
|------------------------------- |  | ------------------------- | ---------- | ------------- | ------------------- |  | ----- | 
|                                |  | Shares Beneficially Owned |           
|                                |  |                           |           
|                                |  |                           |            | Percentage of |                    
|                                |  | Number of                 |            |               | Total Issued        | 
|                                |  | Common/Exchangeable       |            |               | Common/Exchangeable | 
|Name of Beneficial Owner(1)     |  | Shares                    |            |               | Shares              | 
|                                |  |                           |            |               |                     | 
|Westbury (Bermuda) Limited(2)   |  |                           | 20,559,973 |               |                     |  | 19.9% | 
|Prides Capital Partners, LLC(3) |  |                           | 10,100,230 |               |                     |  | 10.0% | 
|Kelso & Company, L.P(4)         |  |                           | 7,150,000  |               |                     |  | 6.6%  | 
|David Sutherland-Yoest(5)       |  |                           | 5,470,183  |               |                     |  | 5.3%  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Beneficial ownership is determined in accordance with the rules
    of the Securities and Exchange Commission. In general, a person
    who has voting power or investment power with respect to
    securities is treated as a beneficial owner of those securities.
    Shares of common stock subject to options or warrants currently
    exercisable or exercisable within 60 days of March 1,
    2006 count as outstanding for computing the percentage
    beneficially owned by the person holding these options or
    warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(2) | Consists of 18,076,640 shares of common stock and
    2,483,333 shares of common stock issuable upon the exercise
    of warrants. The stockholder of Westbury Bermuda Limited is
    Westbury Trust. The trustees of Westbury Trust are Robert
    Martyn, Gary W. DeGroote and Rick Burdick. The address for
    Westbury Bermuda Limited is Victoria Hall, 11 Victoria Street,
    P.O. Box HM 1065, Hamilton, Bermuda, HMEX.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(3) | Based on information contained in a
    Form 13-D/ A filed
    with the Securities Exchange Commission by Prides Capital
    Partners, LLC on February 16, 2006. The principal business
    office of Prides Capital Partners, LLC is 200 High Street,
    Suite 700, Boston MA 02110.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(4) | Consists of 6,435,000 shares of common stock issuable upon
    the exercise of warrants issued to Kelso Investment Associates
    VI, L.P. and 715,000 shares of common stock issuable upon
    the exercise of warrants issued to KEP VI, LLC. Kelso Investment
    Associates VI, L.P. and KEP VI, LLC are affiliates of
    Kelso & Company, L.P. The address of Kelso &
    Company, L.P. is 320 Park Avenue, 24th Floor,
    New York, New York, 10022.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(5) | Consists of 1,949,497 exchangeable shares of Waste Services
    (CA) Inc. owned by D.S.Y. Investments Ltd., of which
    Mr. Sutherland-Yoest is the sole director and stockholder,
    as well as 755,486 shares of common stock owned by
    Mr. Sutherland-Yoest personally, 1,000,000 shares of
    common stock issuable upon the exercise of currently exercisable
    warrants to purchase common shares, 1,000,000 shares of
    common stock issuable upon the exercise of currently exercisable
    options, 500,000 shares of common stock owned by
    Mr. Sutherland-Yoests wife and 265,200 shares of
    common stock owned by Mr. Sutherland-Yoests daughter
    which Mr. Sutherland-Yoest may be deemed to beneficially
    own. Mr. Sutherland-Yoest disclaims beneficial ownership
    with respect to the shares owned by his wife and his daughter.
    The address of Mr. Sutherland-Yoest is c/o Waste
    Services, Inc., 1122 International Blvd., Suite 601,
    Burlington, Ontario L7L 6Z8.

47



---



##### Table of Contents





|                                                             |  |             |            |  |           |  |      |  
|------------------------------------------------------------ |  | ----------- | ---------- |  | --------- |  | ---- | -
|                                                             |  | Outstanding |            |  | % of      | 
|Name                                                         |  | Shares(1)   |            |  | Shares(2) | 
|                                                             |  |             |            |  |           | 
|David Sutherland-Yoest(3)                                    |  |             | 5,470,183  |  |           |  | 5.3  | %
|Lucien Rémillard(6)                                          |  |             | 3,073,497  |  |           |  | 3.0  | %
|Gary W. DeGroote(4)                                          |  |             | 2,385,000  |  |           |  | 2.4  | %
|George E. Matelich(5)                                        |  |             | 774,697    |  |           |  | *    |  
|Ivan R. Cairns(7)                                            |  |             | 602,500    |  |           |  | *    |  
|Mark A. Pytosh                                               |  |             | 520,000    |  |           |  | *    |  
|Charles A. Wilcox                                            |  |             | 400,000    |  |           |  | *    |  
|Michael J. Verrochi                                          |  |             | 385,739    |  |           |  | *    |  
|Brian A. Goebel(8)                                           |  |             | 150,000    |  |           |  | *    |  
|Wallace L. Timmeny                                           |  |             | 15,500     |  |           |  | *    |  
|Michael B. Lazar                                             |  |             | 14,562     |  |           |  | *    |  
|Jack E. Short                                                |  |             | 10,000     |  |           |  | *    |  
|                                                             |  |             |            |  |           | 
|All executive officers and directors as a group (12 persons) |  |             | 13,801,678 |  |           |  | 13.3 | %
|                                                             |  |             |            |  |           | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Less than one (1%) percent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(1) | In general, a person who has voting power or investment power
    with respect to securities is treated as a beneficial owner of
    those securities. Shares of common stock subject to options or
    warrants currently exercisable or exercisable within
    60 days of March 1, 2006 count as outstanding for
    computing the percentage beneficially owned by the person
    holding these options or warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(2) | Percentages based upon 100,990,643 shares of common stock
    outstanding as of March 1, 2006, which includes 6,326,882
    exchangeable shares of Waste Services (CA) Inc. not owned
    directly or indirectly by us.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(3) | Consists of 1,949,497 exchangeable shares of Waste Services
    (CA) Inc. owned by D.S.Y. Investments Ltd., of which
    Mr. Sutherland-Yoest is the sole director and stockholder,
    as well as 755,486 shares of common stock owned by
    Mr. Sutherland-Yoest personally, 1,000,000 shares of
    common stock issuable upon the exercise of currently exercisable
    warrants to purchase common shares, 1,000,000 shares of
    common stock issuable upon the exercise of currently exercisable
    options, 500,000 Common Shares owned by
    Mr. Sutherland-Yoests wife and 265,200 shares of
    common stock owned by Mr. Sutherland-Yoests daughter,
    which Mr. Sutherland-Yoest may be deemed to beneficially
    own. Mr. Sutherland-Yoest disclaims beneficial ownership
    with respect to the shares owned by his wife and his daughter.
|   
|(4) | Consists of 2,275,000 exchangeable shares of Waste Services
    (CA) Inc. owned by GWD Management Inc., and
    110,000 shares of common stock issuable upon exercise of
    currently exercisable options to purchase shares of our common
    stock issued to Mr. DeGroote. Mr. DeGroote is the
    controlling stockholder and director of GWD Management Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(5) | Consists of 728,797 shares of common stock owned by
    Mr. Matelich, 900 shares of common stock owned by
    Mr. Matelichs children and 45,000 shares of
    common stock issuable upon the exercise of currently exercisable
    options to purchase common shares issued to Mr. Matelich.
    Mr. Matelich disclaims beneficial ownership of the shares
    owned by his children. Mr. Matelich is a Managing Director
    of Kelso & Company, L.P. Affiliates of Kelso &
    Company, L.P. own currently exercisable warrants to
    purchase 7,150,000 shares of common stock.
    Mr. Matelich disclaims beneficial ownership of the shares
    owned by affiliates of Kelso & Company, L.P.                                                                                                                                                                
|   
|(6) | Consists of 1,500,000 exchangeable shares of Waste Services
    (CA) Inc. owned by Historia Investments Inc.,
    1,478,497 shares of common stock owned by The Victoria Bank
    (Barbados) Incorporated, and 95,000 shares of common stock
    issuable upon the exercise of currently exercisable options
    issued to Mr. Rémillard. Mr. Rémillard is
    the controlling stockholder of Historia Investments Inc. and is
    indirectly                                                                                                                                                                                                                                                                                                                                                                                                                      

48



---



##### Table of Contents



|    |                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | the controlling stockholder of The Victoria Bank (Barbados)
    Incorporated, and is deemed to beneficially own the common and
    exchangeable shares owned by each such entity
    Mr. Rémillard disclaims beneficial ownership of the
    common and exchangeable shares owned by The Victoria Bank
    (Barbados) Incorporated and Historia Investments Inc.
|   
|(7) | Consists of 600,000 options to acquire common shares that are
    currently exercisable and 2,500 shares of common stock
    owned by Mr. Cairns.                                                                                                                                                                                                               
|   
|(8) | Consists of 150,000 options to acquire common shares that are
    currently exercisable or are exercisable within 60 days of
    March 1, 2006.                                                                                                                                                                                                                 

Securities Authorized for Issuance under Equity Compensation
Plans




|                                                           |       |                         |            |            |                      |                      |      |                             |  |  |           |           |    
|---------------------------------------------------------- | ----- | ----------------------- | ---------- | ---------- | -------------------- | -------------------- | ---- | --------------------------- |  |  | --------- | --------- | ---
|                                                           |       | (a)                     |            |            | (b)                  |                      |      | (c)                         | 
|                                                           |       |                         |            |            |                      | Number of Securities |     
|                                                           |       |                         |            |            |                      | Remaining Available  |     
|                                                           |       |                         |            |            |                      | for Future Issuance  |     
|                                                           |       |                         |            |            |                      | Under Equity         |     
|                                                           |       |                         |            |            |                      | Compensation Plans   |     
|                                                           |       | Number of Securities to |            |            | Weighted-Average     |                      |      | (Excluding Securities to be | 
|                                                           |       | be Issued upon Exercise |            |            | Exercise Price of    |                      |      | Issued upon Exercise of     | 
|                                                           |       | of Outstanding Options, |            |            | Outstanding Options, |                      |      | Outstanding Options,        | 
|Plan Category                                              |       | Warrants and Rights     |            |            | Warrants and Rights  |                      |      | Warrants or Rights)         | 
|                                                           |       |                         |            |            |                      |                      |      |                             | 
|Equity compensation plans approved by security holders     |       |                         | 12,563,500 |            |                      | $                    | 4.85 |                             |  |  | 6,439,591 | (1)      
|Equity compensation plans not approved by security holders |       |                         | 1,000,000  | (2)        |                      | $                    | 2.70 |                             |  |  |          |          
|                                                           |       |                         |            |            |                      |                      |      |                             | 
|                                                           | Total |                         |            | 13,563,500 |                      |                      | $    | 4.69                        |  |  |           | 6,439,591 | (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 1,000,000 shares of our common
    stock, at an exercise price of $2.70 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 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 and Related Transactions



Advisory Services




49



---



##### Table of Contents



Placement Agent Fees




Lease of Premises




Florida Recycling Acquisition




Standby Purchase Agreement




Other Transactions




father-in




50



---



##### Table of Contents












|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services

Audit Fees




Audit-Related Fees




Tax Fees




All Other Fees




Pre-Approval Policies and Procedures







PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

Consolidated Financial Statements


Consolidated Financial Statements




| |                                                                     
| | --------------------------------------------------------------------
| | Managements Report on Internal Control over Financial
    Reporting
| | Reports of Independent Registered Public Accounting Firms           
| | Consolidated Balance Sheets                                         
| | Consolidated Statements of Operations and Comprehensive Loss        
| | Consolidated Statements of Shareholders Equity                     
| | Consolidated Statements of Cash Flows                               
| | Notes to Consolidated Financial Statements                          

51



---



##### Table of Contents





| |                                  
| | ---------------------------------
| | (2) 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  |  | 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 | .3  |  | 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 | .4  |  | 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).                                                                                                                                                                                                
| | 3 | .5  |  | 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 | .6  |  | 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. 00-25955) 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.                                                                                                                                                                                               
| | 4 | .5  |  | 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 | .6  |  | 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 | .7  |  | 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 | .8  |  | 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 | .9  |  | 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 | .10 |  | 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).

52



---



##### Table of Contents



| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4  | .11 |  | 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.                                                                                                                                                                                                                                                                                                                                      
| | 4  | .12 |  | 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).                                                                                                                                                                                                                                                                                                                                                                              
| | 4  | .13 |  | 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  | .14 |  | 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 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  |  | Amended and Restated Credit Agreement dated as of April 30,
    2004 among Capital Environmental Resource Inc., Waste Services,
    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 10.4 to Form 8-K
    (No. 000-25955) filed May 20, 2004).
| | 10 | .8  |  | First Amendment to Amended and Restated Credit Agreement dated
    as of August 25, 2004 (Incorporated by reference to
    Exhibit 10.1 to Form 8-K (No. 000-25955) field
    August 27, 2004).                                                                                                                                                                                                                                                                                                                                                                         
| | 10 | .9  |  | Second Amendment to Amended and Restated Credit Agreement dated
    as of October 4, 2004 (Incorporated by reference to
    Exhibit 10.1 to Form 8-K (No. 000-25955) filed
    October 5, 2004).                                                                                                                                                                                                                                                                                                                                                                        
| | 10 | .10 |  | Third Amendment to Amended and Restated Credit Agreement dated
    as of October 26, 2005 (Incorporated by reference to
    Exhibit 20.1 to Form 10-K (No. 000-25955) filed
    October 26, 2005).                                                                                                                                                                                                                                                                                                                                                                      
| | 10 | .11 |  | Fourth Amendment to Amended and Restated Credit Agreement dated
    as of December 28, 2005 (Incorporated by reference to
    Exhibit 20.1 to Form 8-K (No. 000-25955) filed
    December 28, 2005.                                                                                                                                                                                                                                                                                                                                                                     
| | 10 | .12 |  | 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 | .13 |  | 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 | .14 |  | 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 | .15 |  | 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
    May 17, 2004).                                                                                                                                                                                                                                                                                                                 

53



---



##### Table of Contents



| |    |     |  |                                                                                                                                                                                                                                                                 
| | -- | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .16 |  | 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).
| | 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.                                                                                                                                                                                                                                    
| | 23 | .2  |  | Consent of BDO Dunwoody 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 Mark A.
    Pytosh, Chief Financial Officer.                                                                                                               
| | 32 | .1  |  | Certification of Chief Executive Officer and Chief 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.                                                                 

54



---



##### Table of Contents



SIGNATURES






| |                                     
| | ------------------------------------
| | WASTE SERVICES, INC.                
|
| | /s/ David Sutherland-Yoest          
| |                                     
| | 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 13, 2006
|                                                    
|/s/ Mark A. PytoshMark A. Pytosh                     |  | Executive Vice President and
    Chief Financial Officer          |  | March 13, 2006
|                                                    
|/s/ Brian A. GoebelBrian A. Goebel                   |  | Vice President, Corporate Controller and Chief Accounting Officer |  | March 13, 2006
|                                                    
|/s/ Gary W. DeGrooteGary W. DeGroote                 |  | Director                                                          |  | March 13, 2006
|                                                    
|/s/ Michael B. LazarMichael B. Lazar                 |  | Director                                                          |  | March 13, 2006
|                                                    
|/s/ George E. MatelichGeorge E. Matelich             |  | Director                                                          |  | March 13, 2006
|                                                    
|/s/ Lucien
    RémillardLucien Rémillard             |  | Director                                                          |  | March 13, 2006
|                                                    
|/s/ Jack E. ShortJack E. Short                       |  | Director                                                          |  | March 13, 2006
|                                                    
|/s/ Wallace L. TimmenyWallace L. Timmeny             |  | Director                                                          |  | March 13, 2006
|                                                    
|/s/ Michael J. VerrochiMichael J. Verrochi           |  | Director                                                          |  | March 13, 2006

55



---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                     |  |  |      | 
|-------------------------------------------------------------------- |  |  | ---- | 
|Managements Report on Internal
    Control Over Financial Reporting |  |  | F-2  | 
|Reports of Independent Registered Public
    Accounting Firms        |  |  | F-3  | 
|Consolidated Balance Sheets                                          |  |  | F-7  | 
|Consolidated Statements of Operations and
    Comprehensive Loss     |  |  | F-8  | 
|Consolidated Statements of
    Shareholders Equity                  |  |  | F-9  | 
|Consolidated Statements of Cash Flows                                |  |  | F-10 | 
|Notes to Consolidated Financial
    Statements                       |  |  | F-11 | 

F-1



---



##### Table of Contents






MANAGEMENTS REPORT ON INTERNAL CONTROL


OVER FINANCIAL REPORTING


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




Managements Report on Internal Control
over Financial Reporting 10-K, Internal Control  Integrated Framework








Internal
Control  Integrated Framework Internal Control  Integrated
Framework


F-3



---



##### Table of Contents









| |                     
| | --------------------
| | /s/ BDO Seidman, LLP





F-4



---



##### Table of Contents



Report of Independent Registered Public Accounting Firm












Internal Control 
Integrated Framework




| |                     
| | --------------------
| | /s/ BDO Seidman, LLP





F-5



---



##### Table of Contents



REPORT OF INDEPENDENT AUDITORS


















Comments by Auditor for U.S. Readers on
Canada-U.S. Reporting Difference












F-6



---



##### Table of Contents



WASTE SERVICES, INC.





CONSOLIDATED BALANCE SHEETS


(In thousands of U.S. dollars, except share amounts)


As of December 31,


|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |         |         |          |         |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | -------- | ------- | ------- | ------- | -------- | ------- | ------- | 
|                                                                                                                                                |                                                                                                                                                                             | 2005                       |                                            |          | 2004    |        
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        
|ASSETS                                                                                                                                         
|Current assets:                                                                                                                                 |                                                                                                                                                                             |                            |                                            |          |         |         |         |         
|                                                                                                                                                | Cash and cash equivalents                                                                                                                                                   |                            | $                                          | 8,887    |         |         | $       | 8,507    |        
|                                                                                                                                                | Accounts receivable (net allowance for doubtful accounts of $925
    and $1,264 as of December 31, 2005 and 2004, respectively)                                             |                            |                                            | 49,583   |         |         |         | 47,856   |        
|                                                                                                                                                | Prepaid expenses and other current assets                                                                                                                                   |                            |                                            | 11,112   |         |         |         | 10,940   |        
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        
|                                                                                                                                                |                                                                                                                                                                             |                            | Total current assets                       |          |         | 69,582  |         |          |         | 67,303  | 
|Property and equipment, net                                                                                                                     |                                                                                                                                                                             |                            | 133,263                                    |          |         |         | 130,467 |         
|Landfill sites, net                                                                                                                             |                                                                                                                                                                             |                            | 172,128                                    |          |         |         | 169,616 |         
|Goodwill and other intangible assets, net                                                                                                       |                                                                                                                                                                             |                            | 329,471                                    |          |         |         | 327,756 |         
|Other assets                                                                                                                                    |                                                                                                                                                                             |                            | 23,945                                     |          |         |         | 25,441  |         
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        
|                                                                                                                                                |                                                                                                                                                                             | Total assets               |                                            | $        | 728,389 |         |         | $        | 720,583 |        
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        
|                                                                                                                                               
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                           
|Current liabilities:                                                                                                                            |                                                                                                                                                                             |                            |                                            |          |         |         |         |         
|                                                                                                                                                | Accounts payable                                                                                                                                                            |                            | $                                          | 26,152   |         |         | $       | 25,949   |        
|                                                                                                                                                | Accrued expenses and other current liabilities                                                                                                                              |                            |                                            | 40,700   |         |         |         | 42,533   |        
|                                                                                                                                                | Short-term financing and current portion of long-term debt                                                                                                                  |                            |                                            | 1,365    |         |         |         | 1,166    |        
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        
|                                                                                                                                                |                                                                                                                                                                             | Total current liabilities  |                                            |          | 68,217  |         |         |          | 69,648  |        
|Long-term debt                                                                                                                                  |                                                                                                                                                                             |                            | 284,850                                    |          |         |         | 276,214 |         
|Accrued closure, post-closure and other obligations                                                                                             |                                                                                                                                                                             |                            | 25,860                                     |          |         |         | 10,974  |         
|Cumulative mandatorily redeemable Preferred Stock (net of
    discount of $2,347 and $8,426 as of December 31, 2005 and
    2004, respectively) |                                                                                                                                                                             |                            | 84,971                                     |          |         |         | 64,971  |         
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        
|                                                                                                                                                |                                                                                                                                                                             | Total liabilities          |                                            |          | 463,898 |         |         |          | 421,807 |        
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        
|Shareholders equity:                                                                                                                           |                                                                                                                                                                             |                            |                                            |          |         |         |         |         
|                                                                                                                                                | Common stock $0.01 par value; 500,000,000 shares
    authorized; 93,685,889 and 90,358,196 shares issued and
    outstanding as of December 31, 2005 and 2004, respectively |                            |                                            | 937      |         |         |         | 904      |        
|                                                                                                                                                | Additional paid-in capital                                                                                                                                                  |                            |                                            | 383,618  |         |         |         | 374,186  |        
|                                                                                                                                                | Treasury stock at cost; 500,000 shares as of
    December 31, 2005 and 2004                                                                                                 |                            |                                            | (1,235   | )       |         |         | (1,235   | )      
|                                                                                                                                                | Accumulated other comprehensive income                                                                                                                                      |                            |                                            | 35,673   |         |         |         | 29,133   |        
|                                                                                                                                                | Accumulated deficit                                                                                                                                                         |                            |                                            | (154,502 | )       |         |         | (104,212 | )      
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        
|                                                                                                                                                |                                                                                                                                                                             | Total shareholders equity |                                            |          | 264,491 |         |         |          | 298,776 |        
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        
|                                                                                                                                                |                                                                                                                                                                             |                            | Total liabilities and shareholders equity |          | $       | 728,389 |         |          | $       | 720,583 | 
|                                                                                                                                                |                                                                                                                                                                             |                            |                                            |          |         |        



F-7



---



##### 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,


|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |   |   |         |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ---- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------ | -
|                                                                                                                                                                             |                                                                                                         | 2005 |         |         | 2004 |   |         | 2003    |  
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|Revenue                                                                                                                                                                      |                                                                                                         | $    | 382,446 |         |      | $ | 310,785 |         |   | $ | 126,750 |       
|Operating and other expenses:                                                                                                                                                |                                                                                                         |      |         |         |      |   |         |         |   |   |         |       
|                                                                                                                                                                             | Cost of operations (exclusive of depreciation, depletion and
    amortization)                          |      |         | 276,329 |      |   |         | 223,397 |   |   |         | 84,677 |  
|                                                                                                                                                                             | Selling, general and administrative expense (exclusive of
    depreciation, depletion and amortization) |      |         | 56,485  |      |   |         | 54,679  |   |   |         | 30,432 |  
|                                                                                                                                                                             | Settlement with sellers of Florida Recycling                                                            |      |         | (4,120  | )    |   |         | (8,635  | ) |   |         |       |  
|                                                                                                                                                                             | Depreciation, depletion and amortization                                                                |      |         | 42,954  |      |   |         | 34,204  |   |   |         | 14,927 |  
|                                                                                                                                                                             | Foreign exchange loss (gain) and other                                                                  |      |         | (228    | )    |   |         | (377    | ) |   |         | 1,760  |  
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|Income (loss) from operations                                                                                                                                                |                                                                                                         |      | 11,026  |         |      |   | 7,517   |         |   |   | (5,046  | )     
|Interest expense                                                                                                                                                             |                                                                                                         |      | 28,196  |         |      |   | 30,838  |         |   |   | 8,278   |       
|Changes in fair value of warrants                                                                                                                                            |                                                                                                         |      |        |         |      |   | (111    | )       |   |   |        |       
|Cumulative mandatorily redeemable preferred stock dividends and
    amortization of issue costs                                                                              |                                                                                                         |      | 20,984  |         |      |   | 17,582  |         |   |   | 10,161  |       
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|Loss before income taxes                                                                                                                                                     |                                                                                                         |      | (38,154 | )       |      |   | (40,792 | )       |   |   | (23,485 | )     
|Income tax provision (benefit)                                                                                                                                               |                                                                                                         |      | 12,136  |         |      |   | 7,587   |         |   |   | (587    | )     
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|Loss before cumulative effect of change in accounting
    principle                                                                                                          |                                                                                                         |      | (50,290 | )       |      |   | (48,379 | )       |   |   | (22,898 | )     
|Cumulative effect of change in accounting principle, net of
    provision for income taxes of $132 and $256 for the years ended
    December 31, 2004 and 2003, respectively |                                                                                                         |      |        |         |      |   | 225     |         |   |   | 518     |       
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|Net loss                                                                                                                                                                     |                                                                                                         |      | (50,290 | )       |      |   | (48,154 | )       |   |   | (22,380 | )     
|Deemed dividend on Series 1 Preferred Stock                                                                                                                                  |                                                                                                         |      |        |         |      |   |        |         |   |   | (54,572 | )     
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|Net loss attributable to common shareholders                                                                                                                                 |                                                                                                         | $    | (50,290 | )       |      | $ | (48,154 | )       |   | $ | (76,952 | )     
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|Basic and diluted loss per share:                                                                                                                                            |                                                                                                         |      |         |         |      |   |         |         |   |   |         |       
|                                                                                                                                                                             | Basic and diluted loss per share before cumulative effect of
    change in accounting principle         |      | $       | (0.51   | )    |   | $       | (0.55   | ) |   | $       | (1.99  | )
|                                                                                                                                                                             | Cumulative effect of change in accounting principle                                                     |      |         |        |      |   |         |        |   |   |         | 0.01   |  
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|                                                                                                                                                                             | Loss per share  basic and diluted                                                                      |      | $       | (0.51   | )    |   | $       | (0.55   | ) |   | $       | (1.98  | )
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|                                                                                                                                                                             | Weighted average common shares outstanding  basic and
    diluted                                      |      |         | 98,640  |      |   |         | 88,232  |   |   |         | 38,782 |  
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|Statements of Comprehensive Loss                                                                                                                                            
|Net loss                                                                                                                                                                     |                                                                                                         | $    | (50,290 | )       |      | $ | (48,154 | )       |   | $ | (22,380 | )     
|Foreign currency translation adjustment                                                                                                                                      |                                                                                                         |      | 6,540   |         |      |   | 13,181  |         |   |   | 19,903  |       
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  
|Comprehensive loss                                                                                                                                                           |                                                                                                         | $    | (43,750 | )       |      | $ | (34,973 | )       |   | $ | (2,477  | )     
|                                                                                                                                                                             |                                                                                                         |      |         |         |      |   |         |         |  



F-8



---



##### Table of Contents



WASTE SERVICES, INC.





CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


|                                                                       |  |                                                  |         |   |                 |   |          |                 |  |  |            |   |  |          |             |   |               |  |        |             |  |       |               |  |  |        |         |   |         |   |        |        |  |   |        |   |  |   |          |   |  |   |         |  
|---------------------------------------------------------------------- |  | ------------------------------------------------ | ------- | - | --------------- | - | -------- | --------------- |  |  | ---------- | - |  | -------- | ----------- | - | ------------- |  | ------ | ----------- |  | ----- | ------------- |  |  | ------ | ------- | - | ------- | - | ------ | ------ |  | - | ------ | - |  | - | -------- | - |  | - | ------- | -
|                                                                       |  | Waste Services,                                  |         |   | Waste Services, |   |          | Waste Services, |  |  |            |   |  |          |             |   |               |  |       
|                                                                       |  | (CA) Inc.                                        |         |   | (CA) Inc.       |   |          | Inc.            |  |  |            |   |  |          | Accumulated |   |               |  |        |            
|                                                                       |  | Common Stock                                     |         |   | Preferred Stock |   |          | Common Stock    |  |  | Additional |   |  | Treasury |             |   | Other         |  |        |             |  | Total |              
|                                                                       |  |                                                  |         |   |                 |   |          |                 |  |  | Paid in    |   |  | Shares   |             |   | Comprehensive |  |        | Accumulated |  |       | Shareholders | 
|                                                                       |  | Shares                                           |         |   | Amount          |   |          | Shares          |  |  | Amount     |   |  | Shares   |             |   | Amount        |  |        | Capital     |  |       | at Cost       |  |  | Income |         |   | Deficit |   |        | Equity | 
|                                                                       |  |                                                  |         |   |                 |   |          |                 |  |  |            |   |  |          |             |   |               |  |        |             |  |       |               |  |  |        |         |   |         |   |        |        | 
|                                                                       |  | (In thousands of U.S. dollars and share amounts) |        
|Balance, December 31, 2002                                             |  |                                                  | 35,195  |   |                 | $ | 113,549  |                 |  |  |           |   |  | $        |            |   |               |  |       |             |  | $     |              |  |  | $      | 1,897   |   |         | $ |       |        |  | $ | (3,951 | ) |  | $ | (33,678  | ) |  | $ | 77,817  |  
|Warrants issued in connection with Redeemable Preferred                |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | 13,774  |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 13,774  |  
|Issuance of Series 1 Preferred Stock                                   |  |                                                  |        |   |                 |   |         |                 |  |  | 28,146     |   |  |          | 76,236      |   |               |  |       |             |  |       |              |  |  |        | 7,586   |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 83,822  |  
|Issuance of Common Stock                                               |  |                                                  | 4,850   |   |                 |   | 24,812   |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        |        |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 24,812  |  
|Issuance of warrants                                                   |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | 138     |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 138     |  
|Conversion of Series 1 Preferred to Common Stock                       |  |                                                  | 28,146  |   |                 |   | 76,236   |                 |  |  | (28,146    | ) |  |          | (76,236     | ) |               |  |       |             |  |       |              |  |  |        |        |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   |        |  
|Exercise of options and warrants                                       |  |                                                  | 148     |   |                 |   | 798      |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | (244    | ) |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 554     |  
|Additional value of warrants and deferred stock-based
    compensation |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | 2,677   |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 2,677   |  
|Foreign currency translation adjustment                                |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        |        |   |         |   |       |        |  |   | 19,903 |   |  |   |         |   |  |   | 19,903  |  
|Net loss                                                               |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        |        |   |         |   |       |        |  |   |       |   |  |   | (22,380  | ) |  |   | (22,380 | )
|                                                                       |  |                                                  |         |   |                 |   |          |                 |  |  |            |   |  |          |             |   |               |  |        |             |  |       |               |  |  |        |         |   |         |   |        |        | 
|Balance, December 31, 2003                                             |  |                                                  | 68,339  |   |                 |   | 215,395  |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | 25,828  |   |         |   |       |        |  |   | 15,952 |   |  |   | (56,058  | ) |  |   | 201,117 |  
|                                                                       |  |                                                  |         |   |                 |   |          |                 |  |  |            |   |  |          |             |   |               |  |        |             |  |       |               |  |  |        |         |   |         |   |        |        | 
|Sale of common shares and warrants                                     |  |                                                  | 13,400  |   |                 |   | 49,126   |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | 2,552   |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 51,678  |  
|Common shares and warrants issued in acquisitions                      |  |                                                  | 14,837  |   |                 |   | 80,856   |                 |  |  |           |   |  |          |            |   |               |  | 40     |             |  |       |              |  |  |        | 215     |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 81,071  |  
|Exercise of options and warrants                                       |  |                                                  | 311     |   |                 |   | 1,253    |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | (212    | ) |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 1,041   |  
|Deferred stock-based compensation                                      |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | 122     |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 122     |  
|Migration 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 |   |  |   |         |   |  |   | 13,181  |  
|Net loss                                                               |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        |        |   |         |   |       |        |  |   |       |   |  |   | (48,154  | ) |  |   | (48,154 | )
|                                                                       |  |                                                  |         |   |                 |   |          |                 |  |  |            |   |  |          |             |   |               |  |        |             |  |       |               |  |  |        |         |   |         |   |        |        | 
|Balance, December 31, 2004                                             |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  | 90,358 |             |  |       | 904           |  |  |        | 374,186 |   |         |   | (1,235 | )      |  |   | 29,133 |   |  |   | (104,212 | ) |  |   | 298,776 |  
|                                                                       |  |                                                  |         |   |                 |   |          |                 |  |  |            |   |  |          |             |   |               |  |        |             |  |       |               |  |  |        |         |   |         |   |        |        | 
|Common shares and warrants issued acquisitions                         |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  | 2,926  |             |  |       | 29            |  |  |        | 7,881   |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 7,910   |  
|Exercise of options and warrants                                       |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  | 162    |             |  |       | 2             |  |  |        | 519     |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 521     |  
|Stock-based compensation                                               |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | 1,060   |   |         |   |       |        |  |   |       |   |  |   |         |   |  |   | 1,060   |  
|Conversion of exchangeable shares                                      |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  | 240    |             |  |       | 2             |  |  |        | (2      | ) |         |   |       |        |  |   |       |   |  |   |         |   |  |   |        |  
|Other paid in capital                                                  |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        | (26     | ) |         |   |       |        |  |   |       |   |  |   |         |   |  |   | (26     | )
|Foreign currency translation adjustment                                |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        |        |   |         |   |       |        |  |   | 6,540  |   |  |   |         |   |  |   | 6,540   |  
|Net loss                                                               |  |                                                  |        |   |                 |   |         |                 |  |  |           |   |  |          |            |   |               |  |       |             |  |       |              |  |  |        |        |   |         |   |       |        |  |   |       |   |  |   | (50,290  | ) |  |   | (50,290 | )
|                                                                       |  |                                                  |         |   |                 |   |          |                 |  |  |            |   |  |          |             |   |               |  |        |             |  |       |               |  |  |        |         |   |         |   |        |        | 
|Balance, December 31, 2005                                             |  |                                                  |        |   |                 | $ |         |                 |  |  |           |   |  | $        |            |   |               |  | 93,686 |             |  | $     | 937           |  |  | $      | 383,618 |   |         | $ | (1,235 | )      |  | $ | 35,673 |   |  | $ | (154,502 | ) |  | $ | 264,491 |  
|                                                                       |  |                                                  |         |   |                 |   |          |                 |  |  |            |   |  |          |             |   |               |  |        |             |  |       |               |  |  |        |         |   |         |   |        |        | 



F-9



---



##### Table of Contents



WASTE SERVICES, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands of U.S. dollars)


For the Years Ended December 31,


|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |   |        |          |          |   |        |        |  
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ---------------------------------------------- | ---- | ------ | -------- | -------- | - | ------ | -------- | -------- | - | ------ | ------ | -
|                                                             |                                                                                                                   | 2005                                                                                     |                                                                                                 |                                                | 2004 |        |          | 2003     |  
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  
|Cash flows from operating activities:                        |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |   |        |          |         
|                                                             | Net loss                                                                                                          |                                                                                          | $                                                                                               | (50,290                                        | )    |        | $        | (48,154  | ) |        | $        | (22,380  | )
|                                                             | Adjustments to reconcile net loss to net cash flows from
    operating activities:                                |                                                                                          |                                                                                                 |                                                |      |        |          |          |   |        |          |          |  
|                                                             |                                                                                                                   |                                                                                          | Depreciation, depletion and amortization                                                        |                                                |      | 42,954 |          |          |   | 34,204 |          |          |   | 14,927 |       
|                                                             |                                                                                                                   |                                                                                          | Non-cash component of settlement with sellers of Florida
    Recycling                          |                                                |      | (4,120 | )        |          |   | (1,235 | )        |          |   |       |       
|                                                             |                                                                                                                   |                                                                                          | Cumulative mandatorily redeemable preferred stock dividends and
    amortization of issue costs |                                                |      | 20,984 |          |          |   | 17,582 |          |          |   | 10,161 |       
|                                                             |                                                                                                                   |                                                                                          | Amortization of debt issue costs                                                                |                                                |      | 1,408  |          |          |   | 10,294 |          |          |   | 3,281  |       
|                                                             |                                                                                                                   |                                                                                          | Deferred income tax provision (benefit)                                                         |                                                |      | 11,581 |          |          |   | 7,218  |          |          |   | (990   | )     
|                                                             |                                                                                                                   |                                                                                          | Non-cash stock-based compensation expense (benefit)                                             |                                                |      | 1,060  |          |          |   | (90    | )        |          |   | 2,677  |       
|                                                             |                                                                                                                   |                                                                                          | Changes in fair value of warrants                                                               |                                                |      |       |          |          |   | (111   | )        |          |   |       |       
|                                                             |                                                                                                                   |                                                                                          | Cumulative effect of change in accounting principle, net of tax                                 |                                                |      |       |          |          |   | (225   | )        |          |   | (518   | )     
|                                                             |                                                                                                                   |                                                                                          | Foreign exchange loss (gain)                                                                    |                                                |      | 755    |          |          |   | (90    | )        |          |   | 1,915  |       
|                                                             |                                                                                                                   |                                                                                          | Other non-cash items                                                                            |                                                |      | (229   | )        |          |   | 86     |          |          |   | 455    |       
|                                                             |                                                                                                                   | Changes in operating assets and liabilities (excluding the
    effects of acquisitions): |                                                                                                 |                                                |      |        |          |          |   |        |          |          |   |       
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 | Accounts receivable                            |      |        | (1,201   | )        |   |        | (7,085   | )        |   |        | (1,749 | )
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 | Prepaid expenses and other current assets      |      |        | 4,495    |          |   |        | (2,303   | )        |   |        | (5,959 | )
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 | Accounts payable                               |      |        | (2,157   | )        |   |        | 3,363    |          |   |        | 3,886  |  
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 | Accrued expenses and other current liabilities |      |        | (617     | )        |   |        | 11,243   |          |   |        | 3,740  |  
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  
|                                                             |                                                                                                                   |                                                                                          | 24,623                                                                                          |                                                |      |        | 24,697   |          |   |        | 9,446    |         
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  
|Cash flows from investing activities:                        |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |   |        |          |         
|                                                             | Cash used in business combinations and significant asset
    acquisitions, net of cash acquired                   |                                                                                          |                                                                                                 | (8,090                                         | )    |        |          | (164,679 | ) |        |          | (161,371 | )
|                                                             | Capital expenditures                                                                                              |                                                                                          |                                                                                                 | (33,573                                        | )    |        |          | (46,209  | ) |        |          | (24,438  | )
|                                                             | Proceeds from asset sales and business divestitures                                                               |                                                                                          |                                                                                                 | 3,198                                          |      |        |          | 14,231   |   |        |          | 952      |  
|                                                             | Deposits for business acquisitions and other                                                                      |                                                                                          |                                                                                                 | (1,046                                         | )    |        |          | (1,551   | ) |        |          | (10,776  | )
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  
|                                                             |                                                                                                                   |                                                                                          | (39,511                                                                                         | )                                              |      |        | (198,208 | )        |   |        | (195,633 | )       
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  
|Cash flows from financing activities:                        |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |   |        |          |         
|                                                             | Proceeds from issuance of debt and draw on revolving credit
    facility                                          |                                                                                          |                                                                                                 | 25,000                                         |      |        |          | 283,000  |   |        |          | 166,493  |  
|                                                             | Principal repayments of debt and capital lease obligations                                                        |                                                                                          |                                                                                                 | (16,704                                        | )    |        |          | (187,158 | ) |        |          | (74,251  | )
|                                                             | Sale of common shares and warrants                                                                                |                                                                                          |                                                                                                 | 7,125                                          |      |        |          | 53,600   |   |        |          |         |  
|                                                             | Proceeds from release of restricted cash and release of
    (deposits on) collateral supporting letters of credit |                                                                                          |                                                                                                 |                                               |      |        |          | 24,341   |   |        |          | (9,929   | )
|                                                             | Proceeds from the issuance of Series 1 Preferred Shares                                                           |                                                                                          |                                                                                                 |                                               |      |        |          |         |   |        |          | 86,189   |  
|                                                             | Proceeds from the issuance of cumulative mandatorily redeemable
    Preferred Shares                              |                                                                                          |                                                                                                 |                                               |      |        |          |         |   |        |          | 55,000   |  
|                                                             | Proceeds from the exercise of options and warrants                                                                |                                                                                          |                                                                                                 | 521                                            |      |        |          | 1,041    |   |        |          | 554      |  
|                                                             | Fees paid for financing transactions                                                                              |                                                                                          |                                                                                                 | (995                                           | )    |        |          | (14,141  | ) |        |          | (18,967  | )
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  
|                                                             |                                                                                                                   |                                                                                          | 14,947                                                                                          |                                                |      |        | 160,683  |          |   |        | 205,089  |         
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                                   |                                                                                          | 321                                                                                             |                                                |      |        | 273      |          |   |        | 385      |         
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  
|Increase (decrease) in cash and cash equivalents             |                                                                                                                   |                                                                                          | 380                                                                                             |                                                |      |        | (12,555  | )        |   |        | 19,287   |         
|Cash and cash equivalents at the beginning of the year       |                                                                                                                   |                                                                                          | 8,507                                                                                           |                                                |      |        | 21,062   |          |   |        | 1,775    |         
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  
|Cash and cash equivalents at the end of the year             |                                                                                                                   | $                                                                                        | 8,887                                                                                           |                                                |      | $      | 8,507    |          |   | $      | 21,062   |         
|                                                             |                                                                                                                   |                                                                                          |                                                                                                 |                                                |      |        |          |          |  



F-10



---



##### Table of Contents






WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                                   
|-- | --------------------------------------------------
|1. | Organization of Business and Basis of Presentation











F-11



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                                       
| | --------------------------------------
| | Business Combinations and Acquisitions





| |                                              
| | ---------------------------------------------
| | Cash and Cash Equivalents and Restricted Cash





| |                             
| | ----------------------------
| | Concentration of Credit Risk





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





|                                     |                                                  |      |       |        |      |   |       |        |   |   |     |      |  
|------------------------------------ | ------------------------------------------------ | ---- | ----- | ------ | ---- | - | ----- | ------ | - | - | --- | ---- | -
|                                     |                                                  | 2005 |       |        | 2004 |   |       | 2003   |  
|                                     |                                                  |      |       |        |      |   |       |        |  
|Balance at the beginning of the year |                                                  | $    | 1,264 |        |      | $ | 620   |        |   | $ | 350 |     
|                                     | Acquisitions                                     |      |       |       |      |   |       | 1,380  |   |   |     | 243  |  
|                                     | Provisions                                       |      |       | 1,199  |      |   |       | 2,243  |   |   |     | 229  |  
|                                     | Impact of foreign exchange rate fluctuations     |      |       | 5      |      |   |       | 12     |   |   |     | 73   |  
|                                     | Bad debts charged to reserves, net of recoveries |      |       | (1,543 | )    |   |       | (2,991 | ) |   |     | (275 | )
|                                     |                                                  |      |       |        |      |   |       |        |  
|Balance at the end of the year       |                                                  | $    | 925   |        |      | $ | 1,264 |        |   | $ | 620 |     
|                                     |                                                  |      |       |        |      |   |       |        |  

F-12



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




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



|                                                            |  |                                           
|----------------------------------------------------------- |  | ------------------------------------------
|Buildings                                                   |  | 10 to 25 years                            
|Vehicles                                                    |  | 10 years                                  
|Containers, compactors and landfill and recycling equipment |  | 5 to 12 years                             
|Furniture, fixtures and other office equipment              |  | 3 to 5 years                              
|Leasehold improvements                                      |  | Shorter of term of lease or estimated life



| |                  
| | -----------------
| | Long-Lived Assets







| |               
| | --------------
| | Landfill Sites



units-of


F-13



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


units-of












| |                                     
| | ------------------------------------
| | Goodwill and Other Intangible Assets



F-14



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






not-to




| |                         
| | ------------------------
| | Other Non-Current Assets







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





| |                    
| | -------------------
| | Environmental Costs





| |                                             
| | --------------------------------------------
| | Accrued Closure and Post-Closure Obligations



F-15



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








| |                    
| | -------------------
| | Revenue Recognition





| |                     
| | --------------------
| | Royalty Arrangements





| |                  
| | -----------------
| | Advertising Costs





| |                
| | ---------------
| | Risk Management

U.S.-based


F-16



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                     |            |      |       |        |      |   |       |       |  
|------------------------------------ | ---------- | ---- | ----- | ------ | ---- | - | ----- | ----- | -
|                                     |            | 2005 |       |        | 2004 |  
|                                     |            |      |       |        |      |  
|Balance at the beginning of the year |            | $    | 2,426 |        |      | $ |      |      
|                                     | Provisions |      |       | 4,141  |      |   |       | 2,978 |  
|                                     | Payments   |      |       | (2,211 | )    |   |       | (552  | )
|                                     |            |      |       |        |      |  
|Balance at the end of the year       |            | $    | 4,356 |        |      | $ | 2,426 |      
|                                     |            |      |       |        |      |  





| |                               
| | ------------------------------
| | Stock-Based Compensation Plans



|                                                                                                                              |             |      |         |       |      |   |         |       |   |   |         |       |  
|----------------------------------------------------------------------------------------------------------------------------- | ----------- | ---- | ------- | ----- | ---- | - | ------- | ----- | - | - | ------- | ----- | -
|                                                                                                                              |             | 2005 |         |       | 2004 |   |         | 2003  |  
|                                                                                                                              |             |      |         |       |      |   |         |       |  
|Net loss attributable to Common Shareholders as reported                                                                      |             | $    | (50,290 | )     |      | $ | (48,154 | )     |   | $ | (76,952 | )    
|Add:  Employee compensation expense (benefit) for
    equity awards included in the determination of net loss as
    reported |             |      | 344     |       |      |   | (1,420  | )     |   |   | 2,677   |      
|Less:  Stock based compensation expense for equity
    awards determined by the fair value based method                       |             |      | (9,994  | )     |      |   | (8,892  | )     |   |   | (6,160  | )    
|                                                                                                                              |             |      |         |       |      |   |         |       |  
|Pro forma net loss attributable to Common Shareholders                                                                        |             | $    | (59,940 | )     |      | $ | (58,466 | )     |   | $ | (80,435 | )    
|                                                                                                                              |             |      |         |       |      |   |         |       |  
|Basic and diluted loss per share:                                                                                             |             |      |         |       |      |   |         |       |   |   |         |      
|                                                                                                                              | As reported |      | $       | (0.51 | )    |   | $       | (0.55 | ) |   | $       | (1.98 | )
|                                                                                                                              |             |      |         |       |      |   |         |       |  
|                                                                                                                              | Pro forma   |      | $       | (0.61 | )    |   | $       | (0.66 | ) |   | $       | (2.07 | )
|                                                                                                                              |             |      |         |       |      |   |         |       |  



|                                        |  |      |                |  |      |  |                |      |  |  |                | 
|--------------------------------------- |  | ---- | -------------- |  | ---- |  | -------------- | ---- |  |  | -------------- | 
|                                        |  | 2005 |                |  | 2004 |  |                | 2003 | 
|                                        |  |      |                |  |      |  |                |      | 
|Annual dividend yield                   |  |      |               |  |      |  |               |      |  |  |               | 
|Weighted average expected lives (years) |  |      | 2.8 years      |  |      |  | 3.0 years      |      |  |  | 3.0 years      | 
|Risk-free interest rate                 |  |      | 2.57% to 4.62% |  |      |  | 2.57% to 3.25% |      |  |  | 3.05% to 3.47% | 
|Volatility                              |  |      | 39%            |  |      |  | 84%            |      |  |  | 72%            | 





F-17



---



##### 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-18



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|                                             |  |              |         |                |            |   |        |            |  |   |         |  
|-------------------------------------------- |  | ------------ | ------- | -------------- | ---------- | - | ------ | ---------- |  | - | ------- | -
|                                             |  |              |         | Adjustment for |            |   |       
|                                             |  | December 31, |         |                | Change in  |   |        | January 1, | 
|                                             |  | 2003         |         |                | Accounting |   |        | 2004       | 
|                                             |  |              |         |                |            |   |        |            | 
|Landfill sites                               |  | $            | 128,044 |                |            | $ | (3,191 | )          |  | $ | 124,853 |  
|Accumulated depletion                        |  |              | (10,503 | )              |            |   | 717    |            |  |   | (9,786  | )
|                                             |  |              |         |                |            |   |        |            | 
|Landfill sites, net                          |  | $            | 117,541 |                |            | $ | (2,474 | )          |  | $ | 115,067 |  
|                                             |  |              |         |                |            |   |        |            | 
|Accrued closure and post-closure obligations |  | $            | 7,737   |                |            | $ | (2,831 | )          |  | $ | 4,906   |  
|                                             |  |              |         |                |            |   |        |            | 
|Deferred income tax asset (liability)        |  | $            | 3,727   |                |            | $ | (132   | )          |  | $ | 3,595   |  
|                                             |  |              |         |                |            |   |        |            | 



| |                                    
| | -----------------------------------
| | Adoption of New Accounting Standard



4-01(a)


F-19



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








|   |                                                                                      
|-- | -------------------------------------------------------------------------------------
|3. | Business Combinations, Significant Asset Acquisitions and
    Disposals of Businesses



800-acre






F-20



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


re-audited










F-21



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |   |         |         |        |   |         |         |        |  
|------------------------------------- | ------------------------------------------------------------ | ---------------------------------------------- | ----- | ------ | ------ | - | ------- | --------- | ----- | --- | ------- | ------- | ------ | ----- | ------ | ------ | ---- | - | ------- | ------- | ------ | - | ------- | ------- | ------ | -
|                                      |                                                              |                                                |       | 2004   |        |   |        
|                                      |                                                              |                                                |       |        |        |   |        
|                                      |                                                              |                                                |       | Allied |        |   | Florida |           |       | All |         |         |        |       |       
|                                      |                                                              | 2005                                           |       |        | Assets |   |         | Recycling |       |     | Others  |         |        | Total |        |        | 2003 |  
|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |  
|Purchase price:                       |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |   |         |         |        |   |         |        
|                                      | Cash                                                         |                                                | $     | 1,122  |        |   | $       | 45,988    |       |     | $       | 104,234 |        |       | $      | 18,350 |      |   | $       | 168,572 |        |   | $       | 161,371 |       
|                                      | Seller financed note payable                                 |                                                |       |       |        |   |         |          |       |     |         |        |        |       |        | 5,000  |      |   |         | 5,000   |        |   |         |        |       
|                                      | Common stock and warrants                                    |                                                |       |       |        |   |         |          |       |     |         | 51,357  |        |       |        | 36,721 |      |   |         | 88,078  |        |   |         | 18,382  |       
|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |  
|Total purchase price                  |                                                              |                                                | 1,122 |        |        |   | 45,988  |           |       |     | 155,591 |         |        |       | 60,071 |        |      |   | 261,650 |         |        |   | 179,753 |        
|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |  
|Allocated as follows:                 |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |   |         |         |        |   |         |        
|                                      | Working capital assumed:                                     |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |   |         |         |        |   |         |         |       
|                                      |                                                              | Accounts receivable                            |       |        |       |   |         |           | 3,755 |     |         |         | 7,426  |       |        |        | 409  |   |         |         | 11,590 |   |         |         | 6,676  |  
|                                      |                                                              | Prepaid expenses and other current assets      |       |        | 25     |   |         |           | 182   |     |         |         | 935    |       |        |        | 69   |   |         |         | 1,186  |   |         |         | 324    |  
|                                      |                                                              | Accounts payable                               |       |        |       |   |         |           |      |     |         |         | (8,604 | )     |        |        | (738 | ) |         |         | (9,342 | ) |         |         | (976   | )
|                                      |                                                              | Accrued expenses and other current liabilities |       |        | (8     | ) |         |           | (870  | )   |         |         | (4,410 | )     |        |        |     |   |         |         | (5,280 | ) |         |         | (6,930 | )
|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |  
|                                      |                                                              | Net working capital                            |       |        | 17     |   |         |           | 3,067 |     |         |         | (4,653 | )     |        |        | (260 | ) |         |         | (1,846 | ) |         |         | (906   | )
|                                      | Property and equipment                                       |                                                |       | 810    |        |   |         | 10,728    |       |     |         | 23,911  |        |       |        | 6,044  |      |   |         | 40,683  |        |   |         | 13,030  |       
|                                      | Landfill sites                                               |                                                |       |       |        |   |         |          |       |     |         |        |        |       |        | 41,982 |      |   |         | 41,982  |        |   |         | 90,094  |       
|                                      | Other assets                                                 |                                                |       |       |        |   |         |          |       |     |         | 271     |        |       |        |       |      |   |         | 271     |        |   |         |        |       
|                                      | Deferred taxes                                               |                                                |       |       |        |   |         |          |       |     |         |        |        |       |        | (334   | )    |   |         | (334    | )      |   |         |        |       
|                                      | Long-term debt assumed                                       |                                                |       |       |        |   |         |          |       |     |         |        |        |       |        |       |      |   |         |        |        |   |         | (4,429  | )     
|                                      | Accrued closures, post-closure and other obligations assumed |                                                |       |       |        |   |         |          |       |     |         |        |        |       |        | (52    | )    |   |         | (52     | )      |   |         | (1,483  | )     
|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |  
|                                      | Net book value of assets acquired and liabilities assumed    |                                                |       | 827    |        |   |         | 13,795    |       |     |         | 19,529  |        |       |        | 47,380 |      |   |         | 80,704  |        |   |         | 96,306  |       
|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |  
|Excess purchase price to be allocated |                                                              | $                                              | 295   |        |        | $ | 32,193  |           |       | $   | 136,062 |         |        | $     | 12,691 |        |      | $ | 180,946 |         |        | $ | 83,447  |        
|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |  
|Allocated as follows:                 |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |   |         |         |        |   |         |        
|                                      | Goodwill                                                     |                                                | $     | 172    |        |   | $       | 23,201    |       |     | $       | 108,906 |        |       | $      | 12,667 |      |   | $       | 144,774 |        |   | $       | 66,639  |       
|                                      | Other intangible assets                                      |                                                |       | 123    |        |   |         | 8,992     |       |     |         | 27,156  |        |       |        | 24     |      |   |         | 36,172  |        |   |         | 16,808  |       
|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |  
|Total allocated                       |                                                              | $                                              | 295   |        |        | $ | 32,193  |           |       | $   | 136,062 |         |        | $     | 12,691 |        |      | $ | 180,946 |         |        | $ | 83,447  |        
|                                      |                                                              |                                                |       |        |        |   |         |           |       |     |         |         |        |       |        |        |      |  





F-22



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








|                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                     |  | 2005 |         |   | 2004 |   |         | 2003 | 
|                                                                                     |  |      |         |   |      |   |         |      | 
|Revenue                                                                              |  | $    | 383,071 |   |      | $ | 350,408 |      |  | $ | 315,300 |  
|                                                                                     |  |      |         |   |      |   |         |      | 
|Net loss attributable to common shareholders                                         |  | $    | (50,267 | ) |      | $ | (54,058 | )    |  | $ | (99,893 | )
|                                                                                     |  |      |         |   |      |   |         |      | 
|Basic and diluted net loss per Common Share                                          |  | $    | (0.51   | ) |      | $ | (0.60   | )    |  | $ | (2.05   | )
|                                                                                     |  |      |         |   |      |   |         |      | 
|Basic and diluted pro forma weighted average number of common
    shares outstanding |  |      | 98,640  |   |      |   | 90,503  |      |  |   | 48,632  |  
|                                                                                     |  |      |         |   |      |   |         |      | 





|   |                                          
|-- | -----------------------------------------
|4. | Prepaid Expenses and Other Current Assets



|                      |  |      |        |  |      |   |        | 
|--------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                      |  | 2005 |        |  | 2004 |  
|                      |  |      |        |  |      |  
|Prepaid expenses      |  | $    | 2,694  |  |      | $ | 6,990  | 
|Deferred income taxes |  |      | 4,763  |  |      | $ |       | 
|Inventory             |  |      | 1,832  |  |      |   | 1,791  | 
|Other current assets  |  |      | 1,823  |  |      |   | 2,159  | 
|                      |  |      |        |  |      |  
|                      |  | $    | 11,112 |  |      | $ | 10,940 | 
|                      |  |      |        |  |      |  



|   |                       
|-- | ----------------------
|5. | Property and Equipment



|                                                                           |  |      |         |   |      |   |         |  
|-------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                           |  | 2005 |         |   | 2004 |  
|                                                                           |  |      |         |   |      |  
|Land and buildings                                                         |  | $    | 27,446  |   |      | $ | 18,872  |  
|Vehicles                                                                   |  |      | 103,120 |   |      |   | 101,215 |  
|Containers, compactors and landfill and recycling equipment                |  |      | 71,228  |   |      |   | 61,550  |  
|Furniture, fixtures, other office equipment and leasehold
    improvements |  |      | 10,389  |   |      |   | 8,562   |  
|                                                                           |  |      |         |   |      |  
|Total property and equipment                                               |  |      | 212,183 |   |      |   | 190,199 |  
|Less: Accumulated depreciation                                             |  |      | (78,920 | ) |      |   | (59,732 | )
|                                                                           |  |      |         |   |      |  
|Property and equipment, net                                                |  | $    | 133,263 |   |      | $ | 130,467 |  
|                                                                           |  |      |         |   |      |  

F-23



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|   |                                                                        
|-- | -----------------------------------------------------------------------
|6. | Landfill Sites, Accrued Closure, Post-Closure and Other
    Obligations



| |               
| | --------------
| | Landfill Sites



|                            |  |      |         |   |      |   |         |  
|--------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                            |  | 2005 |         |   | 2004 |  
|                            |  |      |         |   |      |  
|Landfill sites              |  | $    | 205,345 |   |      | $ | 188,616 |  
|Less: Accumulated depletion |  |      | (33,217 | ) |      |   | (19,000 | )
|                            |  |      |         |   |      |  
|Landfill sites, net         |  | $    | 172,128 |   |      | $ | 169,616 |  
|                            |  |      |         |   |      |  





|                                     |                                                              |      |         |         |      |   |         |        |   |   |         |        |  
|------------------------------------ | ------------------------------------------------------------ | ---- | ------- | ------- | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                                     |                                                              | 2005 |         |         | 2004 |   |         | 2003   |  
|                                     |                                                              |      |         |         |      |   |         |        |  
|Balance at the beginning of the year |                                                              | $    | 169,616 |         |      | $ | 117,541 |        |   | $ | 13,084  |       
|                                     | Landfill site construction costs                             |      |         | 10,775  |      |   |         | 12,839 |   |   |         | 12,268 |  
|                                     | Landfill purchase price                                      |      |         | 3,000   |      |   |         | 41,982 |   |   |         | 90,094 |  
|                                     | Additional asset retirement obligations                      |      |         | 1,777   |      |   |         | 858    |   |   |         |       |  
|                                     | Purchase price allocation adjustments for prior acquisitions |      |         | 99      |      |   |         | 5,907  |   |   |         |       |  
|                                     | Depletion                                                    |      |         | (13,434 | )    |   |         | (8,105 | ) |   |         | (4,789 | )
|                                     | Divestitures                                                 |      |         |        |      |   |         | (154   | ) |   |         |       |  
|                                     | Capitalized interest                                         |      |         |        |      |   |         | 178    |   |   |         |       |  
|                                     | Effect of foreign exchange rate fluctuations                 |      |         | 295     |      |   |         | 1,044  |   |   |         | 3,227  |  
|                                     | Change in accounting principle                               |      |         |        |      |   |         | (2,474 | ) |   |         | 3,657  |  
|                                     |                                                              |      |         |         |      |   |         |        |  
|Balance at the end of the year       |                                                              | $    | 172,128 |         |      | $ | 169,616 |        |   | $ | 117,541 |       
|                                     |                                                              |      |         |         |      |   |         |        |  



| |                                                    
| | ---------------------------------------------------
| | Accrued Closure, Post-Closure and Other Obligations



|                                             |  |      |        |  |      |   |        | 
|-------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                             |  | 2005 |        |  | 2004 |  
|                                             |  |      |        |  |      |  
|Accrued closure and post-closure obligations |  | $    | 9,106  |  |      | $ | 6,390  | 
|Deferred income tax liability                |  |      | 16,206 |  |      |   | 3,984  | 
|Other obligations                            |  |      | 548    |  |      |   | 600    | 
|                                             |  |      |        |  |      |  
|                                             |  | $    | 25,860 |  |      | $ | 10,974 | 
|                                             |  |      |        |  |      |  



F-24



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                     |                                                              |      |       |       |      |   |       |        |   |   |       |       | 
|------------------------------------ | ------------------------------------------------------------ | ---- | ----- | ----- | ---- | - | ----- | ------ | - | - | ----- | ----- | 
|                                     |                                                              | 2005 |       |       | 2004 |   |       | 2003   |  
|                                     |                                                              |      |       |       |      |   |       |        |  
|Balance at the beginning of the year |                                                              | $    | 6,390 |       |      | $ | 7,737 |        |   | $ | 1,925 |      
|                                     | Additional asset retirement obligations                      |      |       | 1,777 |      |   |       | 858    |   |   |       |      | 
|                                     | Accretion                                                    |      |       | 724   |      |   |       | 463    |   |   |       | 455   | 
|                                     | Acquisitions                                                 |      |       |      |      |   |       | 52     |   |   |       | 1,483 | 
|                                     | Divestitures                                                 |      |       |      |      |   |       | (146   | ) |   |       |      | 
|                                     | Purchase price allocation adjustments for prior acquisitions |      |       |      |      |   |       | (92    | ) |   |       |      | 
|                                     | Effect of foreign exchange rate fluctuations                 |      |       | 215   |      |   |       | 349    |   |   |       | 991   | 
|                                     | Change in accounting principle                               |      |       |      |      |   |       | (2,831 | ) |   |       | 2,883 | 
|                                     |                                                              |      |       |       |      |   |       |        |  
|Balance at the end of the year       |                                                              | $    | 9,106 |       |      | $ | 6,390 |        |   | $ | 7,737 |      
|                                     |                                                              |      |       |       |      |   |       |        |  



|           |  |   |         | 
|---------- |  | - | ------- | 
|2006       |  | $ | 107     | 
|2007       |  |   | 394     | 
|2008       |  |   | 394     | 
|2009       |  |   | 5,839   | 
|2010       |  |   | 1,970   | 
|Thereafter |  |   | 185,877 | 
|           |  |   |        
|           |  | $ | 194,581 | 
|           |  |   |        





|   |                                     
|-- | ------------------------------------
|7. | Goodwill and Other Intangible Assets



|                                                     |                                      |      |         |         |      |   |         |        |  
|---------------------------------------------------- | ------------------------------------ | ---- | ------- | ------- | ---- | - | ------- | ------ | -
|                                                     |                                      | 2005 |         |         | 2004 |  
|                                                     |                                      |      |         |         |      |  
|Other intangible assets subject to amortization:     |                                      |      |         |         |      |   |         |       
|                                                     | Customer relationships and contracts |      | $       | 35,394  |      |   | $       | 50,495 |  
|                                                     | Non-competition agreements and other |      |         | 3,136   |      |   |         | 4,126  |  
|                                                     |                                      |      |         |         |      |  
|                                                     |                                      |      | 38,530  |         |      |   | 54,621  |       
|Less: Accumulated amortization:                      |                                      |      |         |         |      |   |         |       
|                                                     | Customer relationships and contracts |      |         | (12,310 | )    |   |         | (5,913 | )
|                                                     | Non-competition agreements and other |      |         | (1,950  | )    |   |         | (1,782 | )
|                                                     |                                      |      |         |         |      |  
|Other intangible assets subject to amortization, net |                                      |      | 24,270  |         |      |   | 46,926  |       
|Goodwill                                             |                                      |      | 305,201 |         |      |   | 280,830 |       
|                                                     |                                      |      |         |         |      |  
|Goodwill and other intangible assets, net            |                                      | $    | 329,471 |         |      | $ | 327,756 |       
|                                                     |                                      |      |         |         |      |  

F-25



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                     |                                                              |                              |         |        |        |   |        |           |   |   |        |   |  |   |         |        | 
|------------------------------------ | ------------------------------------------------------------ | ---------------------------- | ------- | ------ | ------ | - | ------ | --------- | - | - | ------ | - |  | - | ------- | ------ | 
|                                     |                                                              | Year Ended December 31, 2005 |        
|                                     |                                                              |                              |        
|                                     |                                                              | Florida                      |         |        | Canada |   |        | All Other |   |   | Total  |  
|                                     |                                                              |                              |         |        |        |   |        |           |   |   |        |  
|Balance at the beginning of the year |                                                              | $                            | 174,629 |        |        | $ | 85,255 |           |   | $ | 20,946 |   |  | $ | 280,830 |       
|                                     | Acquisitions                                                 |                              |         |       |        |   |        | 163       |   |   |        | 9 |  |   |         | 172    | 
|                                     | Divestitures                                                 |                              |         |       |        |   |        |          |   |   |        |  |  |   |         |       | 
|                                     | Effect of foreign exchange rate fluctuations                 |                              |         |       |        |   |        | 2,730     |   |   |        |  |  |   |         | 2,730  | 
|                                     | Purchase price allocation adjustments for prior acquisitions |                              |         | 24,748 |        |   |        | (3,279    | ) |   |        |  |  |   |         | 21,469 | 
|                                     |                                                              |                              |         |        |        |   |        |           |   |   |        |  
|Balance at the end of the year       |                                                              | $                            | 199,377 |        |        | $ | 84,869 |           |   | $ | 20,955 |   |  | $ | 305,201 |       
|                                     |                                                              |                              |         |        |        |   |        |           |   |   |        |  



|                                     |                                                              |                              |         |         |        |   |        |           |  |   |        |        |   |   |         |         |  
|------------------------------------ | ------------------------------------------------------------ | ---------------------------- | ------- | ------- | ------ | - | ------ | --------- |  | - | ------ | ------ | - | - | ------- | ------- | -
|                                     |                                                              | Year Ended December 31, 2004 |        
|                                     |                                                              |                              |        
|                                     |                                                              | Florida                      |         |         | Canada |   |        | All Other |  |   | Total  |       
|                                     |                                                              |                              |         |         |        |   |        |           |  |   |        |       
|Balance at the beginning of the year |                                                              | $                            | 56,034  |         |        | $ | 78,722 |           |  | $ | 9,788  |        |   | $ | 144,544 |        
|                                     | Acquisitions                                                 |                              |         | 133,093 |        |   |        | 314       |  |   |        | 11,367 |   |   |         | 144,774 |  
|                                     | Divestitures                                                 |                              |         | (8,599  | )      |   |        |          |  |   |        |       |   |   |         | (8,599  | )
|                                     | Effect of foreign exchange rate fluctuations                 |                              |         |        |        |   |        | 6,219     |  |   |        |       |   |   |         | 6,219   |  
|                                     | Purchase price allocation adjustments for prior acquisitions |                              |         | (5,899  | )      |   |        |          |  |   |        | (209   | ) |   |         | (6,108  | )
|                                     |                                                              |                              |         |         |        |   |        |           |  |   |        |       
|Balance at the end of the year       |                                                              | $                            | 174,629 |         |        | $ | 85,255 |           |  | $ | 20,946 |        |   | $ | 280,830 |        
|                                     |                                                              |                              |         |         |        |   |        |           |  |   |        |       



|           |  |   |        | 
|---------- |  | - | ------ | 
|2006       |  | $ | 5,178  | 
|2007       |  |   | 3,738  | 
|2008       |  |   | 2,720  | 
|2009       |  |   | 2,142  | 
|2010       |  |   | 1,835  | 
|Thereafter |  |   | 8,657  | 
|           |  |   |       
|           |  | $ | 24,270 | 
|           |  |   |       



|                                     |  |  |             | 
|------------------------------------ |  |  | ----------- | 
|Customer relationships and contracts |  |  | 11.5  years | 
|Non-competition agreements and other |  |  | 3.0 years   | 

F-26



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |             
|-- | ------------
|8. | Other Assets



|                                                                                                                                                             |  |      |        |  |      |   |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------ |  | ---- | - | ------ | 
|                                                                                                                                                             |  | 2005 |        |  | 2004 |  
|                                                                                                                                                             |  |      |        |  |      |  
|Debt and redeemable Preferred Stock issue costs, net of
    accumulated amortization of $4,761 and $2,271 as of
    December 31, 2005 and 2004, respectively |  | $    | 9,428  |  |      | $ | 10,833 | 
|Acquisition deposits and deferred acquisition costs                                                                                                          |  |      | 13,815 |  |      |   | 12,576 | 
|Other assets                                                                                                                                                 |  |      | 702    |  |      |   | 2,032  | 
|                                                                                                                                                             |  |      |        |  |      |  
|                                                                                                                                                             |  | $    | 23,945 |  |      | $ | 25,441 | 
|                                                                                                                                                             |  |      |        |  |      |  



|   |                                               
|-- | ----------------------------------------------
|9. | Accrued Expenses and Other Current Liabilities



|                                                       |  |      |        |  |      |   |        | 
|------------------------------------------------------ |  | ---- | ------ |  | ---- | - | ------ | 
|                                                       |  | 2005 |        |  | 2004 |  
|                                                       |  |      |        |  |      |  
|Deferred revenue                                       |  | $    | 10,205 |  |      | $ | 9,443  | 
|Accrued compensation, benefits and subcontractor costs |  |      | 8,090  |  |      |   | 8,393  | 
|Accrued waste disposal costs                           |  |      | 7,099  |  |      |   | 8,220  | 
|Accrued insurance                                      |  |      | 4,360  |  |      |   | 2,426  | 
|Accrued interest                                       |  |      | 4,207  |  |      |   | 4,762  | 
|Accrued acquisition costs                              |  |      | 1,637  |  |      |   | 2,230  | 
|Current portion of capital lease obligations           |  |      | 454    |  |      |   | 567    | 
|Other accrued expenses and current liabilities         |  |      | 4,648  |  |      |   | 6,492  | 
|                                                       |  |      |        |  |      |  
|                                                       |  | $    | 40,700 |  |      | $ | 42,533 | 
|                                                       |  |      |        |  |      |  



|    |     
|--- | ----
|10. | Debt



|                                                                                             |                                                                                                                                                                                                              |      |         |         |      |   |         |        | 
|-------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---- | ------- | ------- | ---- | - | ------- | ------ | 
|                                                                                             |                                                                                                                                                                                                              | 2005 |         |         | 2004 |  
|                                                                                             |                                                                                                                                                                                                              |      |         |         |      |  
|Senior Secured Credit Facilities:                                                            |                                                                                                                                                                                                              |      |         |         |      |   |         |       
|                                                                                             | Revolving credit facility, floating interest rate at 6.71% as of
    December 31, 2004, due April 2009                                                                                                       |      | $       |        |      |   | $       | 15,000 | 
|                                                                                             | Term loan facility, floating interest rate at 7.91% and 6.78% as
    of December 31, 2005 and 2004, respectively, due
    $313 per quarter to March 2010, $29,500 per quarter
    thereafter, due March 2011 |      |         | 123,250 |      |   |         | 99,250 | 
|Senior Subordinated Notes, fixed interest rate at 9.5%, due 2014                             |                                                                                                                                                                                                              |      | 160,000 |         |      |   | 160,000 |       
|Other subordinated promissory note payable, interest at 6.67%,
    due through
    June 2017 |                                                                                                                                                                                                              |      | 2,965   |         |      |   | 3,130   |       
|                                                                                             |                                                                                                                                                                                                              |      |         |         |      |  
|                                                                                             |                                                                                                                                                                                                              |      | 286,215 |         |      |   | 277,380 |       
|Less: Current portion                                                                        |                                                                                                                                                                                                              |      | (1,365  | )       |      |   | (1,166  | )     
|                                                                                             |                                                                                                                                                                                                              |      |         |         |      |  
|Long-term portion                                                                            |                                                                                                                                                                                                              | $    | 284,850 |         |      | $ | 276,214 |       
|                                                                                             |                                                                                                                                                                                                              |      |         |         |      |  

F-27



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|           |  |   |         | 
|---------- |  | - | ------- | 
|2006       |  | $ | 1,365   | 
|2007       |  |   | 1,440   | 
|2008       |  |   | 1,453   | 
|2009       |  |   | 1,467   | 
|2010       |  |   | 89,044  | 
|Thereafter |  |   | 191,446 | 
|           |  |   |        
|           |  | $ | 286,215 | 
|           |  |   |        



| |                                 
| | --------------------------------
| | Senior Secured Credit Facilities

five-year seven-year








F-28



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




Senior
Subordinated Notes


1 2










|    |                                                   
|--- | --------------------------------------------------
|11. | Cumulative Mandatorily Redeemable Preferred Shares



F-29



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










F-30



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|    |                              
|--- | -----------------------------
|12. | Commitments and Contingencies



| |       
| | ------
| | Leases



|           |  |   |        | 
|---------- |  | - | ------ | 
|2006       |  | $ | 5,359  | 
|2007       |  |   | 4,656  | 
|2008       |  |   | 4,016  | 
|2009       |  |   | 2,773  | 
|2010       |  |   | 2,389  | 
|Thereafter |  |   | 7,895  | 
|           |  |   |       
|           |  | $ | 27,088 | 
|           |  |   |       





| |                                   
| | ----------------------------------
| | Surety Bonds and Letters of Credit





| |                    
| | -------------------
| | Environmental Risks







| |                   
| | ------------------
| | Disposal Agreement



F-31



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








| |                                 
| | --------------------------------
| | Collective Bargaining Agreements





| |                  
| | -----------------
| | Legal Proceedings







F-32



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










| |                  
| | -----------------
| | Other Commitments





|    |              
|--- | -------------
|13. | Capital Stock



| |                      
| | ---------------------
| | Migration Transaction



non-U.S.






F-33



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                  
| | -----------------
| | Equity Placements







| |                          
| | -------------------------
| | Series 1 Preferred Shares



|             |  |           |            |  |           |   |      |          |  |   |              |         |          |        |        |       |           |   |           |  |  |   |      | 
|------------ |  | --------- | ---------- |  | --------- | - | ---- | -------- |  | - | ------------ | ------- | -------- | ------ | ------ | ----- | --------- | - | --------- |  |  | - | ---- | 
|             |  |           |            |  |           |   |      |          |  |   |              | Warrant |         
|             |  | Series 1  |            |  |           |   |      |          |  |   |              |         | Exercise |       
|             |  | Preferred |            |  | Price Per |   |      | Gross    |  |   |              |         | Warrants |        |        | Price |          
|Period       |  | Shares    |            |  | Share     |   |      | Proceeds |  |   | Net Proceeds |         |          | Issued |        |       | Per Share |  
|             |  |           |            |  |           |   |      |          |  |   |              |         |          |        |        |       |           |  
|March - June |  |           | 10,241,666 |  |           | $ | 3.00 |          |  | $ | 30,725       |         |          | $      | 28,925 |       |           | $ | 2,048,333 |  |  | $ | 3.00 | 
|June(a)      |  |           | 5,000,000  |  |           |   | 3.00 |          |  |   | 15,000       |         |          |        | 14,100 |       |           |   | 1,000,000 |  |  |   | 3.00 | 
|July(b)      |  |           | 4,154,667  |  |           |   | 3.00 |          |  |   | 12,464       |         |          |        | 11,600 |       |           |   | 830,933   |  |  |   | 3.00 | 
|September(b) |  |           | 8,750,000  |  |           |   | 3.20 |          |  |   | 28,000       |         |          |        | 27,877 |       |           |   | 1,575,000 |  |  |   | 3.20 | 
|             |  |           |            |  |           |   |      |          |  |   |              |         |          |        |        |       |           |  
|             |  |           | 28,146,333 |  |           |   |      |          |  | $ | 86,189       |         |          | $      | 82,502 | (c)   |           | $ | 5,454,266 |  |  |   |      | 
|             |  |           |            |  |           |   |      |          |  |   |              |         |          |        |        |       |           |  






|    |  |                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The proceeds from this issue were received and recorded as of
    June 25, 2003; the shares were issued July 8, 2003.                                                          
|   
|(b) |  | A shareholder and certain of our officers and directors and/or
    their affiliates, purchased 1,762,500 Series 1 Preferred
    Shares in these private placement transactions.
|   
|(c) |  | Separately, we recorded a tax asset of $1.3 million for the
    deductible portion of the fees paid.                                                                           





F-34



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                                                               
| | --------------------------------------------------------------
| | Employee and Director Stock Option Plans and Option
    Grants







F-35



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                                    |                                            |      |            |             |      |  |            |             |   |  |           |             |  
|--------------------------------------------------- | ------------------------------------------ | ---- | ---------- | ----------- | ---- |  | ---------- | ----------- | - |  | --------- | ----------- | -
|                                                    |                                            | 2005 |            |             | 2004 |  |            | 2003        |  
|                                                    |                                            |      |            |             |      |  |            |             |  
|Options outstanding at the beginning of the year    |                                            |      | 12,652,964 |             |      |  | 7,806,699  |             |   |  | 2,435,816 |            
|                                                    | Options granted during the year            |      |            | 876,000     |      |  |            | 5,472,000   |   |  |           | 5,493,000   |  
|                                                    | Options exercised during the year          |      |            | (15,000     | )    |  |            | (192,500    | ) |  |           | (20,000     | )
|                                                    | Options forfeited during the year          |      |            | (950,464    | )    |  |            | (433,235    | ) |  |           | (102,117    | )
|                                                    |                                            |      |            |             |      |  |            |             |  
|Options outstanding at the end of the year          |                                            |      | 12,563,500 |             |      |  | 12,652,964 |             |   |  | 7,806,699 |            
|                                                    |                                            |      |            |             |      |  |            |             |  
|Options exercisable at the end of the year          |                                            |      | 6,586,000  |             |      |  | 2,727,964  |             |   |  | 1,790,699 |            
|                                                    |                                            |      |            |             |      |  |            |             |  
|Weighted average exercise price: (C$ Options In C$) |                                            |      |            |             |      |  |            |             |   |  |           |            
|                                                    | Options granted                            |      | $          |            |      |  | $          | 7.37        |   |  | $         | 6.49        |  
|                                                    | Options exercised                          |      | $          |            |      |  | $          | 5.22        |   |  | $         | 4.05        |  
|                                                    | Options forfeited                          |      | $          | 10.35       |      |  | $          | 8.33        |   |  | $         | 9.47        |  
|                                                    | Options outstanding at the end of the year |      | $          | 6.37        |      |  | $          | 6.45        |   |  | $         | 6.15        |  
|Option price ranges: (C$ Options In C$)             |                                            |      |            |             |      |  |            |             |   |  |           |            
|                                                    | Options granted                            |      | $          |            |      |  | $          | 3.23-$8.40  |   |  | $         | 5.25-$7.28  |  
|                                                    | Options exercised                          |      | $          |            |      |  | $          | 4.05-$6.03  |   |  | $         | 4.05        |  
|                                                    | Options forfeited                          |      | $          | 5.25-$18.05 |      |  | $          | 5.25-$18.05 |   |  | $         | 5.89-$14.44 |  
|                                                    | Options outstanding at the end of the year |      | $          | 4.05-$18.05 |      |  | $          | 3.23-$18.05 |   |  | $         | 4.05-$18.05 |  
|Weighted average exercise price: (US$ Options)      |                                            |      |            |             |      |  |            |             |   |  |           |            
|                                                    | Options granted                            |      | $          | 3.60        |      |  | $          | 4.82        |   |  | $         | 4.49        |  
|                                                    | Options exercised                          |      | $          | 3.53        |      |  | $          | 3.73        |   |  | $         |            |  
|                                                    | Options forfeited                          |      | $          | 4.98        |      |  | $          | 7.42        |   |  | $         | 6.34        |  
|                                                    | Options outstanding at the end of the year |      | $          | 4.45        |      |  | $          | 4.61        |   |  | $         | 4.55        |  
|Option price ranges: (US$ Options)                  |                                            |      |            |             |      |  |            |             |   |  |           |            
|                                                    | Options granted                            |      | $          | 3.58-$3.96  |      |  | $          | 2.70-$6.25  |   |  | $         | 3.89-$5.52  |  
|                                                    | Options exercised                          |      | $          | 3.53        |      |  | $          | 3.46-$4.15  |   |  | $         |            |  
|                                                    | Options forfeited                          |      | $          | 2.70-$12.00 |      |  | $          | 3.89-$12.00 |   |  | $         | 4.00-$12.00 |  
|                                                    | Options outstanding at the end of the year |      | $          | 2.70-$6.25  |      |  | $          | 2.70-$6.25  |   |  | $         | 3.12-$12.00 |  

F-36



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Warrants




|                                                  |                                    |           |            |          |              |  |             |             |  |  |              |           |   |           |             |             |              |  |            |            |  |  |             |             | 
|------------------------------------------------- | ---------------------------------- | --------- | ---------- | -------- | ------------ |  | ----------- | ----------- |  |  | ------------ | --------- | - | --------- | ----------- | ----------- | ------------ |  | ---------- | ---------- |  |  | ----------- | ----------- | 
|                                                  |                                    | 2005      |            |          | 2004         |  |             | 2003        | 
|                                                  |                                    |           |            |          |              |  |             |             | 
|                                                  |                                    | Number of |            |          | Warrant      |  |             | Number of   |  |  | Warrant      |           |   | Number of |             |             | Warrant      | 
|                                                  |                                    | Warrants  |            |          | Price Ranges |  |             | Warrants    |  |  | Price Ranges |           |   | Warrants  |             |             | Price Ranges | 
|                                                  |                                    |           |            |          |              |  |             |             |  |  |              |           |   |           |             |             |              | 
|Warrants outstanding at the beginning of the year |                                    |           | 15,230,115 |          |              |  | $2.70-$5.75 |             |  |  | 13,810,515   |           |   |           | $2.70-$4.70 |             |              |  | 1,150,000  |            |  |  | $2.70-$3.94 |            
|                                                  | Warrants issued during the year    |           |            | 264,085  |              |  |             | $2.84       |  |  |              | 1,540,000 |   |           |             | $4.00-$5.75 |              |  |            | 12,660,515 |  |  |             | $3.00-$4.70 | 
|                                                  | Warrants exercised during the year |           |            | (149,650 | )            |  |             | $3.00-$3.20 |  |  |              | (120,400  | ) |           |             | $3.00       |              |  |            |           |  |  |             |            | 
|                                                  | Warrants expired during the year   |           |            | (150,000 | )            |  |             | $3.94       |  |  |              |          |   |           |             |            |              |  |            |           |  |  |             |            | 
|                                                  |                                    |           |            |          |              |  |             |             |  |  |              |           |   |           |             |             |              | 
|Warrants outstanding at the end of the year       |                                    |           | 15,194,550 |          |              |  | $2.70-$5.75 |             |  |  | 15,230,115   |           |   |           | $2.70-$5.75 |             |              |  | 13,810,515 |            |  |  | $2.70-$4.70 |            
|                                                  |                                    |           |            |          |              |  |             |             |  |  |              |           |   |           |             |             |              | 
|Warrants exercisable at the end of the year       |                                    |           | 15,061,217 |          |              |  | $2.70-$5.75 |             |  |  | 15,030,115   |           |   |           | $2.70-$5.75 |             |              |  | 13,349,265 |            |  |  | $2.70-$3.94 |            
|                                                  |                                    |           |            |          |              |  |             |             |  |  |              |           |   |           |             |             |              | 





|    |             
|--- | ------------
|14. | Income Taxes



|                                        |                            |      |        |       |      |   |       |       |  |   |      |      |  
|--------------------------------------- | -------------------------- | ---- | ------ | ----- | ---- | - | ----- | ----- |  | - | ---- | ---- | -
|                                        |                            | 2005 |        |       | 2004 |   |       | 2003  | 
|                                        |                            |      |        |       |      |   |       |       | 
|Current:                                |                            |      |        |       |      |   |       |       |  |   |      |     
|                                        | Federal                    |      | $      |      |      |   | $     |      |  |   | $    |     |  
|                                        | State                      |      |        |      |      |   |       |      |  |   |      |     |  
|                                        | Canada                     |      |        | 555   |      |   |       | 369   |  |   |      | 403  |  
|                                        |                            |      |        |       |      |   |       |       | 
|Current income tax provision            |                            |      | 555    |       |      |   | 369   |       |  |   | 403  |     
|                                        |                            |      |        |       |      |   |       |       | 
|Deferred:                               |                            |      |        |       |      |   |       |       |  |   |      |     
|                                        | Federal and state deferred |      |        | 5,452 |      |   |       | 3,983 |  |   |      |     |  
|                                        | Foreign deferred           |      |        | 6,129 |      |   |       | 3,235 |  |   |      | (990 | )
|                                        |                            |      |        |       |      |   |       |       | 
|Deferred income tax provision (benefit) |                            |      | 11,581 |       |      |   | 7,218 |       |  |   | (990 | )   
|                                        |                            |      |        |       |      |   |       |       | 
|Provision (benefit) for income taxes    |                            | $    | 12,136 |       |      | $ | 7,587 |       |  | $ | (587 | )   
|                                        |                            |      |        |       |      |   |       |       | 



F-37



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                               |                                                               |      |         |        |      |   |         |        |   |   |        |       |  
|------------------------------ | ------------------------------------------------------------- | ---- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------ | ----- | -
|                               |                                                               | 2005 |         |        | 2004 |   |         | 2003   |  
|                               |                                                               |      |         |        |      |   |         |        |  
|Provision at statutory rate    |                                                               | $    | (13,263 | )      |      | $ | (14,277 | )      |   | $ | (8,675 | )    
|                               | State, net of federal benefit                                 |      |         | 425    |      |   |         | 499    |   |   |        |      |  
|                               | Effect of change in enacted rates on deferred taxes           |      |         |       |      |   |         |       |   |   |        | (478  | )
|                               | Non-deductible warrant expense                                |      |         | 377    |      |   |         | 514    |   |   |        | 903   |  
|                               | Non-deductible interest expense and preferred stock dividends |      |         | 7,490  |      |   |         | 6,921  |   |   |        | 3,790 |  
|                               | Non-deductible foreign exchange (gains) and loss              |      |         | 146    |      |   |         | (16    | ) |   |        | 366   |  
|                               | Other permanent differences                                   |      |         | 710    |      |   |         | (601   | ) |   |        | 509   |  
|                               | Distributed earnings in foreign subsidiary                    |      |         | 2,430  |      |   |         | 1,866  |   |   |        |      |  
|                               | Valuation allowance                                           |      |         | 13,585 |      |   |         | 12,412 |   |   |        | 2,641 |  
|                               | Large corporations tax                                        |      |         | 236    |      |   |         | 269    |   |   |        | 357   |  
|                               |                                                               |      |         |        |      |   |         |        |  
|Income tax provision (benefit) |                                                               | $    | 12,136  |        |      | $ | 7,587   |        |   | $ | (587   | )    
|                               |                                                               |      |         |        |      |   |         |        |  



F-38



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                                    |                                                                         |      |         |         |      |   |        |         |  
|--------------------------------------------------- | ----------------------------------------------------------------------- | ---- | ------- | ------- | ---- | - | ------ | ------- | -
|                                                    |                                                                         | 2005 |         |         | 2004 |  
|                                                    |                                                                         |      |         |         |      |  
|Deferred income tax assets:                         |                                                                         |      |         |         |      |   |        |        
|                                                    | Tax loss carry forward  U.S.                                           |      | $       | 27,928  |      |   | $      | 15,955  |  
|                                                    | Tax loss carry forward  Canada                                         |      |         | 4,763   |      |   |        | 10,602  |  
|                                                    | Accruals not currently deductibles  U.S.                               |      |         | 123     |      |   |        | 1,753   |  
|                                                    | Less: Valuation allowance  U.S.                                        |      |         | (28,051 | )    |   |        | (15,842 | )
|                                                    |                                                                         |      |         |         |      |  
|                                                    | Net deferred tax assets                                                 |      |         | 4,763   |      |   |        | 12,468  |  
|Deferred income tax liabilities:                    |                                                                         |      |         |         |      |   |        |        
|                                                    | Book basis in property and goodwill in excess of tax
    basis  U.S.   |      |         | (9,436  | )    |   |        | (3,984  | )
|                                                    | Book basis in property and goodwill in excess of tax
    basis  Canada |      |         | (6,770  | )    |   |        | (9,400  | )
|                                                    | Undistributed earnings in foreign subsidiary 
    U.S.                 |      |         |        |      |   |        | (1,866  | )
|                                                    |                                                                         |      |         |         |      |  
|Net deferred income tax asset (liability)           |                                                                         |      | (11,443 | )       |      |   | (2,782 | )      
|                                                    | Less: current portion of deferred taxes                                 |      |         | (4,763  | )    |   |        |        |  
|                                                    |                                                                         |      |         |         |      |  
|Net deferred income tax asset (liability) long-term |                                                                         | $    | (16,206 | )       |      | $ | (2,782 | )      
|                                                    |                                                                         |      |         |         |      |  





|           |  |      |        |  |        |   |        |       |  |   |        | 
|---------- |  | ---- | ------ |  | ------ | - | ------ | ----- |  | - | ------ | 
|           |  | U.S. |        |  | Canada |   |        | Total | 
|           |  |      |        |  |        |   |        |       | 
|2006       |  | $    |       |  |        | $ |       |       |  | $ |       | 
|2007       |  |      |       |  |        |   |       |       |  |   |       | 
|2008       |  |      |       |  |        |   | 9,509  |       |  |   | 9,509  | 
|2009       |  |      |       |  |        |   | 3,841  |       |  |   | 3,841  | 
|2010       |  |      |       |  |        |   |       |       |  |   |       | 
|Thereafter |  |      | 79,796 |  |        |   |       |       |  |   | 79,796 | 
|           |  |      |        |  |        |   |        |       | 
|           |  | $    | 79,796 |  |        | $ | 13,350 |       |  | $ | 93,146 | 
|           |  |      |        |  |        |   |        |       | 

15-year




|                                     |                                    |      |        |        |      |   |        |        |  |   |       |       | 
|------------------------------------ | ---------------------------------- | ---- | ------ | ------ | ---- | - | ------ | ------ |  | - | ----- | ----- | 
|                                     |                                    | 2005 |        |        | 2004 |   |        | 2003   | 
|                                     |                                    |      |        |        |      |   |        |        | 
|Balance at the beginning of the year |                                    | $    | 15,842 |        |      | $ | 2,641  |        |  | $ |      |      
|                                     | Additions to valuation allowance   |      |        | 13,585 |      |   |        | 12,412 |  |   |       | 2,641 | 
|                                     | Adjustments to valuation allowance |      |        | (1,376 | )    |   |        | 789    |  |   |       |      | 
|                                     |                                    |      |        |        |      |   |        |        | 
|Balance at the end of the year       |                                    | $    | 28,051 |        |      | $ | 15,842 |        |  | $ | 2,641 |      
|                                     |                                    |      |        |        |      |   |        |        | 

F-39



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                               
|--- | ------------------------------
|15. | Net Loss Per Share Information



|                                                                                        |                                                                                      |      |       |         |      |  |       |         |   |  |        |         |  
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ---- | ----- | ------- | ---- |  | ----- | ------- | - |  | ------ | ------- | -
|                                                                                        |                                                                                      | 2005 |       |         | 2004 |  |       | 2003    |  
|                                                                                        |                                                                                      |      |       |         |      |  |       |         |  
|Numerator:                                                                              |                                                                                      |      |       |         |      |  |       |         |   |  |        |        
|                                                                                        | Net loss attributable to common shareholders                                         |      | $     | (50,290 | )    |  | $     | (48,154 | ) |  | $      | (76,952 | )
|                                                                                        |                                                                                      |      |       |         |      |  |       |         |  
|Denominator:                                                                            |                                                                                      |      |       |         |      |  |       |         |   |  |        |        
|                                                                                        | Basic and diluted pro forma weighted average number of common
    shares outstanding |      |       | 98,640  |      |  |       | 88,232  |   |  |        | 38,782  |  
|                                                                                        |                                                                                      |      |       |         |      |  |       |         |  
|Antidilutive securities not included in the diluted earnings per
    share calculation: |                                                                                      |      |       |         |      |  |       |         |   |  |        |        
|                                                                                        | Series 1 Preferred Shares                                                            |      |       |        |      |  |       |        |   |  |        | 13,582  |  
|                                                                                        | Options to purchase Common Shares                                                    |      |       | 44      |      |  |       | 299     |   |  |        | 707     |  
|                                                                                        | Warrants to purchase Common Shares                                                   |      |       | 2,158   |      |  |       | 2,189   |   |  |        | 3,189   |  
|                                                                                        |                                                                                      |      |       |         |      |  |       |         |  
|                                                                                        |                                                                                      |      | 2,202 |         |      |  | 2,488 |         |   |  | 17,478 |        
|                                                                                        |                                                                                      |      |       |         |      |  |       |         |  



|    |                
|--- | ---------------
|16. | Retirement Plan







|    |                    
|--- | -------------------
|17. | Segment Information



F-40



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








|                                         |  |         |         |           |        |   |         |            |  |   |           |   |  |       |         |   |  |   |         | 
|---------------------------------------- |  | ------- | ------- | --------- | ------ | - | ------- | ---------- |  | - | --------- | - |  | ----- | ------- | - |  | - | ------- | 
|                                         |  | 2005    |        
|                                         |  |         |        
|                                         |  |         |         | All Other |        |   |        
|                                         |  | Florida |         |           | Canada |   |         | Operations |  |   | Corporate |   |  | Total |        
|                                         |  |         |         |           |        |   |         |            |  |   |           |   |  |       |        
|Revenue                                  |  | $       | 187,041 |           |        | $ | 166,331 |            |  | $ | 29,074    |   |  | $     |        |   |  | $ | 382,446 | 
|Depreciation, depletion and amortization |  |         | 20,044  |           |        |   | 18,045  |            |  |   | 3,285     |   |  |       | 1,580   |   |  |   | 42,954  | 
|Income (loss) from operations            |  |         | 11,572  |           |        |   | 23,622  |            |  |   | (948      | ) |  |       | (23,220 | ) |  |   | 11,026  | 
|Capital expenditures                     |  |         | 16,581  |           |        |   | 9,670   |            |  |   | 5,603     |   |  |       | 1,719   |   |  |   | 33,573  | 
|Total assets                             |  |         | 398,255 |           |        |   | 191,108 |            |  |   | 101,360   |   |  |       | 37,666  |   |  |   | 728,389 | 

|                                         |  |         |         |           |        |   |         |            |  |   |           |   |  |       |         |   |  |   |         | 
|---------------------------------------- |  | ------- | ------- | --------- | ------ | - | ------- | ---------- |  | - | --------- | - |  | ----- | ------- | - |  | - | ------- | 
|                                         |  | 2004    |        
|                                         |  |         |        
|                                         |  |         |         | All Other |        |   |        
|                                         |  | Florida |         |           | Canada |   |         | Operations |  |   | Corporate |   |  | Total |        
|                                         |  |         |         |           |        |   |         |            |  |   |           |   |  |       |        
|Revenue                                  |  | $       | 144,089 |           |        | $ | 142,718 |            |  | $ | 23,978    |   |  | $     |        |   |  | $ | 310,785 | 
|Depreciation, depletion and amortization |  |         | 15,588  |           |        |   | 15,392  |            |  |   | 2,226     |   |  |       | 998     |   |  |   | 34,204  | 
|Income (loss) from operations            |  |         | 8,170   |           |        |   | 16,550  |            |  |   | (955      | ) |  |       | (16,248 | ) |  |   | 7,517   | 
|Capital expenditures                     |  |         | 14,687  |           |        |   | 12,054  |            |  |   | 18,179    |   |  |       | 1,289   |   |  |   | 46,209  | 
|Total assets                             |  |         | 368,619 |           |        |   | 196,204 |            |  |   | 94,907    |   |  |       | 60,853  |   |  |   | 720,583 | 

|                                         |  |         |         |           |        |   |         |            |  |   |           |   |  |       |         |   |  |   |         |  
|---------------------------------------- |  | ------- | ------- | --------- | ------ | - | ------- | ---------- |  | - | --------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                         |  | 2003    |        
|                                         |  |         |        
|                                         |  |         |         | All Other |        |   |        
|                                         |  | Florida |         |           | Canada |   |         | Operations |  |   | Corporate |   |  | Total |        
|                                         |  |         |         |           |        |   |         |            |  |   |           |   |  |       |        
|Revenue                                  |  | $       |        |           |        | $ | 124,985 |            |  | $ | 1,765     |   |  | $     |        |   |  | $ | 126,750 |  
|Depreciation, depletion and amortization |  |         | 4       |           |        |   | 14,160  |            |  |   | 196       |   |  |       | 567     |   |  |   | 14,927  |  
|Income (loss) from operations            |  |         | (403    | )         |        |   | 12,404  |            |  |   | (158      | ) |  |       | (16,889 | ) |  |   | (5,046  | )
|Capital expenditures                     |  |         | 7,851   |           |        |   | 12,721  |            |  |   | 2,332     |   |  |       | 1,534   |   |  |   | 24,438  |  
|Total assets                             |  |         | 185,926 |           |        |   | 182,241 |            |  |   | 26,815    |   |  |       | 76,016  |   |  |   | 470,998 |  



|    |                           
|--- | --------------------------
|18. | Related Party Transactions



father-in




F-41



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






364-Day














F-42



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                                    
|--- | -----------------------------------
|19. | Supplementary Cash Flow Information



|                                                           |                            |      |       |        |      |   |        |        |  |   |        |       | 
|---------------------------------------------------------- | -------------------------- | ---- | ----- | ------ | ---- | - | ------ | ------ |  | - | ------ | ----- | 
|                                                           |                            | 2005 |       |        | 2004 |   |        | 2003   | 
|                                                           |                            |      |       |        |      |   |        |        | 
|Common Shares issued relative to acquisitions              |                            | $    | 1,146 |        |      | $ | 88,078 |        |  | $ | 24,812 |      
|Beneficial conversion feature of Series 1 Preferred Shares |                            |      |      |        |      |   |       |        |  |   | 54,572 |      
|Amounts accrued for capital expenditures                   |                            |      | 2,439 |        |      |   |       |        |  |   | 2,564  |      
|Other cash flow information:                               |                            |      |       |        |      |   |        |        |  |   |        |      
|                                                           | Cash paid for interest     |      | $     | 26,847 |      |   | $      | 15,782 |  |   | $      | 5,147 | 
|                                                           | Cash paid for income taxes |      |       | 828    |      |   |        | 341    |  |   |        | 1,220 | 



|    |                                              
|--- | ---------------------------------------------
|20. | Selected Quarterly Financial Data (unaudited)



|                                           |  |         |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|------------------------------------------ |  | ------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                           |  | 2005    |        
|                                           |  |         |        
|                                           |  | First   |         |   | Second  |   |         | Third   |  |   | Fourth  |  
|                                           |  | Quarter |         |   | Quarter |   |         | Quarter |  |   | Quarter |  
|                                           |  |         |         |   |         |   |         |         |  |   |         |  
|Revenue                                    |  | $       | 88,985  |   |         | $ | 95,384  |         |  | $ | 101,751 |   |  | $ | 96,326  |  
|Income (loss) from operations              |  |         | (283    | ) |         |   | 786     |         |  |   | 6,507   |   |  |   | 4,016   |  
|Net loss                                   |  |         | (14,267 | ) |         |   | (14,514 | )       |  |   | (9,411  | ) |  |   | (12,098 | )
|Basic and diluted loss per share           |  | $       | (0.15   | ) |         | $ | (0.15   | )       |  | $ | (0.10   | ) |  | $ | (0.12   | )
|Shares used in computing per share amounts |  |         | 96,516  |   |         |   | 99,072  |         |  |   | 99,413  |   |  |   | 99,516  |  

|                                                                                                |  |         |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|----------------------------------------------------------------------------------------------- |  | ------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                                                                                |  | 2004    |        
|                                                                                                |  |         |        
|                                                                                                |  | First   |         |   | Second  |   |         | Third   |  |   | Fourth  |  
|                                                                                                |  | Quarter |         |   | Quarter |   |         | Quarter |  |   | Quarter |  
|                                                                                                |  |         |         |   |         |   |         |         |  |   |         |  
|Revenue                                                                                         |  | $       | 50,317  |   |         | $ | 72,626  |         |  | $ | 94,615  |   |  | $ | 93,227  |  
|Income from operations                                                                          |  |         | 205     |   |         |   | 871     |         |  |   | 5,660   |   |  |   | 781     |  
|Loss before cumulative effect of change in accounting principal                                 |  |         | (10,959 | ) |         |   | (18,615 | )       |  |   | (5,719  | ) |  |   | (13,086 | )
|Cumulative effect of change in accounting principle                                             |  |         | 225     |   |         |   |        |         |  |   |        |   |  |   |        |  
|Net loss                                                                                        |  |         | (10,734 | ) |         |   | (18,615 | )       |  |   | (5,719  | ) |  |   | (13,086 | )
|Basic and diluted loss per share before cumulative effect of
    change in accounting principle |  | $       | (0.15   | ) |         | $ | (0.21   | )       |  | $ | (0.06   | ) |  | $ | (0.14   | )
|Cumulative effect of change in accounting principle                                             |  |         |        |   |         |   |        |         |  |   |        |   |  |   |        |  
|                                                                                                |  |         |         |   |         |   |         |         |  |   |         |  
|Basic and diluted loss per share                                                                |  | $       | (0.15   | ) |         | $ | (0.21   | )       |  | $ | (0.06   | ) |  | $ | (0.14   | )
|                                                                                                |  |         |         |   |         |   |         |         |  |   |         |  
|Shares used in computing per share amounts                                                      |  |         | 70,583  |   |         |   | 88,855  |         |  |   | 96,854  |   |  |   | 96,418  |  



|    |                                             
|--- | --------------------------------------------
|21. | Condensed Consolidating Financial Statements



F-43



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




F-44



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |          |          |   |         |          |         | 
|--------------------------------------------------- | ---------------------------------------------------------- | ------------------------- | ------- | -------- | ---------- |  | ------ | ------------ | ------- |  | ------------ | -------- | -------- | - | ------- | -------- | ------- | 
|                                                    |                                                            | December 31, 2005         |        
|                                                    |                                                            |                           |        
|                                                    |                                                            |                           |         | Non-     |            |  |       
|                                                    |                                                            | Guarantors                |         |          | Guarantors |  |        | Eliminations |         |  | Consolidated |         
|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |         
|ASSETS                                             
|Current assets:                                     |                                                            |                           |         |          |            |  |        |              |         |  |              |          |          |   |         |         
|                                                    | Cash and cash equivalents                                  |                           | $       | 3,681    |            |  | $      | 5,206        |         |  | $            |         |          |   | $       | 8,887    |        
|                                                    | Accounts receivable, net                                   |                           |         | 25,438   |            |  |        | 24,145       |         |  |              |         |          |   |         | 49,583   |        
|                                                    | Prepaid expenses and other current assets                  |                           |         | 3,018    |            |  |        | 8,094        |         |  |              |         |          |   |         | 11,112   |        
|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total current assets      |         |          | 32,137     |  |        |              | 37,445  |  |              |          |         |   |         |          | 69,582  | 
|Property and equipment, net                         |                                                            |                           | 67,354  |          |            |  | 65,909 |              |         |  |             |          |          |   | 133,263 |         
|Landfill sites, net                                 |                                                            |                           | 162,028 |          |            |  | 10,100 |              |         |  |             |          |          |   | 172,128 |         
|Goodwill and other intangible assets, net           |                                                            |                           | 243,276 |          |            |  | 86,195 |              |         |  |             |          |          |   | 329,471 |         
|Other assets                                        |                                                            |                           | 10,391  |          |            |  | 13,554 |              |         |  |             |          |          |   | 23,945  |         
|Due from affiliates                                 |                                                            |                           |        |          |            |  | 2,295  |              |         |  | (2,295       | )        |          |   |        |         
|Investment in subsidiary                            |                                                            |                           | 177,883 |          |            |  |       |              |         |  | (177,883     | )        |          |   |        |         
|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total assets              |         | $        | 693,069    |  |        | $            | 215,498 |  |              | $        | (180,178 | ) |         | $        | 728,389 | 
|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |         
|                                                   
|LIABILITIES AND SHAREHOLDERS EQUITY               
|Current liabilities:                                |                                                            |                           |         |          |            |  |        |              |         |  |              |          |          |   |         |         
|                                                    | Accounts payable                                           |                           | $       | 14,665   |            |  | $      | 11,487       |         |  | $            |         |          |   | $       | 26,152   |        
|                                                    | Accrued expenses and other current liabilities             |                           |         | 27,911   |            |  |        | 12,789       |         |  |              |         |          |   |         | 40,700   |        
|                                                    | Short-term financing and current portion of long-term debt |                           |         | 1,365    |            |  |        |             |         |  |              |         |          |   |         | 1,365    |        
|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total current liabilities |         |          | 43,941     |  |        |              | 24,276  |  |              |          |         |   |         |          | 68,217  | 
|Long  term debt                                    |                                                            |                           | 284,850 |          |            |  |       |              |         |  |             |          |          |   | 284,850 |         
|Accrued closure, post-closure and other obligations |                                                            |                           | 12,521  |          |            |  | 13,339 |              |         |  |             |          |          |   | 25,860  |         
|Cumulative mandatorily redeemable Preferred Stock   |                                                            |                           | 84,971  |          |            |  |       |              |         |  |             |          |          |   | 84,971  |         
|Due to affiliates                                   |                                                            |                           | 2,295   |          |            |  |       |              |         |  | (2,295       | )        |          |   |        |         
|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total liabilities         |         |          | 428,578    |  |        |              | 37,615  |  |              |          | (2,295   | ) |         |          | 463,898 | 
|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |         
|Shareholders equity:                               |                                                            |                           |         |          |            |  |        |              |         |  |              |          |          |   |         |         
|                                                    | Common stock of Waste Services, Inc.                       |                           |         | 937      |            |  |        |             |         |  |              |         |          |   |         | 937      |        
|                                                    | Additional paid-in capital                                 |                           |         | 383,618  |            |  |        | 177,883      |         |  |              | (177,883 | )        |   |         | 383,618  |        
|                                                    | Treasury stock of Waste Services, Inc.                     |                           |         | (1,235   | )          |  |        |             |         |  |              |         |          |   |         | (1,235   | )      
|                                                    | Accumulated other comprehensive income                     |                           |         | 35,673   |            |  |        |             |         |  |              |         |          |   |         | 35,673   |        
|                                                    | Accumulated deficit                                        |                           |         | (154,502 | )          |  |        |             |         |  |              |         |          |   |         | (154,502 | )      
|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |         
|                                                    | Total shareholders equity                                 |                           |         | 264,491  |            |  |        | 177,883      |         |  |              | (177,883 | )        |   |         | 264,491  |        
|                                                    |                                                            |                           |         |          |            |  |        |              |         |  |              |         
|                                                    | Total 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, 2004                          |        
|                                                    |                                                            |                                            |        
|                                                    |                                                            |                                            |         | Non-     |            |  |       
|                                                    |                                                            | Guarantors                                 |         |          | Guarantors |  |        | Eliminations |         |  | Consolidated |         
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         
|ASSETS                                             
|Current assets:                                     |                                                            |                                            |         |          |            |  |        |              |         |  |              |          |          |   |         |         
|                                                    | Cash and cash equivalents                                  |                                            | $       | 6,223    |            |  | $      | 2,284        |         |  | $            |         |          |   | $       | 8,507    |        
|                                                    | Accounts receivable, net                                   |                                            |         | 24,509   |            |  |        | 23,347       |         |  |              |         |          |   |         | 47,856   |        
|                                                    | Prepaid expenses and other current assets                  |                                            |         | 6,439    |            |  |        | 4,501        |         |  |              |         |          |   |         | 10,940   |        
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total current assets                       |         |          | 37,171     |  |        |              | 30,132  |  |              |          |         |   |         |          | 67,303  | 
|Property and equipment, net                         |                                                            |                                            | 64,805  |          |            |  | 65,662 |              |         |  |             |          |          |   | 130,467 |         
|Landfill sites, net                                 |                                                            |                                            | 155,710 |          |            |  | 13,906 |              |         |  |             |          |          |   | 169,616 |         
|Deferred income taxes, net                          |                                                            |                                            |        |          |            |  |       |              |         |  |             |          |          |   |        |         
|Goodwill and other intangible assets, net           |                                                            |                                            | 240,578 |          |            |  | 87,178 |              |         |  |             |          |          |   | 327,756 |         
|Other assets                                        |                                                            |                                            | 12,106  |          |            |  | 13,335 |              |         |  |             |          |          |   | 25,441  |         
|Due from affiliates                                 |                                                            |                                            |        |          |            |  | 8,869  |              |         |  | (8,869       | )        |          |   |        |         
|Investment in subsidiary                            |                                                            |                                            | 192,115 |          |            |  |       |              |         |  | (192,115     | )        |          |   |        |         
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total assets                               |         | $        | 702,485    |  |        | $            | 219,082 |  |              | $        | (200,984 | ) |         | $        | 720,583 | 
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         
|                                                   
|LIABILITIES AND SHAREHOLDERS EQUITY               
|Current liabilities:                                |                                                            |                                            |         |          |            |  |        |              |         |  |              |          |          |   |         |         
|                                                    | Accounts payable                                           |                                            | $       | 15,757   |            |  | $      | 10,192       |         |  | $            |         |          |   | $       | 25,949   |        
|                                                    | Accrued expenses and other current liabilities             |                                            |         | 31,104   |            |  |        | 11,429       |         |  |              |         |          |   |         | 42,533   |        
|                                                    | Short-term financing and current portion of long-term debt |                                            |         | 1,166    |            |  |        |             |         |  |              |         |          |   |         | 1,166    |        
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total current liabilities                  |         |          | 48,027     |  |        |              | 21,621  |  |              |          |         |   |         |          | 69,648  | 
|Long  term debt                                    |                                                            |                                            | 276,214 |          |            |  |       |              |         |  |             |          |          |   | 276,214 |         
|Accrued closure, post-closure and other obligations |                                                            |                                            | 5,628   |          |            |  | 5,346  |              |         |  |             |          |          |   | 10,974  |         
|Cumulative mandatorily redeemable Preferred Stock   |                                                            |                                            | 64,971  |          |            |  |       |              |         |  |             |          |          |   | 64,971  |         
|Due to affiliates                                   |                                                            |                                            | 8,869   |          |            |  |       |              |         |  | (8,869       | )        |          |   |        |         
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total liabilities                          |         |          | 403,709    |  |        |              | 26,967  |  |              |          | (8,869   | ) |         |          | 421,807 | 
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         
|Shareholders equity:                               |                                                            |                                            |         |          |            |  |        |              |         |  |              |          |          |   |         |         
|                                                    | Common stock of Waste Services, Inc.                       |                                            |         | 904      |            |  |        |             |         |  |              |         |          |   |         | 904      |        
|                                                    | Additional paid-in capital                                 |                                            |         | 374,186  |            |  |        | 192,115      |         |  |              | (192,115 | )        |   |         | 374,186  |        
|                                                    | Treasury stock of Waste Services, Inc.                     |                                            |         | (1,235   | )          |  |        |             |         |  |              |         |          |   |         | (1,235   | )      
|                                                    | Accumulated other comprehensive income                     |                                            |         | 29,133   |            |  |        |             |         |  |              |         |          |   |         | 29,133   |        
|                                                    | Accumulated deficit                                        |                                            |         | (104,212 | )          |  |        |             |         |  |              |         |          |   |         | (104,212 | )      
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total shareholders equity                 |         |          | 298,776    |  |        |              | 192,115 |  |              |          | (192,115 | ) |         |          | 298,776 | 
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         
|                                                    |                                                            | Total liabilities and shareholders equity |         | $        | 702,485    |  |        | $            | 219,082 |  |              | $        | (200,984 | ) |         | $        | 720,583 | 
|                                                    |                                                            |                                            |         |          |            |  |        |              |         |  |              |         

F-46



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                                                                |                                                                                                         |                   |         |         |            |   |         |              |  |   |              |       |  |   |         |         |  
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ----------------- | ------- | ------- | ---------- | - | ------- | ------------ |  | - | ------------ | ----- |  | - | ------- | ------- | -
|                                                                                                |                                                                                                         | December 31, 2005 |        
|                                                                                                |                                                                                                         |                   |        
|                                                                                                |                                                                                                         |                   |         | Non-    |            |   |        
|                                                                                                |                                                                                                         | Guarantors        |         |         | Guarantors |   |         | Eliminations |  |   | Consolidated |      
|                                                                                                |                                                                                                         |                   |         |         |            |   |         |              |  |   |              |      
|Revenue                                                                                         |                                                                                                         | $                 | 216,115 |         |            | $ | 166,331 |              |  | $ |             |       |  | $ | 382,446 |        
|Operating and other expenses:                                                                   |                                                                                                         |                   |         |         |            |   |         |              |  |   |              |       |  |   |         |        
|                                                                                                | Cost of operations (exclusive of depreciation, depletion and
    amortization)                          |                   |         | 165,316 |            |   |         | 111,013      |  |   |              |      |  |   |         | 276,329 |  
|                                                                                                | Selling, general and administrative expense (exclusive of
    depreciation, depletion and amortization) |                   |         | 33,288  |            |   |         | 23,197       |  |   |              |      |  |   |         | 56,485  |  
|                                                                                                | Settlement with sellers of Florida Recycling                                                            |                   |         | (4,120  | )          |   |         |             |  |   |              |      |  |   |         | (4,120  | )
|                                                                                                | Depreciation, depletion and amortization                                                                |                   |         | 23,598  |            |   |         | 19,356       |  |   |              |      |  |   |         | 42,954  |  
|                                                                                                | Foreign exchange gain and other                                                                         |                   |         | (799    | )          |   |         | 571          |  |   |              |      |  |   |         | (228    | )
|                                                                                                | Equity earnings in investees                                                                            |                   |         | (5,264  | )          |   |         |             |  |   |              | 5,264 |  |   |         |        |  
|                                                                                                |                                                                                                         |                   |         |         |            |   |         |              |  |   |              |      
|Income (loss) from operations                                                                   |                                                                                                         |                   | 4,096   |         |            |   | 12,194  |              |  |   | (5,264       | )     |  |   | 11,026  |        
|Interest expense                                                                                |                                                                                                         |                   | 27,950  |         |            |   | 246     |              |  |   |             |       |  |   | 28,196  |        
|Cumulative mandatorily redeemable Preferred Stock dividends and
    amortization of issue costs |                                                                                                         |                   | 20,984  |         |            |   |        |              |  |   |             |       |  |   | 20,984  |        
|                                                                                                |                                                                                                         |                   |         |         |            |   |         |              |  |   |              |      
|Income (loss) before income taxes                                                               |                                                                                                         |                   | (44,838 | )       |            |   | 11,948  |              |  |   | (5,264       | )     |  |   | (38,154 | )      
|                                                                                                | Income tax provision                                                                                    |                   |         | 5,452   |            |   |         | 6,684        |  |   |              |      |  |   |         | 12,136  |  
|                                                                                                |                                                                                                         |                   |         |         |            |   |         |              |  |   |              |      
|Net income (loss) attributable to Common Shareholders                                           |                                                                                                         | $                 | (50,290 | )       |            | $ | 5,264   |              |  | $ | (5,264       | )     |  | $ | (50,290 | )      
|                                                                                                |                                                                                                         |                   |         |         |            |   |         |              |  |   |              |      

F-47



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                                                                   |                                                                                                         |                   |         |         |            |   |         |              |   |   |              |       |  |  |         |         |  
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ----------------- | ------- | ------- | ---------- | - | ------- | ------------ | - | - | ------------ | ----- |  |  | ------- | ------- | -
|                                                                                                   |                                                                                                         | December 31, 2004 |        
|                                                                                                   |                                                                                                         |                   |        
|                                                                                                   |                                                                                                         |                   |         | Non-    |            |   |        
|                                                                                                   |                                                                                                         | Guarantors        |         |         | Guarantors |   |         | Eliminations |   |   | Consolidated |      
|                                                                                                   |                                                                                                         |                   |         |         |            |   |         |              |   |   |              |      
|Revenue                                                                                            |                                                                                                         | $                 | 168,067 |         |            | $ | 142,718 |              |   | $ |             |       |  |  | 310,785 |        
|Operating and other expenses:                                                                      |                                                                                                         |                   |         |         |            |   |         |              |   |   |              |       |  |  |         |        
|                                                                                                   | Cost of operations (exclusive of depreciation, depletion and
    amortization)                          |                   |         | 126,406 |            |   |         | 96,991       |   |   |              |      |  |  |         | 223,397 |  
|                                                                                                   | Selling, general and administrative expense (exclusive of
    depreciation, depletion and amortization) |                   |         | 32,883  |            |   |         | 21,796       |   |   |              |      |  |  |         | 54,679  |  
|                                                                                                   | Settlement with sellers of Florida Recycling                                                            |                   |         | (8,635  | )          |   |         |             |   |   |              |      |  |  |         | (8,635  | )
|                                                                                                   | Depreciation, depletion and amortization                                                                |                   |         | 17,888  |            |   |         | 16,316       |   |   |              |      |  |  |         | 34,204  |  
|                                                                                                   | Foreign exchange gain and other                                                                         |                   |         |        |            |   |         | (377         | ) |   |              |      |  |  |         | (377    | )
|                                                                                                   | Equity earnings in investees                                                                            |                   |         | (4,403  | )          |   |         |             |   |   |              | 4,403 |  |  |         |        |  
|                                                                                                   |                                                                                                         |                   |         |         |            |   |         |              |   |   |              |      
|Income (loss) from operations                                                                      |                                                                                                         |                   | 3,928   |         |            |   | 7,992   |              |   |   | (4,403       | )     |  |  | 7,517   |        
|Interest expense                                                                                   |                                                                                                         |                   | 30,517  |         |            |   | 321     |              |   |   |             |       |  |  | 30,838  |        
|Changes in fair value of warrants                                                                  |                                                                                                         |                   |        |         |            |   | (111    | )            |   |   |             |       |  |  | (111    | )      
|Cumulative mandatorily redeemable Preferred Stock dividends and
    amortization of issue costs    |                                                                                                         |                   | 17,582  |         |            |   |        |              |   |   |             |       |  |  | 17,582  |        
|                                                                                                   |                                                                                                         |                   |         |         |            |   |         |              |   |   |              |      
|Income (loss) before income taxes                                                                  |                                                                                                         |                   | (44,171 | )       |            |   | 7,782   |              |   |   | (4,403       | )     |  |  | (40,792 | )      
|                                                                                                   | Income tax provision                                                                                    |                   |         | 3,983   |            |   |         | 3,604        |   |   |              |      |  |  |         | 7,587   |  
|                                                                                                   |                                                                                                         |                   |         |         |            |   |         |              |   |   |              |      
|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     |              |   |   |             |       |  |  | 225     |        
|                                                                                                   |                                                                                                         |                   |         |         |            |   |         |              |   |   |              |      
|Net 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, 2003 |        
|                                                                                                   |                                                                                                         |                   |        
|                                                                                                   |                                                                                                         |                   |         | Non-  |            |   |        
|                                                                                                   |                                                                                                         | Guarantors        |         |       | Guarantors |   |         | Eliminations |  |   | Consolidated |       
|                                                                                                   |                                                                                                         |                   |         |       |            |   |         |              |  |   |              |       
|Revenue                                                                                            |                                                                                                         | $                 | 1,765   |       |            | $ | 124,985 |              |  | $ |             |        |   |   | 126,750 |       
|Operating and other expenses:                                                                      |                                                                                                         |                   |         |       |            |   |         |              |  |   |              |        |   |   |         |       
|                                                                                                   | Cost of operations (exclusive of depreciation, depletion and
    amortization)                          |                   |         | 1,300 |            |   |         | 83,377       |  |   |              |       |   |   |         | 84,677 | 
|                                                                                                   | Selling, general and administrative expense (exclusive of
    depreciation, depletion and amortization) |                   |         | 4,617 |            |   |         | 25,815       |  |   |              |       |   |   |         | 30,432 | 
|                                                                                                   | Depreciation, depletion and amortization                                                                |                   |         | 200   |            |   |         | 14,727       |  |   |              |       |   |   |         | 14,927 | 
|                                                                                                   | Foreign exchange gain and other                                                                         |                   |         |      |            |   |         | 1,760        |  |   |              |       |   |   |         | 1,760  | 
|                                                                                                   | Equity loss in investees                                                                                |                   |         | 5,035 |            |   |         |             |  |   |              | (5,035 | ) |   |         |       | 
|                                                                                                   |                                                                                                         |                   |         |       |            |   |         |              |  |   |              |       
|Loss from operations                                                                               |                                                                                                         |                   | (9,387  | )     |            |   | (694    | )            |  |   | 5,035        |        |   |   | (5,046  | )     
|Interest expense                                                                                   |                                                                                                         |                   | 2,832   |       |            |   | 5,446   |              |  |   |             |        |   |   | 8,278   |       
|Cumulative mandatorily redeemable Preferred Stock dividends and
    amortization of issue costs    |                                                                                                         |                   | 10,161  |       |            |   |        |              |  |   |             |        |   |   | 10,161  |       
|                                                                                                   |                                                                                                         |                   |         |       |            |   |         |              |  |   |              |       
|Loss before income taxes                                                                           |                                                                                                         |                   | (22,380 | )     |            |   | (6,140  | )            |  |   | 5,035        |        |   |   | (23,485 | )     
|Income tax provision                                                                               |                                                                                                         |                   |        |       |            |   | (587    | )            |  |   |             |        |   |   | (587    | )     
|                                                                                                   |                                                                                                         |                   |         |       |            |   |         |              |  |   |              |       
|Loss before cumulative effect of change in accounting
    principle                                |                                                                                                         |                   | (22,380 | )     |            |   | (5,553  | )            |  |   | 5,035        |        |   |   | (22,898 | )     
|Cumulative effect of change in accounting principle, net of
    provision for income taxes of $256 |                                                                                                         |                   |        |       |            |   | 518     |              |  |   |             |        |   |   | 518     |       
|                                                                                                   |                                                                                                         |                   |         |       |            |   |         |              |  |   |              |       
|Net loss                                                                                           |                                                                                                         |                   | (22,380 | )     |            |   | (5,035  | )            |  |   | 5,035        |        |   |   | (22,380 | )     
|Deemed dividend on Series 1 Preferred Shares                                                       |                                                                                                         |                   |        |       |            |   | (54,572 | )            |  |   |             |        |   |   | (54,572 | )     
|                                                                                                   |                                                                                                         |                   |         |       |            |   |         |              |  |   |              |       
|Net loss attributable to Common Shareholders                                                       |                                                                                                         | $                 | (22,380 | )     |            | $ | (59,607 | )            |  | $ | 5,035        |        |   | $ | (76,952 | )     
|                                                                                                   |                                                                                                         |                   |         |       |            |   |         |              |  |   |              |       

F-49



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                             |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |         |   |   |         |         |  
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------- | ------- | ------- | ---------- | - | ------- | ------------ | - | - | ------------ | ------- | - | - | ------- | ------- | -
|                                                             |                                                                                                 | December 31, 2005 |        
|                                                             |                                                                                                 |                   |        
|                                                             |                                                                                                 |                   |         | Non-    |            |   |        
|                                                             |                                                                                                 | Guarantors        |         |         | Guarantors |   |         | Eliminations |   |   | Consolidated |        
|                                                             |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |        
|Cash provided by (used in) operating activities:             |                                                                                                 | $                 | (13,942 | )       |            | $ | 38,565  |              |   | $ |             |         |   | $ | 24,623  |        
|                                                             |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |        
|Cash flows from investing activities:                        |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |         |   |   |         |        
|                                                             | Cash used in business combinations and significant asset
    acquisitions, net of cash acquired |                   |         | (7,593  | )          |   |         | (497         | ) |   |              |        |   |   |         | (8,090  | )
|                                                             | Capital expenditures                                                                            |                   |         | (22,206 | )          |   |         | (11,367      | ) |   |              |        |   |   |         | (33,573 | )
|                                                             | Proceeds from asset sales and business divestitures                                             |                   |         | 2,487   |            |   |         | 711          |   |   |              |        |   |   |         | 3,198   |  
|                                                             | Deposits for business acquisitions and other                                                    |                   |         | (73     | )          |   |         | (973         | ) |   |              |        |   |   |         | (1,046  | )
|                                                             | Intercompany                                                                                    |                   |         |        |            |   |         | (23,300      | ) |   |              | 23,300  |   |   |         |        |  
|                                                             |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |        
|                                                             |                                                                                                 |                   | (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  |            |   |         |             |   |   |              |        |   |   |         | 25,000  |  
|                                                             | Principal repayments of debt and capital lease obligations                                      |                   |         | (16,166 | )          |   |         | (538         | ) |   |              |        |   |   |         | (16,704 | )
|                                                             | Sale of common shares and warrants                                                              |                   |         | 7,125   |            |   |         |             |   |   |              |        |   |   |         | 7,125   |  
|                                                             | Proceeds from the exercise of options and warrants                                              |                   |         | 521     |            |   |         |             |   |   |              |        |   |   |         | 521     |  
|                                                             | Fees paid for financing transactions                                                            |                   |         | (995    | )          |   |         |             |   |   |              |        |   |   |         | (995    | )
|                                                             | Intercompany                                                                                    |                   |         | 23,300  |            |   |         |             |   |   |              | (23,300 | ) |   |         |        |  
|                                                             |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |        
|                                                             |                                                                                                 |                   | 38,785  |         |            |   | (538    | )            |   |   | (23,300      | )       |   |   | 14,947  |        
|                                                             |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                 |                   |        |         |            |   | 321     |              |   |   |             |         |   |   | 321     |        
|                                                             |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |        
|Increase in cash and cash equivalents                        |                                                                                                 |                   | (2,542  | )       |            |   | 2,922   |              |   |   |             |         |   |   | 380     |        
|Cash and cash equivalents at the beginning of the year       |                                                                                                 |                   | 6,223   |         |            |   | 2,284   |              |   |   |             |         |   |   | 8,507   |        
|                                                             |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |        
|Cash and cash equivalents at the end of the year             |                                                                                                 | $                 | 3,681   |         |            | $ | 5,206   |              |   | $ |             |         |   | $ | 8,887   |        
|                                                             |                                                                                                 |                   |         |         |            |   |         |              |   |   |              |        

F-50



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                             |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |         |   |   |          |          |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------------------------- | ----------------- | -------- | -------- | ---------- | - | ------- | ------------ | - | - | ------------ | ------- | - | - | -------- | -------- | -
|                                                             |                                                                                                     | December 31, 2004 |         
|                                                             |                                                                                                     |                   |         
|                                                             |                                                                                                     |                   |          | Non-     |            |   |        
|                                                             |                                                                                                     | Guarantors        |          |          | Guarantors |   |         | Eliminations |   |   | Consolidated |        
|                                                             |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |        
|Cash flows from (used in) operating activities:              |                                                                                                     | $                 | (665     | )        |            | $ | 25,362  |              |   | $ |             |         |   | $ | 24,697   |         
|                                                             |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |        
|Cash flows from investing activities:                        |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |         |   |   |          |         
|                                                             | Cash used in business combinations and significant asset
    acquisitions, net of cash acquired     |                   |          | (163,555 | )          |   |         | (1,124       | ) |   |              |        |   |   |          | (164,679 | )
|                                                             | Capital expenditures                                                                                |                   |          | (33,159  | )          |   |         | (13,050      | ) |   |              |        |   |   |          | (46,209  | )
|                                                             | Proceeds from asset sales and business divestitures                                                 |                   |          | 14,231   |            |   |         |             |   |   |              |        |   |   |          | 14,231   |  
|                                                             | Deposits for business acquisitions and other                                                        |                   |          | 1,359    |            |   |         | (2,910       | ) |   |              |        |   |   |          | (1,551   | )
|                                                             | Intercompany                                                                                        |                   |          |         |            |   |         | (78,985      | ) |   |              | 78,985  |   |   |          |         |  
|                                                             |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |        
|                                                             |                                                                                                     |                   | (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  |            |   |         |             |   |   |              |        |   |   |          | 283,000  |  
|                                                             | Principal repayments of debt and capital lease obligations                                          |                   |          | (186,031 | )          |   |         | (1,127       | ) |   |              |        |   |   |          | (187,158 | )
|                                                             | Sale of common shares and warrants                                                                  |                   |          |         |            |   |         | 53,600       |   |   |              |        |   |   |          | 53,600   |  
|                                                             | Proceeds from release of restricted cash and release of
    collateral supporting letters of credit |                   |          | 14,433   |            |   |         | 9,908        |   |   |              |        |   |   |          | 24,341   |  
|                                                             | Proceeds from the exercise of options and warrants                                                  |                   |          |         |            |   |         | 1,041        |   |   |              |        |   |   |          | 1,041    |  
|                                                             | Fees paid for financing transactions                                                                |                   |          | (11,218  | )          |   |         | (2,923       | ) |   |              |        |   |   |          | (14,141  | )
|                                                             | Intercompany                                                                                        |                   |          | 78,985   |            |   |         |             |   |   |              | (78,985 | ) |   |          |         |  
|                                                             |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |        
|                                                             |                                                                                                     |                   | 179,169  |          |            |   | 60,499  |              |   |   | (78,985      | )       |   |   | 160,683  |         
|                                                             |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                     |                   |         |          |            |   | 273     |              |   |   |             |         |   |   | 273      |         
|                                                             |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |        
|Increase in cash and cash equivalents                        |                                                                                                     |                   | (2,620   | )        |            |   | (9,935  | )            |   |   |             |         |   |   | (12,555  | )       
|Cash and cash equivalents at the beginning of the year       |                                                                                                     |                   | 8,843    |          |            |   | 12,219  |              |   |   |             |         |   |   | 21,062   |         
|                                                             |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |        
|Cash and cash equivalents at the end of the year             |                                                                                                     | $                 | 6,223    |          |            | $ | 2,284   |              |   | $ |             |         |   | $ | 8,507    |         
|                                                             |                                                                                                     |                   |          |          |            |   |         |              |   |   |              |        

F-51



---



##### Table of Contents



WASTE SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |         |   |   |          |          |  
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------- | -------- | -------- | ---------- | - | ------- | ------------ | - | - | ------------ | ------- | - | - | -------- | -------- | -
|                                                             |                                                                                                 | December 31, 2003 |         
|                                                             |                                                                                                 |                   |         
|                                                             |                                                                                                 |                   |          | Non-     |            |   |        
|                                                             |                                                                                                 | Guarantors        |          |          | Guarantors |   |         | Eliminations |   |   | Consolidated |        
|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |        
|Cash flows from (used in) operating activities:              |                                                                                                 | $                 | (2,682   | )        |            | $ | 12,128  |              |   | $ |             |         |   | $ | 9,446    |         
|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |        
|Cash flows from investing activities:                        |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |         |   |   |          |         
|                                                             | Cash used in business combinations and significant asset
    acquisitions, net of cash acquired |                   |          | (159,913 | )          |   |         | (1,458       | ) |   |              |        |   |   |          | (161,371 | )
|                                                             | Capital expenditures                                                                            |                   |          | (10,260  | )          |   |         | (14,178      | ) |   |              |        |   |   |          | (24,438  | )
|                                                             | Proceeds from asset sales and business divestitures                                             |                   |          |         |            |   |         | 952          |   |   |              |        |   |   |          | 952      |  
|                                                             | Deposits for business acquisitions and other                                                    |                   |          |         |            |   |         | (10,776      | ) |   |              |        |   |   |          | (10,776  | )
|                                                             | Intercompany                                                                                    |                   |          | (15,524  | )          |   |         |             |   |   |              | 15,524  |   |   |          |         |  
|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |        
|                                                             |                                                                                                 |                   | (185,697 | )        |            |   | (25,460 | )            |   |   | 15,524       |         |   |   | (195,633 | )       
|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |        
|Cash flows from financing activities:                        |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |         |   |   |          |         
|                                                             | Proceeds from issuance of debt and draw on revolving credit
    facility                        |                   |          | 157,692  |            |   |         | 8,801        |   |   |              |        |   |   |          | 166,493  |  
|                                                             | Principal repayments of debt and capital lease obligations                                      |                   |          | (1,144   | )          |   |         | (73,107      | ) |   |              |        |   |   |          | (74,251  | )
|                                                             | Proceeds from the issuance of Series 1 Preferred Shares                                         |                   |          |         |            |   |         | 86,189       |   |   |              |        |   |   |          | 86,189   |  
|                                                             | Proceeds from the issuance of cumulative mandatorily redeemable
    Preferred Stock             |                   |          | 55,000   |            |   |         |             |   |   |              |        |   |   |          | 55,000   |  
|                                                             | Deposits on collateral supporting letters of credit                                             |                   |          |         |            |   |         | (9,929       | ) |   |              |        |   |   |          | (9,929   | )
|                                                             | Proceeds from the exercise of options and warrants                                              |                   |          |         |            |   |         | 554          |   |   |              |        |   |   |          | 554      |  
|                                                             | Fees paid for financing transactions                                                            |                   |          | (14,326  | )          |   |         | (4,641       | ) |   |              |        |   |   |          | (18,967  | )
|                                                             | Intercompany                                                                                    |                   |          |         |            |   |         | 15,524       |   |   |              | (15,524 | ) |   |          |         |  
|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |        
|                                                             |                                                                                                 |                   | 197,222  |          |            |   | 23,391  |              |   |   | (15,524      | )       |   |   | 205,089  |         
|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                 |                   |         |          |            |   | 385     |              |   |   |             |         |   |   | 385      |         
|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |        
|Increase in cash and cash equivalents                        |                                                                                                 |                   | 8,843    |          |            |   | 10,444  |              |   |   |             |         |   |   | 19,287   |         
|Cash and cash equivalents at the beginning of the year       |                                                                                                 |                   |         |          |            |   | 1,775   |              |   |   |             |         |   |   | 1,775    |         
|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |        
|Cash and cash equivalents at the end of the year             |                                                                                                 | $                 | 8,843    |          |            | $ | 12,219  |              |   | $ |             |         |   | $ | 21,062   |         
|                                                             |                                                                                                 |                   |          |          |            |   |         |              |   |   |              |        

F-52