UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-KSB





(Mark
One)




x
            ANNUAL REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934




For the
fiscal year ended December 31,
2007




o
              ANNUAL REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934




For the
transition period from _______ to __________





Commission
file number 000-09735





Amerex
Group, Inc.


(Name of
small business issuer in its charter)




Oklahoma
            
            20-4898182(State
      or other jurisdiction of incorporation or organization)
            
            (IRS
      Employer Identification No.)








1105
      N. Peoria
              Tulsa,
      Oklahoma
            
            74106(Address
      of principal executive offices)
            
            (Zip
      Code)





Issuer’s
telephone number: (918)
858-1050





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





Title
      of each class
            
            Name
      of each exchange on which registeredNone
            
            N/A




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





Common
Shares, par value $0.001




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





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes x No o




Issuer’s
revenues for its most recent fiscal year: $8,305,496





Aggregate
market value of the voting and non-voting common equity held by non-affiliates
of the registrant, computed by reference to the closing price of such stock as
of March 19, 2008 at $0.42 per common share, was
$6,698,251.   For purposes of this computation, we consider all
directors, and holders of 10% or more of our common stock, to be
affiliates.  Therefore the number of shares of our common stock held
by non-affiliates as of March 19, 2008 was 11,113,596.





Number of
shares issued and outstanding of each of the issuer’s classes of common equity
as of December 31, 2007 was 15,709,683 shares of common stock, $0.001 par
value.





Transitional
Small Business Disclosure Format (Check one): Yes o No x








TABLE
OF CONTENTS




PagePART IItem 1.
              Description of
      Business
              3Item 2.
              Description of
      Property
              28Item 3.
              Legal
      Proceedings
              28Item 4.
              Submission of
      Matters to a Vote of Security Holders
              30PART IIItem 5.
              Market for Common
      Equity and Related Stockholder Matters
              31Item 6.
              Management’s
      Discussion and Analysis or Plan of Operations
              33Item 7.
              Financial
      Statements
              F-1 -
      F-25Item 8.
              Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure
              70PART
      IIIItem
      9.
              Directors, Executive
      Officers, Promoters, Control Persons and Corporate Governance; Compliance
      with Section 16(a) of
      the Exchange Act
              72Item
      10.
              Executive
      Compensation
              77Item
      11.
              Security Ownership
      of Certain Beneficial Owners and Management and Related Stockholder
      Matters
              79Item
      12.
              Certain
      Relationships and Related Transactions, and
      Director Independence
              81Item
      13.
              Exhibits
              81Item
      14.
              Principal Accountant
      Fees and Services
              85Signatures
              
              86
  2
   NOTE
REGARDING FORWARD-LOOKING STATEMENTS




Forward-looking
statements in this Form 10-KSB including, without limitation, statements
relating to our plans, strategies, objectives, expectations, intentions and
adequacy of resources, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. All statements made in this
report, other than statements of historical fact, are forward-looking
statements. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements. The
following factors, among others, could cause actual results to differ materially
from those set forth in the forward-looking statements: our ability to
successfully develop our brands and proprietary products through internal
development, licensing and/or mergers and acquisitions. Additional factors
include, but are not limited to the following: the size and growth of the market
for our products, competition, pricing pressures, market acceptance of our
products, the effect of economic conditions, intellectual property rights, the
results of financing efforts, risks in product development, other risks
identified in this report and our other periodic filings with the Securities and
Exchange Commission.





PART
I





ITEM
1.DESCRIPTION OF
BUSINESS





History of the
Company




CDX.com
(“CDX.com CO”) was incorporated in the State of Colorado in June, 1978, and
it engaged in the manufacture and sale of computerized pulmonary diagnostic
equipment used in the medical profession. CDX.com CO manufactured some of
the pulmonary diagnostic equipment that it sold, as well as selling equipment
manufactured by third parties. In addition to pulmonary
diagnostic equipment, CDX.com CO also sold items related to testing
equipment as well as maintenance and service agreements. CDX.com CO also
was a reseller of certain products used in the physician market, e.g., blood
pressure cuffs and laryngoscopes. CDX.com CO’s principal customers were
primary care physicians, group practices, clinics, and medical
centers.




On
November 18, 2000, Tampa Bay Financial, Inc., a Florida Venture Capital firm
that specializes in micro-cap first stage corporate investments, acquired
control of CDX.com CO and changed its business from the sale of computerized
pulmonary diagnostic equipment and bio-hazard control products to international
communications, doing business under the name of DataStream Global
Communications. At approximately the same time, and as part of the restructuring
of the company in the fall of 2000, CDX.com CO sold substantially all of
its assets used in connection with its pulmonary diagnostic equipment sales to
Cyberdiagnostics, Inc. The transferred assets included all furniture, fixtures,
equipment, inventory, plans, permits, licenses, approvals and trade names, as
well as the company’s books, records, signage and goodwill associated with the
pulmonary diagnostic equipment sales business. As consideration for that sale,
Cyberdiagnostics, Inc. assumed all of CDX.com’s liabilities and indemnified it
against all claims relating to the assets it acquired.




3




In
January of 2001, CDX.com CO reorganized again. Effective January 26, 2001,
Pensat International Communications, Inc., merged into CDX.com CO’s
wholly-owned subsidiary, Pensat, Inc (“Pensat”). The result of the January
reorganization and the reason for it was that CDX.com CO, through its Pensat
subsidiary, acquired a telecommunications business that was operated as a global
Integrated Communications Provider (ICP) with sales and network operations in
the U.S., Spain, Brazil, and Syria. CDX.com CO operated its newly-acquired
ICP network through its Pensat subsidiary. Pensat’s services included voice,
Internet, and data services delivered over common network facilities. Pensat
filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in
October 2001 and, as indicated in its filing, terminated its operations in the
United States. On May 14, 2002, a motion was made to convert the bankruptcy to
Chapter 7, and there were no active operations at that time. From the date its
subsidiary Pensat ceased both foreign and domestic operations, there was no
corporate activity for CDX.com CO outside of the Pensat Bankruptcy proceeding,
which proceeding was converted to Chapter 7 by Order of the Court entered
January 28, 2003.




On June
4, 2005, Michelle Harrington was elected to serve as CDX.com CO’s sole
officer and director. On June 6, 2005, CDX.com CO was directed by order of
the Third Judicial District Court for Utah County, Utah to issue 300,000,000
shares of common stock to Michelle Harrington. This stock was issued as payment
for debt owed by CDX.com CO to Harrington for transfer agent services under
a judgment dated May 10, 2005, and as a result, Ms. Harrington acquired control
of CDX.com CO.




On July
22, 2005, the CDX.com CO Board of Directors accepted the resignation of Michelle
Harrington as sole officer and director, and appointed James Frack as sole
officer and director. The resignation of Michelle Harrington and appointment of
James Frack were not based on any disagreement with
CDX.com CO.




CDX.com CO
reorganized again in July of 2005: The first part of the July 2005
reorganization involved redomiciling CDX.com CO as an Oklahoma corporation.
This was done as follows:  On July 28, 2005, CDX.com CO implemented a
reverse stock split, reducing all of its outstanding stock to 1/1000th of its
prior value. Also on July 28, 2005, CDX.com CO filed Restated Articles of
Incorporation in Colorado. CDX.com CO then entered into an Agreement of
Merger with CDX.com Merger, Inc. (“CDX.com Merger OK”), an Oklahoma corporation
organized on July 26, 2005 for the purpose of re-domiciling CDX.com CO. CDX.com
Merger OK was the survivor under the merger. The common stock of CDX.com Merger
OK had identical rights, terms and privileges as the common stock of
CDX.com CO.




4




The
second part of the July 2005 reorganization involved establishing Airguide, Inc.
(“Airguide”), an Oklahoma corporation organized on July 26, 2005 as a
wholly-owned subsidiary of the newly-re-domiciled CDX.com Merger OK, as a
holding company for CDX.com Merger OK. Simultaneous with the designation of
Airguide as the holding company, CDX.com Merger OK was merged into the new
Oklahoma Corporation named CDX.com, Inc. (“CDX.com OK”), a corporation created
on July 26, 2005 as a subsidiary of Airguide. This was achieved through a
three-party merger agreement between CDX.com Merger OK, Airguide, and CDX.com
OK. Under this three-party agreement, the previous public shareholders of
CDX.com Merger OK were entitled the same number of shares of Airguide that they
had previously held in CDX.com Merger OK, and their ownership of Airguide stock
occurred by operation of the terms of the three-party agreement, without any
action required on their part. Airguide became the public company as a result of
the three-party merger, and Airguide had the same public stockholder base that
CDX.com Merger OK previously had.




Prior to
the July 2005 Reorganization, Airguide was only a subsidiary and did not
operate, manage, control, or receive any assets or benefits from its parent.
Neither at the time of the July 2005 Reorganization, nor thereafter, did
Airguide operate, manage, finance, receive assets, transfer assets, guarantee
debts or obligations, nor take any action with respect to its subsidiary
CDX.com, Inc. OK. Airguides’s actions were designed to comply with Oklahoma laws
allowing for a merger between parent and subsidiary corporations in which
the liabilities of the parent are transferred by sale of an indirect
subsidiary under a holding company formation. Even though the indirect
subsidiary, in this case CDX.com OK, had liabilities of the parent company,
there is a commercial value for such a company. Accordingly, Airguide held
CDX.com OK as an investment, with no action being taken by Airguide as
controlling stockholder while the stock was held on its books prior to being
sold. Airguide sold the CDX.com OK stock on August 1, 2005, and that sale was
for the purpose of realizing Airguide’s investment.




On
December 23, 2005, Amerex, a privately held company, entered into an agreement
with James Frack, our former president, treasurer, sole director, and principal
stockholder, calling for the relinquishment of 100,000 shares or 15.5% of our
outstanding common stock then owned by him, upon our entering into an agreement
to and consummating our acquisition of Amerex.




On July
5, 2006, we executed a share exchange of our common stock and acquired 100% of
the issued and outstanding capital stock of Amerex, pursuant to a Share Exchange
Agreement dated July 5, 2006. Pursuant to the agreement, the stockholders of
Amerex received 19,760,074 shares of our common stock in exchange for all of the
issued and outstanding capital stock of Amerex, the 100,000 shares of our common
stock issued to James Frack were cancelled, and all warrants and convertible
notes of Amerex were exchanged for our warrants and convertible notes. In
connection with the issuance of our common stock to the former stockholders of
Amerex, the stockholders of Amerex beneficially became the owners of 97.3% of
our issued and outstanding voting securities.




5




On
January 8, 2007, Airguide, Inc. filed a Certificate of Amendment with the
Oklahoma Secretary of State in order to change its name from Airguide, Inc. to
Amerex Group, Inc. (“Amerex Group”). The name change was effective on January 8,
2007.





Recent
Acquisitions





On
September 2, 2005, we purchased the assets of Enhanced Operating Company, LLC,
which we refer to herein as EOC, relating to the development of an oil/water
separation technology business. We are currently in the process of evaluating
technologies that can be utilized in this process. The primary assets purchased
in this transaction were storage tanks and vessels, piping, motors and pumps
and, including approximately 25 acres of property located in Harrison County,
Texas, in consideration for 250,000 restricted shares of our common stock, and
all EBITDA profit in excess of 30% annually over a three-year period until
$1,000,000 is paid. The contract for this acquisition required us to make a cash
infusion of $250,000 in working capital to construct the necessary enhancements
to the site and purchase assets to launch  the business operations of
EOC. These enhancements consist of acquisition of a salt/water separation
technology which will allow us to clean the production water to groundwater
levels and to construct the piping and valves needed to integrate the oil/water
separation system which we purchase separately and the water/salt
separation technology which we have yet to acquire. The $250,000 also includes
necessary testing which needs to be accomplished prior to the implementation of
the system being acquired. The contract also required us to enter into a three
year employment agreement with Michael Eppler, then president of EOC, at a
monthly salary of $10,000 and a sign-on bonus of $50,000. This employment
agreement was terminated in November 2006 and we agreed to pay Mr. Eppler
through November 30, 2006.




On
September 12, 2005, we acquired all of the outstanding capital stock of Waste
Express, Inc. from its sole stockholder. The purchase price consisted of cash in
the amount of $275,000 and an installment note in the amount of $235,000, with
interest at six percent (6%). The purchase agreement also required us to pay a
fee equal to the greater of $2,500 or one percent (1%) per annum of seller’s
current $200,000 line of credit securing Waste Express’ regulatory closure plan
until it secures such plan. On November 10, 2006 we replaced the seller’s line
of credit securing the closure plan and replaced the collateral with our own
Line of Credit for $230,000. See “Business – Acquisitions -- The Waste Express,
Inc., Acquisition.”




On
September 13, 2005, we purchased certain assets consisting primarily of
oil/water separation devices, a mobile laboratory, a mobile treatment unit, and
an International Vac Truck from NES Technology LLC, which we refer to herein as
NES, and Industrial Waste Services LLC, which we refer to herein as IWS, in
consideration for the issuance of 500,000 restricted shares of our common stock
to the members of these two companies, including, Richard Coody, a former member
of our board of directors, and the assumption of certain outstanding
liabilities. Since NES had very limited operations prior to our acquisition of
its assets and since subsequent to the acquisition, we did not provide services
to any of the same the clients who were serviced by NES and since neither the
management nor the location were continuous subsequent to the acquisition, nor
was the NES trade name or project history utilized by us after the acquisition,
we accounted for this transaction as an acquisition of assets.





6




The
assets and real property from these acquisitions were used to establish our
business operations in Tulsa, Oklahoma in November 2005. In the third quarter of
2007 Management decided to terminate those business operations and to sell the
real estate and assets fixed to the real estate used in connection with those
operations. In accordance with the Amendment to the CAMOFI senior convertible
notes, the net proceeds of this sale will be used to pay down this
indebtedness.




In
February 2006, Amerex Acquisition Corp., a wholly-owned subsidiary of Amerex,
acquired approximately 168 acres of heavily developed industrial property in
Pryor, Oklahoma from Kaiser Aluminum and Chemical Corporation in consideration
for $700,000 in cash and delivery of a cash collateralized irrevocable letter of
credit with JP Morgan Chase Bank, in the amount of $800,000, to provide
financial assurance for the removal of all asbestos and asbestos containing
materials from the property within 18 months following closing. The asbestos
removal was completed in September 2007 and we received clearance by the
Oklahoma Department of Environmental Quality and Kaiser Aluminum and Chemical
Corporation instructed JPMorgan Chase Bank to release the letter of credit. The
proceeds from the release of the cash collateralized letter of credit were
deployed in accordance with our agreements with Asbestos Handlers, Inc. and X
Interchange, Inc..  Asbestos Handlers, Inc. is an asbestos abatement
contractor based in Tulsa, Oklahoma. We engaged Asbestos Handers, Inc. to remove
the asbestos from the Pryor facility. X Interchange, Inc. is an intermodal
transportation logistics company based in Lealand, Kansas. We engaged X
Interchange, Inc. to manage the demolition and scrap metal salvage at the Pryor
facility. We were also required to deposit $400,000 with the Oklahoma Department
of Environmental Quality through Guaranteed Abstract Company, a title company
located in Tulsa, Oklahoma, to provide financial assurance of our ability to
close the two injection wells on the Pryor property. This amount
is currently being held in escrow for the benefit of the Oklahoma
Department of Environmental Quality to secure our obligation to close the wells.
We intend to close these two injection wells and pay the $400,000 escrow
deposit, when returned to us, to CAMOFI pursuant to the terms of the recent
amendment to the indebtedness payable to CAMOFI, as discussed in Part II, Item 6,
Management’s Discussion and Analysis or Plan of
Operations–Debt and Credit Facilities,
below.




On April
28, 2006, we purchased certain assets of Environmental Remediation Services,
Inc., herein referred to as ERS, consisting primarily of several vacuum trucks,
truck equipment, trailer equipment, personal safety equipment, forklifts,
tractors, and miscellaneous tools to be used in connection with our emergency
response services. The purchase was considered a purchase of assets rather than
the purchase of a business since the main purpose was to acquire the assets and
to repurpose them to service our existing customers. The purchase price for
the assets consisted of cash in the amount of $1,200,000 and our entering into a
one-year consulting agreement with Kenneth Duckworth, the sole owner of ERS. To
ensure our performance under the consulting agreement, we were required to fund
an Irrevocable Standby Letter of Credit in the amount of $600,000 with American
Bank and Trust of Tulsa, Oklahoma for the benefit of Kenneth Duckworth, with
$150,000 to be released at the end of each quarterly period subsequent to
closing until drawn down in full. All amounts under the consulting agreement
have now been paid, and the letter of credit has been released.




7





Recent
Financings




On
November 21, 2005, we entered into a financing arrangement with CAMOFI Master
LDC, an affiliate of Centrecourt Asset Management LLC, which agreement was
amended on February 23, 2006. Under the arrangement as amended, we issued CAMOFI
Master LDC a two-year convertible note in the aggregate principal amount of
$6,800,000, with interest at ten percent (10%) per annum payable
monthly, convertible into 13,600,000 shares of its common stock at a
conversion price of $0.50 per share, exclusive of any accrued interest on the
note, and a five-year warrant to purchase 2,266,667 shares of our common stock
at an exercise price of $0.01 per share. The terms of the note provided for
funds to be drawn down in three tranches, with the first tranche of $2.5 million
drawn down on November 21, 2005. Pursuant to the financing arrangement, we
defaulted on our obligation to timely file a registration statement for the
shares underlying the note and warrant and CAMOFI Master LDC agreed to waive all
penalties through October 30, 2006 for a five-year warrant to purchase 984,000
shares of our common stock at an exercise price of $0.01 per share. For the
period subsequent to October 30, 2006 through December 31, 2006, the
Company has accrued for $207,400 in liquidation damages under this agreement. We
have also failed to provide CAMOFI with periodic financial reports required
under our agreement, which failure has been waived to date without penalty. The
obligations under the CAMOFI Master LDC note are secured by a first priority
security interest in our assets. These notes were due on November 21, 2007.
However, on December 31, 2007 we executed an agreement with CAMOFI Master
LDC. Under the terms of this new agreement (a) the Maturity Date of the Note was
changed from November 21, 2007 to November 21, 2010, (b) interest payments were
deferred until April 1, 2008, (c) the Interest Rate has been increased from 10%
payable in cash to 10% payable in cash and 2% payable in additional
notes,  (d) we agree to issue a new note in the amount of $2,027,123
with the same terms as the existing Note, to settle liquidated damages and other
penalties associated with the original note, (e) the monthly redemption
amount will be changed to either $250,000 per month or $150,000 per month
depending on the amount of funds that are available to be applied to the
principal amount of the Notes from the sale of the Pryor, OK., and Leigh, TX.
properties,  (f) the monthly redemption amount will now begin on
August 1, 2008, (g) we will use the proceeds from the sale of the Pryor and
Leigh properties, as well as the proceeds from the release of the escrowed funds
of $400,000 securing the closure of the injection wells in Pryor, OK, to pay
down the indebtedness, (h) we agreed to secure at least $2.5 million in
additional equity financing before March 31, 2008, (i) we agreed to file a
registration statement prior to June 30, 2008, (j) CAMOFI maintains its right to
convert up to 100% of the outstanding indebtedness into Common Stock, (k)
weagreed to issue CAMOFI that number of additional shares equal to 4.5% of its
outstanding stock, (l) we agreed to extend the term of CAMOFI’s warrants to
December 31, 2012, and (m) we agreed to make our principal officers and
financial personnel available for an on-site review of the financial condition
of the Company.  Since the definitive agreement has not been executed,
Management will endeavor to negotiate changes to the covenants that were not
satisfied by the Company as of April 1, 2008 and April 2, 2008, and could allow
CAMOFI to declare their indebtedness to be in default. Specifically, these
covenants refer to the covenant to secure additional equity financing before
March 31, 2008 and to pay deferred interest on April 1, 2008,
respectively.




8




On August
12, 2005, we entered into a loan agreement with DCI USA Inc., which we refer to
herein as DCI, pursuant to which DCI agreed to loan us $400,000 in consideration
for two one-year promissory notes, one in the amount of $300,000 and the other
in the amount of $100,000, each note bearing interest at fifteen percent (15%)
per annum, and a warrant to purchase 800,000 shares of our common stock at $.50
per share. Prior to September 12, 2005, DCI informed us that they were
unable to provide any funding and that Hypothecators Mortgage Company, herein
referred to as Hypothecators, agreed to fund the $300,000 note on the same terms
as the note we were to issue DCI, without any warrants.  On September 12,
2005 we issued Hypothecators the $300,000 note in consideration for $300,000,
which we repaid in full on November 27, 2005 with the proceeds of the CAMOFI
Master LDC financing. On September 12, 2005, we also issued a promissory note in
the amount of $100,000 to NY2K International Corp. in consideration for
$100,000, on the same terms as the note we were to issue DCI, without any
warrants, and secured by our property located in Harrison County, Texas. We
determined that we did not immediately require the proceeds of the $100,000
note and returned the funds without interest on the same day
received.




On
September 2, 2005, we issued a one-year promissory note in the amount of
$450,000, with eight percent (8%) interest, to Professional Traders Fund LLC,
which we refer to herein as PTF, in consideration for $450,000. $230,840 of the
note was repaid on November 29, 2005 with proceeds from the CAMOFI Master LDC
financing, and $233,778 was repaid on March 2, 2006, representing principal and
accrued interest. Under the PTF financing, we agreed to issue restricted and
free trading shares of our common stock to PTF, with the number of shares to be
issued and the timing of such issuance to be based upon the timing of repayment
of the note. Based on the timing of repayment, we issued PTF 900,000 shares of
our common stock.




On August
31, 2006 we entered into an agreement with CAMOFI Master LDC for a line of
credit with a maximum borrowing equal to the lesser of $1.5 million or 80% of
accounts receivable aged less than 90 days in consideration for the issuance to
CAMOFI Master LDC of a five-year warrant to purchase 750,000 shares of our
common stock at an exercise price of $0.01 per share. This line of credit is
secured by our accounts receivable. 125% of the number of shares underlying the
warrant (937,500 shares) are required to be registered for resale pursuant to
the registration statement.




9




On May 2,
2007 we issued a convertible note to an individual for $25,000. This note is
convertible into the Company’s common shares at $0.50 per share. The interest
rate on this note is 8% per annum. The note has a term of one year and the
interest is computed on the actual number of days elapsed and a year of 360 days
and is compounded monthly. Actual interest accrued beginning 9 days from the
receipt of the loan funds and is payable on the date which is the earlier of the
maturity date or the date of any repayment of principal.




On May 4,
2007 we issued a convertible note to an individual for $25,000. This note is
convertible into the Company’s common shares at $0.50 per share. The interest
rate on this note is 8% per annum. The note has a term of one year and the
interest is computed on the actual number of days elapsed and a year of 360 days
and is compounded monthly. Actual interest accrued beginning 9 days from the
receipt of the loan funds and is payable on the date which is the earlier of the
maturity date or the date of any repayment of principal.




On July
10, 2007 we issued a convertible note to an individual for $50,000. This note is
convertible into the Company’s common shares at $0.50 per share. The interest
rate on this note is 8% per annum. The note has a term of one year and the
interest is computed on the actual number of days elapsed and a year of 360 days
and is compounded monthly. Actual interest accrued beginning 9 days from the
receipt of the loan funds and is payable on the date which is the earlier of the
maturity date or the date of any repayment of principal.




Also, on
July 10, 2007 we issued a convertible note to this same individual for $12,500.
This note is convertible into the Company’s common shares at $0.50 per share.
The interest rate on this note is 8% per annum. The note has a term of one year
and the interest is computed on the actual number of days elapsed and a year of
360 days and is compounded monthly. Actual interest accrued beginning 9 days
from the receipt of the loan funds and is payable on the date which is the
earlier of the maturity date or the date of any repayment of
principal.




On
August 14, 2007, the Company entered into a loan with Professional Offshore
Opportunity Fund, Ltd (“POOF”), for $750,000.  The financing was used to
fulfill vendor and other obligations.  As disclosed in the Company’s
Current Report on Form 8-K filed on August 16, 2007, the financing is in
the form of a Secured Promissory Note payable in monthly installments commencing
on September 14, 2007, and on the 10thday of
each month thereafter through February 10, 2008. We are currently
paying POOF $20,000 per month to secure extensions of this Note  The loan
bears interest at five percent per annum and is payable in cash or with shares
or the Company’s common stock discounted at 30 percent from the average bid
price for the five trading days preceding the installment.  The Company
also is obligated to pay a monthly utilization fee of 10% of the monthly
installment as of December 31, 2007.




10




The
Company also issued 500,000 shares of its common stock to POOF under a letter
agreement entered into in connection with the financing.  The Company has
agreed to register the shares for sale or to repurchase them at specified
amounts and times.  If the shares are not registered by the maturity date
of the loan or the date it is prepaid, the shares were required to be
repurchased at $200,000 if the note was repaid on or before September 14,
2007, and for an additional $100,000 on the fifteenth of each month thereafter
through January 15, 2008. The maximum repurchase price is $700,000 for a
repurchase on or after January 15, 2008.  As of December 31, 2007, and
as of April 11, 2008, the loan remained outstanding and the shares had not been
repurchased and the term of the Note is being extended on a month-to-month
basis. In the event the Company does not pay the amounts due, the Company’s
obligation under the letter agreement will bear interest at the rate of two
percent per annum. The $750,000 of financing proceeds have been allocated
between the loan and related common stock issued simultaneously, based on
final determinations of the fair values of the loan and common
stock.




The
obligation of the Company also is secured by shares of the Company’s common
stock pledged to POOF by Ron Brewer and Richard Coody, former officers and
directors of the Company.  Each pledged 1,450,000 shares.  POOF can
exercise its rights as a secured party by selling the shares to apply against
the Company’s obligations to POOF in the event of a default by the Company under
the Secured Promissory Note.  POOF also has the right to direct the sale of
shares in the absence of a default at its discretion.  The pledge is
without recourse to the Company.  The Company has agreed to pay to
Mr. Coody and Mr. Brewer amounts equal to 22% of the proceeds of any
of their shares of common stock sold by POOF under the pledge. The funds
will be retained in an escrow account and paid in 2009.




Employees





As of
December 31, 2007, we employed 56 full-time and 4 part-time employees. Of
our 60 employees, two are executive officers. None of our employees is covered
by a collective bargaining agreement. We consider our relationship with our
employees to be good. Our services are limited to basic environmental procedures
and, as such, our field staff does not require advanced degrees or specialized
scientific expertise. They do, however, require specialized training pursuant to
various federal, state and local regulations. These include Class A Commercial
Drivers Licenses with a Hazardous Materials Endorsement for our tractor trailer
driver, Class D Commercial Drivers Licenses with Hazardous Materials
Endorsements for operators of box trucks, and Class D Commercial Drivers
Licenses with a Tanker Endorsement for our tanker drivers. Personnel who are
expected to stop, contain, and clean up on-site releases are required to have 24
hours of initial training. Personnel who are involved in cleanups at waste
sites-including Superfund sites, RCRA corrective action sites, or even voluntary
cleanups involving hazardous substances-must have 40 hours of initial classroom
instruction and annual 8-hour refresher courses, as well as confined space
training for those employees who make encounter such situations.





11





Research
and Development Expenditures




There
were no research and development expenditures incurred for the fiscal year
ending December 31, 2007.





Properties




Our
principal executive offices and production facility are located on approximately
10 acres of leased space in Tulsa, Oklahoma, including six office, storage and
special purpose buildings. We also lease approximately 7,000 square feet of
office space in Portland, Oregon and office space in New York City. . The Tulsa
lease runs through May of 2011 and contains a five year option to renew with 60
days’ prior notice. The cost of this lease is $6,850 per month and is paid
to Ken Duckworth who was the principal owner of Environmental Remediation
Specialists, Inc. The Portland, Oregon lease is a month-to-month lease, at the
rate of approximately $3,000 per month, paid to Cascade General, Inc.. The New
York City lease is a month-to-month lease, at the rate of $1,500 per month.
We own approximately 25.5 acres of property in Leigh, Texas, approximately 2.5
acres of property in Kansas City, Missouri, and approximately 153 acres of
property in Pryor, Oklahoma. We believe that these properties and
facilities are adequate for our current operations. All of our properties and
facilities are insured.





Subsidiaries




The
Company has one wholly-owned subsidiary – Waste Express, Inc., a Missouri
Corporation based in Kansas City, MO.





Patents
and Trademarks




The
Company does not own, either legally or beneficially, any patents, trademarks,
copyrights, franchises, concessions, licenses or royalty
agreements.





Reports
to Security Holders




At this
time, the Company has not provided annual reports to security
holders.  However, shareholders and the general public may view copies
of all of our filings with the SEC, by visiting the SEC website (http://www.sec.gov)
and performing a search of Amerex Group, Inc.’s electronic filings.





12




RISK
FACTORS





RISKS
RELATING TO OUR BUSINESS





Our
limited operating history makes evaluation of our business and our future
prospects difficult.




Our
business is at an early stage of operation and there is no meaningful historical
financial or other information available upon which you can base your evaluation
of our business and its prospects. We have generated $8,305,496 in revenue for
the year ending December 31, 2007.





We
have a history of losses and may continue to incur losses in the
future.




To date,
we have been unable to generate revenue sufficient to cover our current expenses
and to be profitable. We had a net loss of $8,326,572, for the year ended
December 31, 2007. We expect to incur losses for the immediate foreseeable
future. There can be no assurance that we will achieve the level of revenues
needed to be profitable in the future or, if profitability is achieved, that it
will be sustained. Due to these losses, we have a continuing need for additional
capital.





Our
independent auditors have expressed substantial doubt about our ability to
continue as a going concern.





In their
audit opinion issued in connection with our consolidated balance sheets as of
December 31, 2007 and our related consolidated statements of operations,
stockholders’ equity, and cash flows for the year ended December 31, 2007, our
auditors have expressed substantial doubt about our ability to continue as a
going concern given our recurring net losses, negative cash flows from
operations, planned spending levels and the limited amount of funds on our
balance sheet.  We have prepared our financial statements on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business.  The
consolidated financial statements do not include any adjustments that might be
necessary should we be unable to continue in existence.





We
will require additional funding to continue our current operations
and  for our future growth, which, if raised through issuance of
additional shares of our equity securities, could dilute existing stockholders’
equity interests; it is uncertain whether such additional funding will be
available on favorable terms, if at all.




Our
ability to continue our current operations and our future growth will depend, to
a large extent, on our ability to secure additional debt or capital funding and
also on our ability to invest in projects which require a high amount of capital
investment. In order to obtain additional capital to develop these growth
opportunities, we may be required to issue additional shares of our equity
securities. If new shares offered to new and/or existing stockholders are
issued, they may be priced at a discount to the then prevailing market price of
our shares, in which case, existing stockholders’ equity interests may be
diluted. If we fail to utilize the new equity to generate a commensurate
increase in earnings, our earnings per share will be diluted, and this could
lead to a decline in our share price. Any additional debt financing may, apart
from increasing interest expense, contain restrictive covenants with respect to
dividends, future fund-raising exercises and other financial and operational
matters. No assurance can be given that funding will be available when needed or
that it will be available on favorable terms, if at all.




13




The
substantial level of our debt may require us to allocate a substantial portion
of our operating profit to service our debt and may make future borrowing more
difficult. As a result, we may not be able to expend the resources necessary to
react to changes in our business, which could place us at a competitive
disadvantage and have adverse consequences upon our business.




Our
substantial level of our debt could have important consequences to our
stockholders, including the following: (i) a substantial portion of the net cash
provided by our operations will be committed to the payment of our interest
expense and principal repayment obligations and will not be available to us for
operations, capital expenditures, acquisitions or other purposes; (ii) our
ability to obtain additional financing in the future for working capital,
capital expenditures or acquisitions may be limited; (iii) we will be more
highly leveraged than certain of our competitors which may place us at a
competitive disadvantage and limit our flexibility in reacting to changes in our
business. See “Recent Financings” describing the CAMOFI Master LDC Note and
CAMOFI Line of Credit. Our ability to make scheduled payments or to refinance
our indebtedness obligations depends on our financial and operating performance,
which, in turn, is subject to prevailing economic conditions, financial,
business and other factors beyond our control.





Limitations
imposed by CAMOFI Master LDC and CAMOFI Line of Credit indebtedness are
significant and our failure to comply with them could have a negative impact on
our operations and financial condition.




The
documents governing our indebtedness to CAMOFI Master LDC and CAMOFI Line of
Credit contain significant covenants that limit our ability to engage in various
transactions. These covenants significantly restrict our ability to borrow
additional funds, which we may require for continuing our operations. We are
prohibited from additional borrowing that would place any lender senior to
our CAMOFI Master LDC debt or CAMOFI Line of Credit, which could deter potential
lenders from entering into a financing arrangement with us. If we are unable to
obtain additional financing when required our operations could be negatively
impacted.




Failure
to comply with these restrictions and limitations could result in the
acceleration of our CAMOFI Master LDC or CAMOFI Line of Credit indebtedness,
which we would be unable to repay. See following Risk Factor: “ CAMOFI Master
LDC maintains a first priority security interest in all of our
assets...”




14




CAMOFI
Master LDC maintains a first priority security interest in all of our assets and
in the assets of our subsidiaries under the convertible note we issued to CAMOFI
Master LDC. If an event of default occurs under the convertible note, it could
lead to the acceleration of our entire debt obligation to CAMOFI Master LDC,
which we would be unable to pay and therefore lead to a loss of our assets.
Default of the CAMOFI Line of Credit could lead to the acceleration of the
entire debt obligation, back interest, and additional collection
fees.




If an
event of default in respect of the CAMOFI Master LDC note would occur, CAMOFI
Master LDC may elect that the CAMOFI Master LDC note be immediately due and
payable in an amount equal to 125% of the principal amount of the CAMOFI Master
LDC note, plus accrued interest thereon at the rate of 20% per annum. If we
default on the CAMOFI Master LDC note and CAMOFI Master LDC demands all payments
immediately due and payable, we would not have the cash required to pay such
indebtedness. As a result, we may be forced to restructure, file for bankruptcy,
sell assets or cease operations, any of which would render our common stock, and
your investment, worthless. Further, our obligation under the CAMOFI Master LDC
note is secured by substantially all of our and our subsidiaries current and
future assets. Failure to fulfill our obligations under the CAMOFI Master LDC
note and related agreements could lead to a loss of these assets, which
would be detrimental to our operations. The following events, among others,
constitute events of default under the note:





·
              failure
      to pay interest and principal payments when
due;





·
            a
      breach of any material covenant or term or condition of the note, in any
      agreement made in connection therewith or in any other material agreement,
      lease, document or instrument to which the we or our subsidiaries are
      bound;





·
            a
      breach of any material representation or warranty made in the note or in
      any agreement made in connection
therewith;





·
            an
      assignment for the benefit of creditors is made by us or any of our
      subsidiaries;





·
            a
      custodian or the like is appointed for us or any of our subsidiaries for
      any substantial part of our or our subsidiaries’ property which shall
      remain undischarged or unstayed for a period of 60
  days;





·
              we
      are unable to pay any of our debts as they become
  due;




15




·
            any
      form of bankruptcy or insolvency proceeding instituted by or against us or
      any of our subsidiaries;





·
            our
      failure to timely deliver registered shares of our common stock when due
      upon conversions of the note;





·
            our
      common stock is not eligible for quotation or trading is suspended for 5
      consecutive trading days; or





·
            a
      change in control.





Loss
of certain key personnel could limit our ability to maintain relationships with
our customers and continue to operate our business, which would have a negative
impact on our financial condition.




We depend
upon key personnel who may terminate their employment with us at any time, and
we will need to hire additional qualified personnel. Our success depends, to a
significant degree, upon the continued services of key management and technical
personnel, including Nicholas Malino, our chief executive officer and a
member of our board of directors and Craig McMahon, our vice president of
operations. Our key personnel may terminate their employment with us at any
time. The loss of any of these individuals or other key personnel could have a
negative impact on our relationships with our customers and impair our
operations, revenues, prospects, and our ability to raise additional funds.
There are several key employees who have developed unique and longstanding
relationships with one or more of our major customers, and whom, if no
longer employed by the Company may redirect some or all of these customers’
service requirements to other providers or otherwise, diminish the Company’s
relationship with the customer so as to reduce the amount of services that we
are currently providing. In addition, our covenants under the CAMOFI Master LDC
indebtedness require the continued employment of Mr. Malino and Mr. McMahon. In
the event that either of these employees terminates their employment, a
condition of default would occur and may result in the acceleration of our debt
under this agreement which we could not pay.




Our
future success depends on our ability to retain and expand our staff of
qualified personnel, including environmental specialists and technicians, sales
personnel, and engineers. Without qualified personnel, we may incur delays in
rendering our services or be unable to render certain services. We cannot be
certain that we will be successful in our efforts to attract and retain
qualified personnel as their availability is limited due to the demand for
hazardous waste management services and the highly competitive nature of the
hazardous waste management industry. We do not maintain key person insurance on
any of our employees, officers, or directors.




16




We
face intense competition and our failure to meet this competition could
adversely affect our business.




The
market for industrial waste management services is highly competitive. We
compete with many other firms, including large multinational firms having
substantially greater financial, management and marketing resources than we
have. Competitive factors include quality and diversity of services, technical
qualifications, reputation, geographic presence, price and the availability of
key professional personnel. There are numerous methods of handling and disposing
of hazardous and non-hazardous waste, of which our facilities and technology are
one of the available systems. There can be no assurance that a different or new
technology may not supplant us in the market. Further, we cannot guarantee that
in the event that we are successful in the deployment of our systems in the
marketplace, the predominant companies in the field, which have substantially
greater resources and market visibility than us, will not try to develop similar
systems. See “Business--Competition.”




If
we are not able to secure new customers our revenues and profitability may
decline and the return on your investment may be reduced.




Our
business is project-based, though certain projects customers are bound to us for
the contractual periods other customers are non-recurring customers and we do
not expect them to continue to be our customers because of the nature of the
industry. If we fail to secure projects from new customers, our revenues and
profitability may decline and the return on your investment may be reduced.
  There can be no assurance that we will:





·
              obtain
      additional contracts for projects similar in scope to those previously
      obtained from our clients;





·
              be
      able to retain existing clients or attract new
  clients;





·
              provide
      services in a manner acceptable to
clients;





·
              offer
      pricing for services which is acceptable to clients;
  or





·
            broaden
      our client base so that we will not remain largely dependent upon a
      limited number of clients that will continue to account for a substantial
      portion of our revenues.




We
are dependent upon three key customers. Our failure to maintain, renew, or
replace these customers could significantly reduce our revenues and therefore
negatively impact our financial condition, which would adversely affect your
investment.





17




In 2007,
34% of our revenues were derived from a contract we were awarded by the United
States Department of Justice, Drug Enforcement Administration for clandestine
drug lab clean ups in eleven contract regions covering sixteen states, and 11%
of our total revenues were derived from our contracts with Safety Kleen Systems
a national provider of industrial cleaning, parts washing, waste management and
recycling services, which we refer to herein as our Industrial Services
Customer, for waste treatment projects and 26% of our revenues were from our
contracts with the Environmental Quality Company, Inc. Together, these three
clients contributed 71% of our revenues during that year.   Our
contract with the DEA was issued for up to 24 months starting January 9, 2006.
In February of 2008 the Department of Justice, Drug Enforcement Agency announced
the award of new two-year contracts for these services. While not all of the
contracts have been awarded, we have not been awarded any of these new contracts
to date and there is no assurance that we will be awarded any of these contracts
in the future. Although our contract with our Industrial Services Customer,
entered into on October 10, 2005 for one year, is automatically renewed for
additional one-year terms, The Environmental Quality Company may terminate our
contract at anytime, with or without cause, upon thirty days’ prior written
notice. Both of these contracts are requirements contracts, meaning that
the customers place orders for our services and supplies as they require them
and there are no minimum services they are required to place.




If we
fail to maintain, renew, or replace these contracts, our revenues could be
significantly reduced, and therefore negatively impact our financial condition
and your investment in us.  Furthermore, since these types of
contracts, generally, are submitted to a bidding process, it make take several
months to be awarded a contract after the initial bid for the work is submitted
by the Company.  This may cause results to fluctuate materially
quarter to quarter.




Our
customers may make claims against us and/or terminate our services, in whole or
in part, prematurely should we fail to implement projects that fully satisfy
their requirements and expectations, which may harm our reputation, reduce our
profitability and therefore negatively impact our financial
condition.




Failure
to implement projects that fully satisfy the requirements and expectations of
our customers or defective system structures or services as a result of design
or workmanship or due to acts of nature may lead to claims against us and/or
termination of our services, in whole or in part, prematurely. This may arise
from a variety of factors including unsatisfactory design or implementation,
staff turnover, human errors or misinterpretation of and failure to adhere to
regulations and procedures. This may harm our reputation, reduce our
profitability and therefore negatively impact our financial
condition.




18




We
have exposure to credit risks of our customers. Defaults in payment by our
customers will affect our financial position and our profitability.




Defaults
in payment by our customers will affect our financial position and our
profitability. As of December 31, 2007 our accounts receivables of $2,277,396
accounted for approximately 82% of our current assets. Our financial position
and profitability are dependent on the credit worthiness of our customers. We
are unable to provide assurance that risks of default by our customers would not
increase in the future, or that we will not experience cash flow problems as a
result of such defaults. Should these develop into actual events, our operations
will be adversely affected and our profitability may be reduced.




We
may not be able to protect our processes, technologies and systems against
claims by other parties, which could reduce our competitive advantage and
profitability and therefore adversely affect our financial
condition.




We have
not purchased or applied for or obtained licenses to use any patents as we are
of the view that it may not be cost-effective to do so. For processes,
technologies and systems for which we have not applied for or purchased or been
licensed patents, we may have no legal recourse to protect our rights in the
event that they are replicated by other parties. If our competitors are able to
replicate our processes, technologies and systems at lower costs, we may lose
our competitive edge and our profitability may be reduced, and therefore
adversely affect our financial condition.




We
may face claims for infringement of third-party intellectual property rights. As
a result, we would incur substantial costs and spend substantial amounts of time
in defending ourselves against such claims, which could adversely affect our
operations and business.




Although
management is not aware of any issues of infringement, there is no assurance
that third parties will not assert claims to our processes, technologies and
systems. In such an event, we may need to acquire licenses to, or to contest the
validity of, issued or pending patents or claims of third parties. There can be
no assurance that any license acquired under such patents would be made
available to us on acceptable terms, if at all, or that we would prevail in
any such contest. In addition, we would incur substantial costs and spend
substantial amounts of time in defending ourselves in or contesting suits
brought against us for alleged infringement of another party’s patent rights. As
such, our operations and business may be adversely affected by such civil
actions.




19




We
may rely on subcontractors for some of our projects. Failure on the part of
subcontractors to properly perform contracted services could compromise our
relationships with our customers and thereby adversely affect our business. In
addition, our profitability may be reduced if we are not able to secure
competitive rates from our subcontractors.




As we
may, from time to time, subcontract some parts of our services to
subcontractors, we face the risk of unreliability of work performed by them.
Should any of our subcontractors default on their contractual obligations and
work specifications, our ability to deliver service to our customers in
accordance with quality and/or timing specifications may, in turn, be adversely
affected. Furthermore, if we are unable to secure competitive rates from our
subcontractors, our profitability may be reduced.




If
we cannot maintain adequate insurance coverage, we will be unable to continue
certain operations, which would adversely affect our business and financial
condition.




Our
business exposes us to various risks, including claims for causing damage to
property and injuries to persons that may involve allegations of negligence or
professional errors or omissions in the performance of our services. Such claims
could be substantial. We believe that our insurance coverage is presently
adequate and similar to, or greater than, the coverage maintained by other
companies in the industry of our size. If we are unable to obtain adequate or
required insurance coverage in the future or, if our insurance is not available
at affordable rates, we would violate our permit conditions and other
requirements of the environmental laws, rules, and regulations under which we
operate. Such violations would render us unable to continue certain of our
operations. These events would prevent us from being able to perform a
significant portion of our business services and have an adverse effect
on our financial condition.




We
are subject to extensive governmental regulation with which it is frequently
difficult, expensive and time-consuming to comply.




The waste
management industry is subject to extensive EPA, state and local laws and
regulations relating to the collection, packaging, labeling, handling,
documentation, reporting, treatment and disposal of regulated waste. Our
business requires us to comply with these extensive laws and regulations and
also to obtain and maintain permits, authorizations, approvals, certificates or
other types of governmental permission from all states and some local
jurisdictions where we operate or conduct operations.




We
believe that we currently comply in all material respects with all applicable
laws, regulations and permitting requirements. State and local regulations
change often, however, and new regulations are frequently adopted. Changes in
the applicable regulations could require us to obtain new approvals or permits,
to change the way in which we operate. We might be unable to obtain the new
approvals or permits that we require, and the cost of compliance with new or
changed regulations could be significant. In the event we are not in compliance,
we can be subject to fines and administrative, civil or criminal sanctions or
suspension of our business.




20




Potential
liabilities arising out of environmental laws and regulations may harm our
reputation and financial condition.




All
facets of our business are conducted in the context of a rapidly developing and
changing statutory and regulatory framework. Our operations and services are
affected by and subject to regulation by a number of federal agencies including
the EPA and the Occupational Safety and Health Administration, which we refer to
herein as OSHA, as well as applicable state and local regulatory
agencies.




The
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, which we refer to herein as the Superfund Act, addresses the cleanup of
sites at which there has been a release or threatened release of hazardous
substances into the environment. Increasingly, there are efforts to expand the
reach of the Superfund Act to make hazardous waste management companies
responsible for cleanup costs of Superfund sites not owned or operated by such
management companies by claiming that such management companies are “owners” or
“operators” (as those terms are defined in the Superfund Act) of such sites or
that such management companies arranged for “treatment, transportation or
disposal” (as those terms are defined in the Superfund Act) of hazardous
substances to or in such sites. Several recent court decisions have accepted
such claims. Should we be held responsible under the Superfund Act for cleanup
costs as a result of performing services or otherwise, we might be forced to
bear significantly more than our proportional share of such cleanup costs if
other responsible parties do not pay their share.




The
Resource Conservation and Recovery Act of 1976, as amended, which we refer to
herein as RCRA, is the principal federal statute governing hazardous waste
generation, treatment, transportation, storage and disposal. RCRA or EPA
approved state programs are at least as stringent, govern waste handling
activities involving wastes classified as “hazardous.” See “Environmental
Regulation -- Federal Regulation of Hazardous Waste.” Substantial fees and
penalties may be imposed under RCRA and similar state statutes for any violation
of such statutes and regulations.




Although
we believe that we generally benefit from increased environmental regulations
and from enforcement of those regulations, increased regulation and enforcement
also create significant risks for us. The assessment, analysis, remediation,
transportation, handling and management of hazardous substances necessarily
involve significant risks, including the possibility of damages or personal
injuries caused by the escape of hazardous materials into the environment, and
the possibility of fines, penalties or other regulatory action. These risks
include potentially large civil and criminal liabilities to customers and to
third parties for damages arising from performing services for customers. See
“Environmental Regulation.”




21




Potential
liabilities involving customers and third parties may harm our reputation and
financial condition.




In
performing services for our customers, we potentially could be liable for breach
of contract, personal injury, property damage (including environmental
impairment), and negligence, including claims for lack of timely performance or
for failure to deliver the service promised (including improper or negligent
performance or design, failure to meet specifications, and breaches of express
or implied warranties). The damages available to a customer, should it prevail
in its claims, are potentially large and could include consequential
damages.




Industrial
waste management companies, in connection with work performed for customers,
also potentially face liabilities to third parties from various claims including
claims for property damage or personal injury stemming from a release of
hazardous substances or otherwise. Claims for damage to third parties could
arise in a number of ways, including: through a sudden and accidental release or
discharge of contaminants or pollutants during transportation of wastes or the
performance of services; through the inability, despite reasonable care, of a
remedial plan to contain or correct an ongoing seepage or release of pollutants;
through the inadvertent exacerbation of an existing contamination problem; or
through reliance on reports prepared by such waste management companies.
Personal injury claims could arise contemporaneously with performance of the
work or long after completion of projects as a result of alleged exposure
to toxic or hazardous substances. In addition, increasing numbers of
claimants assert that companies performing environmental remediation should be
adjudged strictly liable for damages even though their services were performed
using reasonable care, on the grounds that such services involved “abnormally
dangerous activities.”




Customers
of industrial waste management companies frequently attempt to shift various
liabilities arising out of disposal of their wastes or remediation of their
environmental problems to contractors through contractual indemnities. Such
provisions seek to require the contractors to assume liabilities for damage or
personal injury to third parties and property and for environmental fines and
penalties (including potential liabilities for cleanup costs arising under the
Superfund Act). Moreover, the EPA has increasingly constricted the circumstances
under which it will indemnify its contractors against liabilities incurred in
connection with cleanup of Superfund sites. While such restrictions might have
some adverse impact upon us, such impact should be immaterial because projects
relating to the cleanup of Superfund sites have historically represented less
than 2% of our business. See “Business--Services.”




Although
we attempt to investigate thoroughly each company that we acquire, there may be
liabilities that we fail or are unable to discover, including liabilities
arising from non-compliance with environmental laws by prior owners, and for
which we, as a successor owner, might be responsible. We seek to minimize the
impact of these liabilities by obtaining indemnities and warranties from sellers
of companies which may be supported by deferring payment of or by escrowing a
portion of the purchase price. However, these indemnities and warranties, if
obtained, may not fully cover the liabilities due to their limited scope,
amounts, or duration, the financial limitations of the indemnitors or warrantors
or other reasons.




22




Changes
in environmental regulations and enforcement policies could subject us to
additional liability and adversely affect our ability to continue certain
operations.




Because
the environmental industry continues to develop rapidly, we cannot predict the
extent to which our operations may be affected by future enforcement policies as
applied to existing laws, by changes to current environmental laws and
regulations, or by the enactment of new environmental laws and regulations. Any
predictions regarding possible liability under such laws are complicated further
by current environmental laws which provide that we could be liable, jointly and
severally, for certain activities of third parties over whom we have limited or
no control.




If
environmental regulation or enforcement is relaxed, the demand for our services
may decrease, which would negatively impact our operations and financial
condition.




The
demand for our services is substantially dependent upon the public's concern
with, and the continuation and proliferation of, the laws and regulations
governing the treatment, storage, recycling, and disposal of hazardous,
non-hazardous, and industrial waste. A decrease in the level of public concern,
the repeal or modification of these laws, or any significant relaxation of
regulations relating to the treatment, storage, recycling, and disposal of
hazardous waste and industrial waste would significantly reduce the demand for
our services which would result in reduced revenue and greater competition for
the remaining services which may possibly put downward pressure on our pricing
model and have a material adverse effect on our operations and financial
condition. We are not aware of any current federal or state government or agency
efforts in which a moratorium or limitation has been, or will be, placed upon
the creation of new hazardous waste regulations that would have a material
adverse effect on us; however, no assurance can be made that such a moratorium
or limitation will not be implemented in the future.




The
Internal Revenue Service may place a lien upon all of the assets of the
Compan.y




If the
Company is unable to enter into a satisfactory arrangement with the Internal
Revenue Service with regard to the Company’s failure to pay payroll taxes for
the period  August 17, 2007 through December 31, 2007, the Internal
Revenue Service may place a lien upon all of the assets of the
Company.  The imposition of a lien against the Company’s assets may
cause a default under the Company’s indebtedness, which could permit the
Company’s lenders to demand immediate repayment.  The Company does not
have sufficient funds and may not be able to obtain sufficient funds to repay
all of its current indebtedness.  If the lenders demand immediate
repayment and the Company is unable to repay the indebtedness, the lenders may
enforce their lien against the assets and acquire ownership of the
assets.  If the Internal Revenue Service imposes a lien and then
enforces the lien, it may acquire ownership of the assets. In either case, the
enforcement of a lien could have a material adverse affect on the Company’s
business and may cause it to cease operations.




23




RISKS
RELATED TO OUR SECURITIES





Our
executive officers, directors and principal stockholders have substantial
control over our business, and their interests may not be aligned with the
interests of our other stockholders.




As of
December 31, 2007, our officers and directors, together with their affiliates,
beneficially owned approximately 29.0% of our outstanding common stock.
Accordingly, these stockholders, acting together, will be able to exert
significant influence over all matters requiring stockholder approval, including
the election and removal of directors and any merger, consolidation or sale of
all or substantially all of our assets. In addition, these stockholders may
dictate the day-to-day management of our business. This concentration of
ownership could have the effect of delaying, deferring or preventing a change in
control, or impeding a merger or consolidation, takeover or other business
combination or a sale of all or substantially all of our assets.




We
may be exposed to potential risks relating to our internal controls over
financial reporting and our ability to have those controls attested to by our
independent auditors. As a result, we may face regulatory action and investors
and others may lose confidence in our reported financial information, either of
which could have an adverse effect on our stock price.




As
directed by Section 404 of the Sarbanes-Oxley Act of 2002 (SOX 404), the
Securities and Exchange Commission adopted rules requiring public companies to
include a report of management on the company's internal controls over financial
reporting in their annual reports, including Form 10-KSB. In addition, the
independent registered public accounting firm auditing a company's financial
statements must also attest to and report on management's assessment of the
effectiveness of the company's internal controls over financial reporting as
well as the operating effectiveness of the company's internal
controls.




If we
identify significant deficiencies or material weaknesses in our internal
controls that we cannot remediate in a timely manner or we are unable to receive
a positive attestation from our independent auditors with respect to our
internal controls, we may face regulatory action and investors and others may
lose confidence in our reported financial information, either of which could
have an adverse effect on our stock price.




24




Compliance
with changing regulation of corporate governance and public disclosure may
result in additional expenses, which as a smaller public company may be
disproportionately high.




Our
efforts to comply with evolving laws, regulations and standards regarding
corporate governance and public disclosure will likely result in increased
general and administrative expenses and a diversion of management time and
attention from revenue-generating activities to compliance activities. If we are
unable to fully comply with new or changed laws, regulations and standards we
may face regulatory action and investors and others may lose confidence in our
reported financial information, either of which could have an adverse effect on
our stock price.




There
is only a limited market for our common stock, which could cause our investors
to incur trading losses and fail to resell their shares at or above the price
they paid for them, or to sell them at all.







Our
common stock is quoted on the Over-the-Counter Bulletin Board (OTCBB) under the
symbol “AEXG.”  On March 19, 2008, the last reported sale price of our
common stock was $0.42 per share. Prior to August 21, 2006, our common stock was
quoted on the pink sheets under the symbol “AGDC.”   The symbol
changed from AGDC from AEXG effective March 1, 2007 due to our name change. Our
common stock is not actively traded and there can be no assurance that an active
trading market will be developed or maintained. See “Market for Our Common
Stock.”




The OTCBB
is an inter-dealer, over-the-counter market which provides significantly less
liquidity than NASDAQ or other national or regional exchanges. Securities traded
on the OTCBB are usually thinly traded, highly volatile, have fewer market
makers and are not followed by analysts. The SEC’s order handling rules, which
apply to NASDAQ-listed securities, do not apply to securities quoted on the
OTCBB. Quotes for stocks included on the OTCBB are not listed in newspapers.
Consequently, prices for securities traded solely on the OTCBB may be difficult
to obtain and are frequent targets of fraud or market manipulation. Dealers may
dominate the market and set prices that are not based on competitive forces.
Individuals or groups may create fraudulent markets and control the sudden,
sharp increase of price and trading volume and the equally sudden collapse of
the market price for shares of our common stock. Moreover, the dealer's spread
(the difference between the bid and ask prices) may be large and may result in
substantial losses to the seller of shares of our common stock on the OTCBB if
the stock must be sold immediately and may incur an immediate “paper” loss from
the price spread.




Due to
the foregoing, demand for shares of our common stock on the OTCBB may be
decreased or eliminated and holders of our common stock may be unable to resell
their securities at or near their original acquisition price, or at any
price.




25




Investors
must contact a broker-dealer to trade OTCBB securities. As a result, you may not
be able to buy or sell our securities at the times you wish.




Even
though our securities are quoted on the OTCBB, the OTCBB may not permit our
investors to sell securities when and in the manner that they wish. Because
there are no automated systems for negotiating trades on the OTCBB, trades are
conducted via telephone. In times of heavy market volume, the limitations of
this process may result in a significant increase in the time it takes to
execute investor orders. Therefore, when investors place an order to buy or sell
a specific number of shares at the current market price it is possible for the
price of a stock to go up or down significantly during the lapse of time between
placing a market order and its execution.




Sales
of a substantial number of shares of our common stock may cause the price of our
common stock to decline.




We intend
to undertake future offerings of our stock. If our stockholders sell substantial
amounts of our common stock in the public market, including shares issued upon
conversion of the convertible note and exercise of outstanding warrants, the
market price of our common stock could fall. These sales also may make it
more difficult for us to sell equity or equity-related securities in the future
at a time and price that we deem reasonable or appropriate.




Authorized
additional shares of our common stock available for issuance may dilute current
stockholders.




We are
authorized to issue 100,000,000 shares of our common stock. As of December 31,
2007, there were 15,709,683 shares of common stock issued and outstanding and no
shares of preferred stock authorized, issued or outstanding. However, the total
number of shares of our common stock outstanding does not include shares of our
common stock reserved in anticipation of the exercise of warrants described
herein or conversion of the CAMOFI Master LDC note. Further, in the event that
any additional financing should be in the form of, be convertible into or
exchanged for equity securities, investors may experience additional
dilution.




Penny
stock regulations may impose certain restrictions on the marketability of our
securities, which may adversely affect the ability of purchasers in this
offering to resell our securities.




The
Securities and Exchange Commission has adopted regulations which generally
define a “penny stock” to be any equity security that has a market price (as
defined) of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. Our common stock is subject to rules
that impose additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
investors (generally those with assets in excess of $1,000,000 or annual income
exceeding $200,000, or $300,000 together with their spouse). For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for




26




the
purchase of such securities and have received the purchaser’s written consent to
the transaction prior to the purchase. Additionally, for any transaction
involving a penny stock, unless exempt, the rules require the delivery, prior to
the transaction, of a risk disclosure document mandated by the Commission
relating to the penny stock market. The broker-dealer must also disclose the
commission payable to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer is the sole
market maker, the broker-dealer must disclose this fact and the broker-dealer’s
presumed control over the market. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the “penny
stock” rules may restrict the ability of broker-dealers to sell our securities
and may affect the ability of investors to sell our securities in the secondary
market and the price at which such purchasers can sell any such
securities.




Investors
should be aware that, according to the Commission, the market for penny stocks
has suffered in recent years from patterns of fraud and abuse. Such patterns
include:





·
              Control
      of the market for the security by one or a few broker-dealers that are
      often related to the promoter or
issuer;





·
              Manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press
releases;





·
              “Boiler
      room” practices involving high pressure sales tactics and unrealistic
      price projections by inexperienced sales
  persons;





·
              Excessive
      and undisclosed bid-ask differentials and markups by selling
      broker-dealers; and





·
              The
      wholesale dumping of the same securities by promoters and broker-dealers
      after prices have been manipulated to a desired level, along with the
      inevitable collapse of those prices with consequent investor
      losses.




We
have never paid dividends and we do not anticipate paying dividends in the
future. If you require dividend income, you should not rely on an investment in
our company.




27




We do not
believe that we will pay any cash dividends on our common stock in the future.
We have never declared any cash dividends on our common stock, and if we were to
become profitable, it would be expected that all of such earnings would be
retained to support our business. Since we have no plan to pay cash dividends,
an investor would only realize income from his investment in our shares if there
is a rise in the market price of our common stock, which is uncertain and
unpredictable. In addition, our agreement with CAMOFI Master LDC requires that
we obtain their consent prior to paying any dividends. If you require dividend
income, you should not rely on an investment in our company.





ITEM
2.DESCRIPTION OF
PROPERTY




Our
principal executive offices and production facility are located on approximately
10 acres of leased space in Tulsa, Oklahoma, including six office, storage and
special purpose buildings. We also lease approximately 7,000 square feet of
office space in Portland, Oregon and office space in New York City. The Tulsa
lease runs through May of 2011 and contains a five year option to renew with 60
days’ prior notice. The cost of this lease is $6,850 per month and is paid
to Ken Duckworth who was the principal owner of Environmental Remediation
Specialists, Inc. The Portland, Oregon lease is a month-to-month lease paid to
Cascade General, Inc. at the rate of approximately $3,000 per month. The New
York City lease is a month-to-month lease paid at the rate of $1,500 per month.
We own approximately 25.5 acres of property in Leigh, Texas, approximately 2.5
acres of property in Kansas City, Missouri, and approximately 168 acres of
property in Pryor, Oklahoma. We believe that these properties and facilities are
adequate for our current operations. All of our properties and facilities are
insured.





ITEM
3.LEGAL
PROCEEDINGS





CONCESSIONS
MANUFACTURING COMPANY, LLC




Between
August 19, 2006 and August 28, 2006 several of our employees who were formerly
affiliated with NES Technologies, LLC and National Environmental Solutions, LLC,
as well as NES Technologies, LLC and National Environmental Solutions, LLC, were
served with complaints from the District Court of Tulsa County, State of
Oklahoma and from Concessions Manufacturing Company, LLC f/k/a Concessions
Manufacturing Company, Inc. alleging that the defendants owed Concessions
Manufacturing Company, LLC $50,000. The case is listed as CJ-05-7349. During
this same timeframe, we were also served with a complaint in the district Court
of Tulsa County, State of Oklahoma on behalf of the plaintiff Concessions
Manufacturing Company, LLC f/k/a Concessions Manufacturing Company, Inc. Amerex
Companies, Inc. was named as a defendant along with several members of our board
of directors and staff, and NES Technologies, LLC, a company with which Amerex
Companies, Inc. concluded the acquisition of certain assets described elsewhere
in this document, and two other unrelated defendants. The plaintiff
contends that the one of the unrelated defendants entered into a verbal
commitment to a promissory note in the amount of $37,845.30, and that,
subsequently, NES Technologies, Inc. and several of our employees and one
director (previous to their employment with Amerex Companies, Inc.), and one
present shareholder of Amerex Companies, Inc. (although he was not a shareholder
at the time the alleged assumption of liability took place) assumed the note.
Further, the plaintiffs also allege that Amerex tacitly assumed responsibility
for the note subsequent to the acquisition of certain assets of NES
Technologies, LLC on September 13, 2005. Management believes that the
plaintiff’s case is without merit and will pursue a vigorous
defense.




28




On July
15, 2007 we entered into a Settlement Agreement with Concessions and on August
15, 2007 we paid Concessions $35,000. In consideration of this payment,
Concessions provided Amerex with an executed Dismissal with Prejudice of all of
its claims against Amerex in this litigation.




ENVIROSOLVE
L.L.C.




On
December 15, 2005 a complaint was filed in the district court of Tulsa County,
State of Oklahoma naming Amerex Companies, Inc. along with Universal Wireline
Equipment, LLC, a Company controlled by Richard Coody a director, South Bridge
Business Resources, Inc., a Company controlled by Ronald Brewer, one of our
former directors and our former Chief Operating Officer, and Mr. Coody, Mr.
Brewer and Mr. McMahon as individuals. Mr. McMahon is our Vice President of
Operations.




The
complaint alleges, among other things, that Amerex Companies, Inc., was a party
to a confidentiality agreement signed on July 24, 2004 by Mr. Coody on behalf of
an unrelated company, Universal Wireline Equipment, LLC. The plaintiff who is a
direct competitor of Amerex alleges that Amerex was obligated by the terms of
the Universal/Envirosolve Confidentiality Agreement and that Amerex violated the
terms of the Confidentiality Agreement and utilized proprietary information
shared during Universal’s due diligence process resulting in damages to
Envirosolve, LLC. Amerex was not informed of the existence of the
Universal/Envirosolve Confidentiality Agreement, but notwithstanding such
knowledge denies that it utilized any confidential information neither to the
detriment or Envirosolve nor the benefit of Amerex.




Based
upon our initial investigation of the circumstances of the action, we believe
that the litigation is without merit and intend to pursue a vigorous
defense.




ENHANCED
OPERATING COMPANY, LLC AND MICHAEL EPPLER




On
December 11, 2006 a complaint was filed with the 71st Judicial District Court of
Harrison County, TX naming Amerex Companies, Inc.




29




The
complaint alleges that Amerex misrepresented that it possessed certain abilities
and resources to construct and operate a tank bottom recovery and fuel blending
facility, and that Mr. Eppler, who was an employee of Amerex, was unjustly
terminated, and seeks payment of Mr. Eppler’s monthly salary of $10,000 for an
additional 23 months and other unquantifiable damages.




Based
upon our initial investigation of the circumstances of the action, we believe
that the litigation is without merit and intend to pursue a vigorous
defense.




EMPLOYEE
LITIGATION




On July
18, 2007 a complaint was filed in the
District Court of Tulsa County, in the State of Oklahoma
naming Amerex Companies Inc., by two former employees who were terminated for
cause in February 2007.




The complaint alleges that these
employees were entitled to incentive bonuses based on their performance during
the year ending December 31, 2006. Amerex does not believe that any amounts are
owed to these employees under their agreements and has responded to the
complaint and filed counterclaims.




YAFFE
LITIGATION




On August
23, 2007 a complaint was filed in
the District Court of Tulsa County in the State of
Oklahoma naming Amerex Companies Inc., by Yaffe Metals, Inc.




The
complaint alleges that Yaffe had an exclusive right to purchase the metal
salvaged from the Pryor facility and that Amerex breached the agreement by
selling a portion of the metal to other companies. The case is currently in
discovery and management does not believe that Yaffe was entitled to purchase
the metal on an exclusive basis and has filed counterclaims. Yaffe has not
indicated the amount of damages that it is seeking.




ITEM
4.SUBMISSIONS OF
MATTERS TO A VOTE OF SECURITY HOLDERS




During
the fiscal year ended December 31, 2007, there were no items
submitted  to a vote of security holders, through the solicitation of
proxies or otherwise.





30





PART
II




ITEM
5. MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS





Market
Information




The
Company’s shares of common stock have been quoted on the OTCBB under the symbol
AEXG and the “Pink Sheets” under the symbol AGDC. However, there is a very
limited public market for the Company’s common stock. As of December 31, 2007,
15,709,683 shares of common stock were outstanding.




The
following table sets forth, for the respective periods indicated, the high and
low bid quotations for the Amerex common stock and, prior to July 2006, Airguide
common stock for each quarter during the past three years. The market quotations
represent prices between dealers, do not include retail markup, markdown, or
commissions and may not represent actual transactions.





Quarter
      Ended
            High
      Bid
            Low
      Bid12/31/07
            0.83
            0.599/30/07
            2.40
            1.156/30/07
            1.80
            0.303/31/07
            1.50
            0.2512/31/06
            1.25
            1.019/30/06
            .16
            .166/30/06
            .15
            .153/31/06
            .15
            .1512/31/05
            .15
            .159/30/05
            .15
            .106/30/05
            1.00
            1.003/31/05
            1.00
            1.0012/31/04
            .20
            .209/30/04
            .90
            .90




Holders
of Our Common Stock




As of
March 19, 2008, the Company had 935 registered shareholders.





Stock
Option Grants and Equity Compensation Plans




On
November 13, 2007 the Board of Directors directed the officers of the Company to
adopt and implement the 2007 Incentive Stock Plan (the “Stock Plan”). The Stock
Plan reserves 3,000,000 shares of the Company’s common stock for issuance to
employees and others who may be eligible under the Stock Plan.




31




On
November 13, 2007 the Board of Directors consented to the issuance of common
stock under the Stock Plan to the following:




160,000
shares of common stock to Craig McMahon, our Vice President of Operations, and
60,000 shares of common stock to Paul Koons, our Manager of Emergency Response
Services, 80,000 shares of common stock to Greg Gadbois, the manager of our
Portland, Oregon office, and 92,000 shares of common stock, in the aggregate, to
34 other employees. These stock awards were made in recognition of these
employees’ performance for the fiscal year ending December 31, 2006, and made
the following awards to directors:





Optionee
            Option
      Amount
            VestingNicholas
      J. Malino
            500,000
            Half
      Immediately half on first anniversary of issuanceRobert
      Roever
            400,000
            Half
      Immediately half on first anniversary of issuanceJohn
      Smith, Esq.
            150,000
            Immediately




On
February 19, 2008, the Board of Directors elected to make the following stock
option awards to the Company’s directors





Optionee
            Option
      Amount
            VestingNicholas
      J. Malino
            150,000
            ImmediatelyRobert
      Roever
            150,000
            ImmediatelyPhilip
      Getter
            100,000
            ImmediatelyJohn
      Smith, Esq.
            100,000
            Immediately




Dividends




There are
no restrictions in the Company’s articles of incorporation or bylaws that
prevent it from declaring dividends. The Oklahoma General Corporation Law,
however, does prohibit the Company from declaring dividends where, after giving
effect to the distribution of the dividend:





(1)
              The
      Company would not be able to pay its debts as they become due in the usual
      course of business; or





(2)
              The
      Company’s total assets would be less than the sum of its total liabilities
      plus the amount that would be needed to satisfy the rights of shareholders
      who have preferential rights superior to those receiving the
      distribution.





32




The
Company has not declared any dividends and it does not plan to declare any
dividends in the foreseeable future.





Recent
Sales of Unregistered Securities




On August
14, 2007, the Company issued 500,000 shares of its common stock to Professional
Offshore Opportunity Fund, Ltd. (“POOF”), under a letter agreement entered into
in connection with the contemporaneous loan provided by POOF.  (See,
Part I, Item I, Recent Financings)  The Company has agreed to register the
shares for sale or to repurchase them at specified amounts and times.  If
the shares are not registered by the maturity date of the loan or the date it is
prepaid, the shares must be repurchased at $200,000 if the note is repaid on or
before September 14, 2007, and for an additional $100,000 on the fifteenth
of each month thereafter through January 15, 2008. The maximum repurchase
price is $700,000 for a repurchase on or after January 15, 2008. As of
December 31, 2007, and as of March 24, 2008, the loan remained outstanding and
the shares had not been repurchased and the term of the Note is being extended
on a month-to-month basis. In the event the Company does not pay the amounts
due, the Company’s obligation under the letter agreement will bear interest at
the rate of two percent per annum. The $750,000 proceeds have been allocated
between the loan and related redeemable common stock simultaneously, based on
final determinations of the fair values of the loan and common
stock.




The
shares were not registered in reliance upon Section 4(2) of the Act in that they
were not made available for sale to the public and are restricted against resale
until they are registered under the Act or sold under an exemption from
registration.




ITEM
6. MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





Overview
and Business of Amerex Group, Inc.





General




We are
engaged, through our subsidiaries, in the industrial and hazardous waste
management services industry and the environmental remediation and abatement
services industry.




33




Our
industrial waste management services are conducted through Amerex Companies,
Inc, an Oklahoma corporation and our wholly-owned subsidiary, which we refer to
herein as Amerex, and Waste Express, Inc., a Missouri corporation and
wholly-owned subsidiary of Amerex.




Waste
Express is a treatment, storage and disposal facility of hazardous waste
regulated by the U.S. Department of Environmental Protection and licensed by the
U.S. Department of Environmental Protection under the Resource Conservation and
Recovery Act, of 1976, as amended, which we refer to herein as RCRA, and
the Missouri Hazardous Waste Management Law, which we refer to herein as MHWML.
Amerex conducts waste related services including, transportation of waste
materials, field service remediation and decontamination of equipment, lab pack
services and treatment of all types of industrial and municipal
wastes.




All of
our lab-packing, treatment, storage, processing, collection, testing,
consolidation and disposal of hazardous, non-hazardous industrial and household
waste are performed out of our Kansas City, Missouri facility. Emergency
response services are conducted principally in our Tulsa, Oklahoma and Kansas
City, Missouri facilities. Household hazardous waste collection events for
municipalities are arranged out of our Tulsa, Oklahoma facility. Logistics for
the removal and transportation of potentially hazardous and non-hazardous waste
is conducted out of our Tulsa, Oklahoma facility although the treatment,
storage, processing, testing and consolidation of these wastes are conducted out
of our Waste Express facility in Kansas City, Missouri. Logistics for the
collection of hazardous and non hazardous industrial waste and industrial
wastewater is also arranged through our facility in Portland,
Oregon.




Industry
Background




The
demand for industrial waste management services has resulted primarily from the
adoption and enforcement of increasingly stringent federal, state and local
environmental laws and regulations over the past 30 years. These laws and
regulations have significantly increased the costs and potential liabilities
associated with the handling of industrial wastes. Under these laws and
regulations, a broad list of industrial wastes are classified as "hazardous,"
and generators of hazardous wastes retain potential legal liability for the
proper treatment of such wastes through and including their ultimate disposal.
In response to these laws and regulations, many generators of both hazardous and
non-hazardous wastes have chosen neither  to maintain their own
treatment and disposal facilities nor to develop the technical expertise
necessary to assure regulatory compliance. These generators have instead sought
to have their waste streams managed by firms that possess collection,
transportation, recycling, treatment, disposal and waste-tracking capabilities
and have the expertise and financial capacity necessary to comply with
applicable environmental laws and regulations.





34





Our
Services





Transportation,
treatment and disposal




We
transport, treat and dispose of wastes for commercial and industrial customers,
health care providers, educational and research organizations, other waste
management companies and governmental entities. The wastes handled include
substances which are classified as “hazardous” because of their corrosive,
ignitable, infectious, reactive or toxic properties, and other substances
subject to federal and state environmental regulation. Wastes are collected from
customers and transported by us to and between our facilities for treatment
or bulking for shipment to final disposal locations. In providing this
service, we utilize a variety of specially designed and constructed tank trucks
and semi-trailers, as well as other third-party transporters, including
railroads. Liquid waste is frequently transported in bulk, but may also be
transported in drums. Heavier sludge or bulk solids are transported in sealed,
roll-off containers or bulk dump trailers.




Waste
types processed or transferred in drummed or bulk quantities
include:





·
              flammables,
      combustibles and other
organics;


·
              acids
      and caustics;


·
              cyanides
      and sulfides;


·
              solids
      and sludge;


·
              industrial
      wastewaters;


·
              PCB
      materials and electrical light
ballasts;


·
              medical
      waste;


·
              other
      regulated wastes; and


·
              non-hazardous
      industrial waste.




Before we
receive hazardous waste from a customer, detailed paperwork and analysis are
completed to document the nature of the waste. A representative sample of the
expected waste is analyzed in our owned laboratory in order to establish a waste
profile and to enable us to recommend the best method of treatment and disposal.
Prior to unloading at our treatment facility, a representative sample of the
delivered waste is tested and analyzed to insure that it conforms to the
customer's waste profile record. Once the wastes are characterized,
compatible groups are consolidated to achieve economies in storage, handling,
transportation and ultimate treatment and disposal. At the time of acceptance of
a customer's waste at our facility, a unique computer “bar code” identification
character is assigned to each container of waste, enabling us to use
sophisticated computer systems to track and document the status, location and
disposition of the waste.




35




Disposal
options include reclamation, fuels blending, incineration, aqueous treatment,
and secure chemical landfills. Reclamation includes metal recycling, product
replacement and recycling of various materials to remove impurities and conform
to product specifications. Fuel blending consists of blending liquids and
solids to form a burnable material as a replacement fuel to be used in
permitted cement kiln operations. Incineration is the destruction of various
toxic or hazardous materials to remove the hazardous properties in a permitted
thermal unit. Aqueous treatment is the neutralization or fixation of
characteristically hazardous materials. Secure chemical landfills includes both
hazardous and non-hazardous permitted facilities placement of materials in lined
and monitored landfills.





Field
services




We
provide a wide range of environmental field services to maintain industrial
facilities and process equipment, as well as clean up or contain actual or
threatened releases of hazardous materials into the environment. These services
are provided primarily to large chemical, petroleum, transportation,
utility, industrial and waste management companies, and to governmental
agencies. Field services refers to the dispatching our personnel and equipment
to a customer’s site for the purpose of picking up their hazardous and
industrial waste and transporting it to our transfer facility. Field services is
the initial transportation phase of our services and also consists of completing
the requisite documentation consisting of manifests describing the material
being removed, its state and quantity. Next, we properly contain the
material consistent with prevailing regulations and lade it upon our rolling
stock which may be a roll-off truck, trailer or some specialized containment
such as specially-lined contain vehicles for certain materials. Our field
services also include property posting appropriate signage on a conspicuous
location on the outside of the vehicle to comply with prevailing regulations,
typically of the specific State’s Department of Transportation. We identify,
evaluate, and solve our customers' environmental problems, on a planned or
emergency basis, by providing a comprehensive interdisciplinary response to the
specific requirements of each project.





Lab
packs




We
provide specialized repackaging, treatment and disposal services for chemicals
and hazardous wastes. Such chemicals and wastes are put into Lab packs, which
are packages smaller than a 55-gallon drum, generally less than five gallons or
50 pounds. Our Lab pack operation services a wide variety of customers,
including:





·
              engineering
      and research and development divisions of industrial
      companies;





·
            larger
      companies whose primary business is the collection of hazardous and
      non-hazardous materials from industries, cash washes, oil change centers,
      and automotive repair shops;





·
              college,
      university and high school
labs;




36




·
            clandestine
      methamphetamine laboratories following closure by the Drug Enforcement
      Agency;





·
              state
      and local municipalities; and





·
              municipal
      residents through household hazardous waste collection
    days.




We
provide a team of qualified personnel with science degrees and special training
to collect, label and package waste at the customer's site. Lab packs are then
transported to one of our facilities for consolidation into full-size
containers, which are then sent for further treatment or disposal as part of our
treatment and disposal services.





Project
management




An
increasingly important area of our operations is the management of complex
environmental remediation projects. These projects may include surface
remediation, groundwater restoration, site and facility decontamination, and
emergency response. An interdisciplinary team of managers, chemists, engineers,
and compliance experts design and implement result-oriented remedial programs,
incorporating both off-site removal and on-site treatment, as needed. The
remedial projects group functions as a single source management team, relieving
the customer of the administrative and operational burdens associated with
environmental remediation. As a full- service environmental services
provider, we eliminate the need for multiple subcontractors.




These
projects vary widely in scope, duration and revenue, and they are typically
performed under service agreements with the customer. Environmental remediation
projects may be undertaken in conjunction with or lead to contracts for
additional remediation work or for hazardous waste management services, and
typically involve our analytical laboratory and engineering group.





Surface
remediation




Surface
remediation projects arise in two principal areas: the planned cleanup of
hazardous waste sites and the cleanup of accidental spills and discharges of
hazardous materials, such as those resulting from transportation and industrial
accidents. In addition, some surface remediation projects involve the cleanup
and maintenance of industrial lagoons, ponds and other surface impoundments on a
recurring basis. In all of these cases, an extremely broad range of hazardous
substances may be encountered.




Surface
remediation projects generally require considerable interaction among
engineering, project management and analytical services. Following the selection
of the preferred remedial alternative, the project team identifies the processes
and equipment for cleanup. Simultaneously, our health and safety staff develops
a site safety plan for the project. Remedial approaches usually include physical
removal, mechanical dewatering, stabilization or encapsulation.





37





Groundwater
restoration




Our
groundwater restoration services typically involve response to above-ground
spills, leaking underground tanks and lines, hazardous waste landfills and
leaking surface impoundments. Groundwater restoration efforts often require
complex recovery systems, including recovery drains or wells, air strippers,
biodegradation or carbon filtration systems, and containment barriers. These
systems and technologies can be used individually or in combination to remove a
full range of floating or dissolved organic compounds from groundwater. We
internally design and fabricate most mobile or fixed site groundwater treatment
systems.





Site
and facility decontamination




Site and
facility decontamination involves the cleanup and restoration of buildings,
equipment and other sites and facilities that have been contaminated by exposure
to hazardous materials during a manufacturing process, or by fires, process
malfunctions, spills or other accidents. Our projects have included
decontamination of electrical generating stations, electrical and electronics
components, transformer vaults and commercial, educational, industrial,
laboratory, research and manufacturing facilities.





Emergency
response




We
undertake environmental remediation projects on both a planned and emergency
basis. Emergency response actions may develop into planned remedial action
projects when soil, groundwater, buildings, or facilities are extensively
contaminated. We have established specially trained emergency response teams
which operate on a 24-hour basis from service centers covering 5 states. Our
emergency response teams operate out of our Tulsa, OK facility. We have engaged
a stable of subcontractors who address the needs of emergency situations which
are too distant geographically to permit us to provide a timely response from
this facility. In these cases, after the emergency situation is addressed we
utilize resources out of either our Tulsa, OK or Kansas City, MO facilities to
remove the potentially hazardous material from the subcontractor’s site and to
relocate it to our Kansas City, MO facility for characterization, treatment and
disposal. Many of our remediation activities result from a response to an
emergency situation by one of our response teams. These incidents can result
from transportation accidents involving chemical substances, fires at chemical
facilities or hazardous waste sites, transformer fires or explosions involving
PCBs, and other unanticipated developments when the substances involved pose an
immediate threat to public health or the environment, such as possible
groundwater contamination.




38




Emergency
response projects require trained personnel, equipped with protective gear and
specialized equipment, prepared to respond promptly whenever these situations
occur. To meet the staffing requirements for emergency response projects, we
rely in part upon a network of trained personnel who are available on a contract
basis for specific project assignments. Our health and safety specialists and
other skilled personnel closely supervise these projects during and subsequent
to the cleanup. The steps performed by us include rapid response, containment
and control procedures, analytical testing and assessment, neutralization and
treatment, collection, and transportation of the substances to an appropriate
treatment or disposal facility.





Analytical
services




Analytical
services consist primarily of analytical testing, engineering services and
personnel training. Many of our principal services as described above involve
the selection and application of various technologies. Our analytical testing
laboratories perform a wide range of quantitative and qualitative analyses to
determine the existence, nature, level, and extent of contamination in various
media. Our engineering staff identifies, evaluates and implements the
appropriate environmental solution.





Analytical
testing and engineering services




We
provide analytical testing and engineering services as technical support to
complement our primary services. For example, if we are engaged to perform an
entire environmental remediation project, we will first perform a site or
situation assessment. A site assessment begins with the determination of the
existence of contamination. If present, the nature and extent of the
contamination is defined by gathering samples and then analyzing them at our
laboratory in Kansas City, Missouri in order to establish or verify the nature
and extent of the contaminants. Our engineering staff then develops, evaluates
and presents alternative solutions to remedy the particular situation. Often
treatment systems are completely designed, engineered and fabricated by us in
house. We then implement the mitigation and decontamination program mutually
selected by the customer and us.




Analytical
testing and engineering services are also provided as a separate service if a
customer requires an analysis with respect to certain material, or if a customer
is searching for an appropriate solution to an environmental problem or if an
environmental assessment is required to allow a transfer of
property.




We
operate an EPA-qualified and state-certified analytical testing laboratory in
Kansas City, MO, which tests samples provided by customers to identify and
quantify toxic pollutants in virtually every component of the environment. Our
laboratory staff evaluates the properties of a given material to identify and
characterize the waste materials prior to acceptance for treatment and disposal,
and operates mobile laboratory facilities for field use in emergency response
and remedial action situations.





39




Personnel
training




We
provide comprehensive personnel training programs for our employees and those of
our customers on a commercial basis. Such programs are designed to promote safe
work practices under potential hazardous environmental conditions, whether or
not toxic chemicals are present, in compliance with stringent regulations
promulgated under RCRA and the OSHA. We provide such training at our Tulsa,
Oklahoma facility including a tank for confined space entry, exit, and
extraction, an air-system demonstration maze, respirator fit testing room, leak
and spill response equipment, and a layout of a mock decontamination zone, all
designed to fulfill the requirements of OSHA’s Hazardous Waste and Emergency
Response Standards.




We
typically only track revenues in our service segments. Disposal, which includes
waste treatment, characterization, analytical services, lab-packs, and actual
disposal, made up approximately 44% of our total revenue from January 1, 2007
through December 31, 2007. Field services, which includes transportation and
personnel training, comprised approximately 43% of our revenue from January 1,
2007 through December 31, 2007. Emergency services are tracked separately and
contributed approximately 13% of our revenues during this same period. We expect
that emergency services will comprise a greater portion of our sales in the
future, as this line of business is developed.




Acquisitions




The
Waste Express, Inc., Acquisition




On
September 12, 2005 we acquired all of the outstanding capital stock of Waste
Express, Inc., a Missouri corporation, pursuant to a stock purchase agreement we
entered into with Steven R. Clancy, Waste Express’ then sole stockholder. Waste
Express was incorporated in 1995 and since its inception has operated as a
multi-waste treatment and disposal facility licensed by the U.S. Department of
Environmental Protection under RCRA and the MHWML. As a stock purchase, we
acquired all of the assets, tangible and intangible, associated with the
business, including licenses, permits and customer and vendor contracts. We also
assumed all liabilities associated with the business, including obligations for
services performed or to be performed by Waste Express.




The
purchase price for Waste Express consisted of cash in the amount of $296,281 and
acquisition transactions costs of $63,073. The purchase agreement provides for
contingent consideration to be paid to the prior owner to the extent that
quarterly revenues of Waste Express exceed $270,000, with payments equal to 8%
of any such excess up to a maximum amount of $235,000 plus 6% interest. The
purchase agreement  required us to pay a fee equal to the greater of
$2,500 or one percent (1%) per annum of seller’s current $200,000 line of credit
securing Waste Express’ regulatory closure plan until it secures such plan. The
cash amount of the purchase price was contingent upon Waste Express’ estimated
accumulated reserved liabilities for the disposal of on-site waste not exceeding
$80,000 as of September 9, 2005. The actual amount of reserve for estimated
disposal costs as of September 9, 2005 was $108,000, and in lieu of reducing the
cash portion of the purchase price to $247,000, the seller agreed to waive the
fee for securing the regulatory closure plan through September 30, 2006. The
principal amount of the note was contingent upon Waste Express having no more
than $115,000 in total liabilities as of September 9, 2005, less reserves for
disposal, and $75,000 or more in current (aged less than 60 days) accounts
receivable as of September 9, 2005. The actual total liabilities were $77,162
and the actual current accounts receivable were $76,784, reducing the principal
amount of the note to $225,000. Installment payments on the note are calculated
at eight percent (8%) of quarterly gross revenues collected or generated from
the operation of the business of Waste Express in excess of $270,000 quarterly
until paid in full.  As of March 24, 2008 we have made no further
payment.





40





The
acquisition of certain assets of NES Technology LLC and Industrial Waste
Services LLC




On
September 13, 2005, we purchased the assets of NES Technology LLC and Industrial
Waste Services LLC consisting primarily of oil/water separation devices, a
mobile laboratory, a mobile treatment unit, and an International Vac Truck
relating to their planned business operations in industrial waste disposal and
environmental management services, which were never commenced, in consideration
for the issuance of 500,000 restricted shares of our common stock to the members
of these two companies, including Richard Coody, a member or our board of
directors, and the assumption of outstanding liabilities comprising two
promissory notes to Summit Bank in the amount of $161,790.32 and past due rent.
We have paid the past due rent and the two promissory note to Summit
Bank.




The
acquisition of certain assets of Enhanced Operating Company




On
September 2, 2005, we acquired the assets of EOC relating to the development of
an oil/water separation technology, comprising approximately 25 acres of
property located in Leigh, Harrison County, Texas and improvements thereon
consisting of two buildings and furnishings, six storage tanks and related
piping, storage vessels and treatment units, in consideration for 250,000
restricted shares of our common stock, and all EBITDA profit in excess of
30% annually over a three-year period until $1,000,000 is paid. In addition, the
contract for this acquisition required us to make a cash infusion of $250,000 in
working capital for the business operations of EOC being acquired. To date, we
have not developed the assets at this location. The contract also required us to
enter into a three year employment agreement with Michael Eppler, then president
of EOC, at a monthly salary of $10,000 and a sign-on bonus of
$50,000.  This project has been cancelled and we do not expect to
incur any expense related to the obligation to pay EBITDA profit on excess of
30%.




41




The
acquisition of certain assets of Kaiser Aluminum and Chemical
Corporation




In
February 2006, Amerex Acquisition Corp., a wholly-owned subsidiary of Amerex,
acquired approximately 168 acres of heavily developed industrial property in
Pryor, Oklahoma from Kaiser Aluminum and Chemical Corporation in consideration
for $700,000 which amount was paid in cash at closing. We also delivered to them
an irrevocable letter of credit with JP Morgan Chase Bank to provide financial
assurance for the removal of all asbestos and asbestos containing materials from
the property within 18 months following closing. The asbestos removal was
completed in September 2007 and we received clearance by the Oklahoma
Department of Environmental Quality and Kaiser Aluminum and Chemical Corporation
instructed JPMorgan Chase Bank to release the letter of credit. The proceeds
from the release of the cash collateralized letter of credit were deployed in
accordance with our agreements with Asbestos Handlers, Inc. and X Interchange,
Inc.. Asbestos Handlers, Inc. is an asbestos abatement contractor based in
Tulsa, Oklahoma. We engaged Asbestos Handers, Inc. to remove the asbestos
from the Pryor facility. X Interchange, Inc. is an intermodal transportation
logistics company based in Lealand, Kansas. We engaged X Interchange, Inc. to
manage the demolition and scrap metal salvage at the Pryor facility. In
addition, we were required to deposit $400,000 with the Oklahoma Department of
Environmental Quality through Guaranteed Abstract Title Company in Tulsa,
Oklahoma to provide financial assurance of our ability to close the two
injection wells on the Pryor property. This amount is currently being held
in escrow for the benefit of the Oklahoma Department of Environmental Quality to
secure our obligation to close the wells. We intend to close the two injection
wells and pay the $400,000 escrow deposit, when returned to us, to CAMOFI
pursuant to the terms of the recent amendment to the indebtedness payable to
CAMOFI, discussed in Part II,
Item 6, Management’s Discussion and Analysis or Plan of
Operations - Debt and Credit Facilities, below.





The
acquisition of certain assets of Environmental Remediation Services,
Inc.




On April
28, 2006, we purchased certain assets of Environmental Remediation Services,
Inc., herein referred to as ERS, consisting primarily of several vacuum trucks,
truck equipment, trailer equipment, personal safety equipment, forklifts,
tractors, and miscellaneous tools to be used in connection with our emergency
response services. The purchase price for the assets consisted of cash in the
amount of $1,200,000 and our entering into a one-year consulting agreement with
Kenneth Duckworth, the sole owner of ERS. To ensure our performance under the
consulting agreement, we were required to fund an Irrevocable Standby Letter of
Credit in the amount of $600,000 with American Bank and Trust of Tulsa, Oklahoma
for the benefit of Kenneth Duckworth, with $150,000 to be released at the
end of each quarterly period subsequent to closing until drawn down in full. As
of March 26, 2008 all payments required to be made from the Standby Letter of
Credit have been paid.




42




Letter
of Intent to acquire Perma-Fix Treatment Services




On
September 10, 2007, we entered into a letter of intent to acquire 100% of the
stock of Perma-Fix Treatment Services, Inc. of Tulsa, OK from Perma-Fix
Environmental Services, Inc. (Nasdaq:PESI; BSE: PESI; Germany: PES.BE). This
transaction is subject to our completion of due diligence and the parties
entering into a definitive agreement. Perma-Fix Treatment Services is housed on
more than 25 acres, is licensed to accept an extensive list of waste materials,
and includes a water treatment facility.




The
initial terms of the agreement stipulate that Amerex will pay $2.2 million for
all of the assets and the assumption of certain liabilities of Perma-Fix
Treatment Services, Inc., However, and final terms have not yet been
determined.  Upon the determination of the final terms and conditions,
the parties may execute a definitive Stock Purchase/Sale Agreement. This letter
of intent expired on December 21, 2007 and management does not currently expect
this transaction to be completed.




Future
or Planned Services





Water
Disposal and Separation Services to the Oil and Gas Industry; Resale of the
Remaining Crude Oil




Upon
management’s evaluation of this business we have decided that it should be
discontinued and the resources it would utilize should be dedicated to our core
businesses. The property and the assets associated with this business are being
marketed for sale and the net proceeds will be used to pay down the Company’s
existing indebtedness under the CAMOFI 10% Senior Convertible Notes as amended
on December 31, 2007.





Expansion
of our Waste Management Services to Include Water Treatment
Services




We also
plan to begin operating two water treatment works permitted for discharge to a
POTW. POTW’s are publicly-owned treatment works such as public sewers or sewage
lagoons. These water treatment works will treat industrial wastewater and remove
contaminants to levels that are allowed by the POTW. We plan to construct two
water treatment plants, one at our Tulsa, Oklahoma facility or at the Perma-Fix
Treatment Services facility in the event that the Stock Purchase/Sale
transaction is closed, and one at our Kansas City, Missouri facility, acquire
the necessary processing equipment, as well as staff the facility with qualified
personnel. We plan to have both of these begin construction in July 2008 and to
become operational toward the end of 2008.  We estimate the cost to
completion of the Tulsa facility to be between $350,000 and $500,000. The
facility will be located either on our current leased location in Tulsa,
Oklahoma or at the Perma-Fix Treatment Services facility in the event that the
Perma-Fix Stock Purchase/Sale transaction is closed. We anticipate that this
will be financed through subsequent private placements of our securities. We
also anticipate that the cost of the Kansas City water plant will be
approximately $800,000. Although this facility will be nearly identical to the
plant in Tulsa, we have already purchased the real estate contiguous with our
current Kansas City location and begun the demolition of several existing
structures currently on the site. Additional expenses will be incurred with the
grading of this property and the construction of a 20,000 square foot steel
building with a concrete slab to house the plant. Our Tulsa facility already has
sufficient land and a suitable building with a proper foundation, thus the
difference in costs between the two plants. We intend to finance the
construction of the Kansas City water plant through future offerings of our
common stock.





43





Our
Strategy




In order
to maintain and enhance our position in the waste management industry, we have
implemented a strategy of internal growth through the increased utilization of
our existing facilities and properties, the expansion of our services, the
addition of new sales offices and service centers, and external growth through
strategic acquisitions.





Increased
Utilization of Waste Management Facilities




In order
to fully utilize our current waste management facility, we plan on increasing
our hours of operation to operate 7 days a week and by adding two daily
eight-hour work shifts to our existing daily shift. We intend to begin adding
these shifts as they become required by the workload. Management expects that
additional work will increase during the summer months especially from our
second largest client – our Industrial Services Customer.





Sale  of
Pryor, and Other  Property





We are
currently attempting to sell our property in Pryor, Oklahoma and Leigh County
Texas. Management intends to utilize the proceeds from these sales to pay down
the Company’s indebtedness to CAMOFI.




Our
Pryor, Oklahoma property also currently contains an ammonia /urea fertilizer
manufacturing plant, various large industrial buildings which were used for
manufacturing, drying, mixing and bagging of fertilizer, concrete containment
structures, other assets comprised mainly of salvageable metal, and rail
access.




Our
conversion began during the third quarter of 2006 with the commencement of the
demolition of the existing fertilizer manufacturing plant. Our demolition plan
is structured to recover the scrap metal and components, such as vessels and
valves, which have been estimated by independent appraisers to contain
approximately 6,000 tons of carbon steel, 1,000 tons of stainless steel and
400 tons of copper. The appraisers estimate the scrap value of these metals to
be approximately $2.3 million gross. The actual proceeds from the salvage and
sale of these metals will be dependent upon the actual amount of salvageable
metals, which will not be determinable until their decommissioning, demolition
and removal, the timing of the demolition and the market price of the salvage
metals at the time of sale.




44




The
prices of these commodities have varied considerably over the last five years.
In addition, many specialty items, including component cores such as valves,
flanges, pumps, electric motors, reformers, heat exchangers and other marketable
items purchased with the property may have a commercial need as is and may
therefore be sold as operable equipment rather than at scrap value.




During
the third quarter of 2007 we substantially completed the salvage and reclamation
project. All of the proceeds from the sale of the salvage metals were used to
finance the demolition and clean up of the property and to finance the removal
of asbestos from the facility.




On
September 7, 2007 we received a notice from the Oklahoma Department of
Environmental Quality that the asbestos removal had been properly completed on
the site.




This
property also contains rail access, a rail spur and a rail station which we plan
on using to receive and deliver water and chemicals that we have treated or are
going to treat from clients with access to the rail line and to final disposal
sites if the particular material is not to remain on site. We also expect that
we will have the ability to provide railcar cleaning activities consisting of
the decontamination of rail cars that have been contaminated as a result of
spillage or the transportation of liquid waste within the rail car.




Expansion
of our Service Mix and Diversification of our Client Base




By
expanding our current services to those described above under “Business – Future
or Planned Services,” we expect to diversify our customer base and expand our
revenue generating operations to aid in the protection from any economic down
turns in our current service offerings.




Focus
on the Development of National Clients and Strategic
Relationships




45




We have
developed relationships with several clients with a national or international
presence. These clients, despite their size, are considered small-quantity
generators. It is this type of client that we are targeting, since most of our
smaller competitors do not possess the national infrastructure of transportation
logistics and outlets to adequately service these customers and the large
competitors who do posses these resources prefer to provide services for larger
quantity generators. We intend to continue to focus on becoming specialists in
providing services to these types of customers,




Our
geographical area of operations extends generally to the southwest of a line
extending from Washington State to Florida. In order to properly service
national clients a true national presence is necessary. For this reason we have
developed strategic relationships with other providers that have a strong
presence in areas not covered by our network.




Westward
Expansion




In 2008
we plan to open offices in Sacramento, CA, Salt Lake City, UT., Phoenix, AR.,
and Las Vegas, NV. We expect that our relationships with our national
clients will allow us to open these offices with immediate revenue. We estimate
that the establishment of these production offices will cost between $300,000
and $400,000 and that revenues from the facilities will be immediately
accretive to earnings. We expect to finance these expansions through subsequent
offerings of our equity.




Strategic
Acquisitions




Our
longer range plans involve strategic acquisitions in the second or third quarter
of 2008 of businesses and assets compatible and complimentary with ours, which
allow for the consolidation of facilities and reduction of some material portion
of indirect operating costs such as occupancy costs, back office support and
insurance.




Marketing
Strategy and Sales of our Services




We market
our services on an integrated basis and, in many instances, services in one area
of our business support or lead to a project undertaken in another
area.




We
acquire clients and projects (a) through the relationships that our technical
personnel and managers have developed during their professional careers, (b) by
responding to general solicitations for proposals from public and private
agencies and firms, and (c) through referrals and recommendations from our
existing customers.




46




Customers




We
provide services to approximately 297 customers in 17 states and typically do
not have written contracts with them. In addition to serving commercial and
industrial customers such as waste collectors, manufacturers, health care
providers, research organizations, and chemical companies, our customers include
federal, state and local governmental agencies, and small quantity generators
that have recurring needs for multiple services in managing their environmental
exposure. In February of 2008 the Department of Justice Drug Enforcement Agency
awarded new contracts for these services covering 14 contract areas including 7
of Amerex’s contract areas. We were not awarded any of these contracts. There
are, however, 7 areas which have not yet been awarded, although management
does not expect that the Company will be awarded any of these remaining
contracts. Despite the loss of this contract, management expects to continue to
receive most of the DEA waste from the successful contractors. See below
“Subcontractors”




Subcontractors




We have
formed a number of strategic partnerships with several environmental
subcontractors to assist us in providing services under our contract with the
DEA. Many of these subcontractors have executed agreements with us to perform
this work through the duration of our contract with the DEA.  
  The principal services these subcontractors provide consist of
acting as responders for DEA engagements that are currently outside of our area
of operation or where it is more economically practical. All of our
subcontractors are licensed as hazardous waste handlers in the areas in which
they operate. No subcontractor is considered critical in the sense that they
possess special skills or licenses that could not be replaced in a reasonable
period of time and without materially adverse effects on the economics of the
project or the services we provide. Several of our subcontractors have also
managed a number of customers requiring waste disposal services and therefore
have been a source of new business.




Environmental
Regulation




While our
business has benefited substantially from increased governmental regulation of
hazardous waste transportation, storage and disposal, the industrial waste
management industry itself has become the subject of extensive and evolving
regulation by federal, state and local authorities. We make a continuing effort
to anticipate regulatory, political and legal developments that might affect its
operations, but are not always able to do so. We cannot predict the extent to
which any environmental legislation or regulation that may be enacted or
enforced in the future may affect our operations.




47




We are
required to obtain federal, state and local licenses or approvals for each of
our hazardous waste facilities. Such licenses are difficult to obtain and, in
many instances, extensive studies, tests, and public hearings are required
before the approvals can be issued. We have acquired or are in the process of
applying for all operating licenses and approvals required for the current
operation of our business and the planned expansion or modifications of our
operations.





Federal
Regulation of Hazardous Waste




The most
significant federal environmental laws affecting us are RCRA, the Superfund Act
and the Clean Water Act.




RCRA




RCRA is
the principal federal statute governing hazardous waste generation, treatment,
transportation, storage and disposal. Pursuant to RCRA, the EPA has established
a comprehensive, “cradle-to-grave” system for the management of a wide range of
materials identified as hazardous waste. States, such as Massachusetts,
Connecticut, Illinois, and Maryland, that have adopted hazardous waste
management programs with standards at least as stringent as those promulgated by
the EPA, have been authorized by the EPA to administer their facility permitting
programs in lieu of the EPA's program.




Every
facility that treats, stores or disposes of hazardous waste must obtain a RCRA
license from the EPA or an authorized state agency and must comply with certain
operating requirements. Under RCRA, hazardous waste management facilities in
existence on November 19, 1980 were required to submit a preliminary license
application to the EPA, the so-called Part A application. By virtue of this
filing, a facility obtained Interim Status, allowing it to operate until
licensing proceedings are instituted pursuant to more comprehensive and exacting
regulations (the Part B licensing process). Interim Status facilities may
continue to operate pursuant to the Part A application until the Part B
licensing process is concluded. Our facility located in Kansas City, Missouri is
subject to RCRA licensing and has been issued a Part B license.




RCRA
requires that Part B licenses contain a schedule of required on-site study and
cleanup activities, known as “corrective action,” including detailed compliance
schedules and provisions for assurance of financial responsibility. The EPA
estimates that there are approximately 4,300 facilities that treat, store or
dispose of hazardous wastes, which can be compelled to take corrective action
when necessary. Some facilities are very large and have extensive contamination
problems which rival the largest Superfund sites. Other facilities have
relatively minor environmental problems. Still others will not need remedial
action at all. It is the EPA's policy to compel corrective action at the “worst
sites first.” As a result, the EPA has developed a system for assessing the
relative environmental cleanup priority of RCRA facilities, called the National
Corrective Action Prioritization System, with a High, Medium or Low ranking for
each facility. Our RCRA facility located in Kansas City, Missouri does not
require any remedial action and has never been assigned a ranking since there is
no known environmental impairment of the property.





48





The
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, known as the “Superfund Act”




The
Superfund Act provides for immediate response and removal actions, coordinated
by the EPA, to releases of hazardous substances into the environment, and
authorizes the government to respond to the release or threatened release of
hazardous substances or to order persons responsible for any such release to
perform any necessary cleanup. The statute assigns joint and several liability
for these responses and other related costs, including the cost of damage to
natural resources, to the parties involved in the generation, transportation and
disposal of such hazardous substances. Under the statute, we may be deemed
liable as a generator or transporter of a hazardous substance which is released
into the environment, or as the owner or operator of a facility from which there
is a release of a hazardous substance into the environment.




The
Federal Water Pollution Control Act as amended by the Clean Water Act and
subsequent amendments




This
legislation prohibits discharges to the waters of the United States without
governmental authorization. The EPA has promulgated “pretreatment” regulations
under the Clean Water Act, which establish pretreatment standards for
introduction of pollutants into publicly owned treatment works. In the course of
its treatment process, our wastewater treatment facilities generate waste water
which they discharge to publicly owned treatment works pursuant to permits
issued by the appropriate governmental authority. The Clean Water Act also
serves to create business opportunities for us in that it may prevent industrial
users from discharging their untreated wastewaters to the sewer. If these
industries cannot meet their discharge specifications, then they may utilize the
services of an off-site pretreatment facility such as those of
ours.





Other
Federal Laws




Our
operations are also subject to the Toxic Substances Control Act, the Clean Air
Act, the U.S. Department of Transportation and the Interstate Commerce
Commission. Health and safety standards under the Occupational Safety and Health
Act are also applicable.




The Toxic
Substances Control Act - authorizes the EPA to regulate over 60,000 commercially
produced chemical substances, including the proper disposal of polychlorinated
biphenyls, commonly known as PCBs, and has established a comprehensive
regulatory program, under the jurisdiction of the EPA, which oversees the
storage, treatment and disposal of PCBs.




49




The Clean
Air Act - authorizes the EPA to regulate emissions into the air of potentially
harmful substances. According to industry sources, the five industries which
produced in 2004 the largest amounts of industrial hazardous wastes (by dollar
amount of spending paid for management services) in 2004 were chemicals (28.3%),
oil (15.9%), paper and pulp (13.2%), primary metals (8.7%) and automotive
(5.0%).      As a small industrial waste management firm, we
have significant advantages over many of its competitors in terms of its ability
to efficiently utilize its waste management facilities and to provide our
customers with a heightened commitment to customer service and responsiveness.
In addition, management has taken notice of an important and advantageous
industry trends in the efforts by many generators of industrial wastes to
decrease the number of service providers that they utilize to a select group of
industry leaders in order to minimize potential liability inherent in using less
qualified or less responsive firms.





The
U.S. Department of Transportation and the Interstate Commerce
Commission




Our
transportation operations are regulated by the U.S. Department of Transportation
and the Interstate Commerce Commission, as well as by the regulatory agencies of
each state in which we operate or through which our trucks
pass.





State
Regulation of Hazardous Waste





The
Missouri Hazardous Waste Management Law (MHWML)




State
authorization is a rulemaking process through which EPA delegates the primary
responsibility of implementing the RCRA hazardous waste program to individual
states in lieu of EPA. This process ensures national consistency and minimum
standards while providing flexibility to states in implementing rules.
Currently, 50 states and territories have been granted authority to implement
the base, or initial, program. Many also are authorized to implement additional
parts of the RCRA program that EPA has since promulgated, such as Corrective
Action and the Land Disposal Restrictions. State RCRA programs must always be at
least as stringent as the federal requirements, but states can adopt more
stringent requirements as well. The state of Missouri is authorized to implement
the RCRA hazardous waste program in lieu of the EPA through the
MHWML.




Just
prior our acquisition of Waste Express, the facility was issued a Notice of
Violation by the Missouri Department of Natural Resources for four violations:
exceeding storage capacity, exceeding the one year limit for storage of
materials on site, exceeding the 24 hour restriction in the receiving area .
 We completed corrective action during November and December of 2005,
spending approximately $88,046, and our inspection by the Missouri Department of
Natural Resources during the first quarter of 2006 was free from any violations.
No violation notices have been issued since we have operated the facility.
Notwithstanding these violations, the facility has maintained a considerably
clean inspection record throughout its years of operations.




50




The
Oklahoma Department of Environmental Quality and the Oklahoma Department of
Environmental Quality Land Management Division Rules and
Regulations




Like
Missouri, the state of Oklahoma is authorized by the United States Environmental
Protection Agency to implement and oversee the regulations of the EPA regarding
hazardous waste transportation, treatment, storage and disposal. The Oklahoma
Department of Environmental Quality, herein referred to as the ODEQ, oversees
the enforcement of the Code of Federal regulations and the rules and
regulations of the Land Protection Division of the ODEQ. This agency will
oversee the asbestos removal and the maintenance and eventual closure of the
Class I injection wells that exist on the site of our Pryor, Oklahoma facility.
The primary regulations that we will be subject to at this location are the
Oklahoma Department of Environmental Quality Rules and Regulations sections
252:004 through Section 252:710 and in the Oklahoma Statutes, primarily Title
27A.





Licenses
and Permits




Our waste
treatment facility located in Kansas City, Missouri has been issued a RCRA Part
B license which was scheduled to expire in February 2007. The permit has been
submitted to the Missouri Department of Natural Resources for renewal. The
Department is allowing us to operate under an extension until the renewal is
approved. We expect the Department to issue the renewed permit during the second
half of 2008.




We have
made substantial modifications and improvements to the physical plant and
treatment and process equipment at this treatment facility, consistent with our
strategy to upgrade the quality and efficiency of treatment services and to
ensure regulatory compliance. These improvements also corrected a Notice of
Violation which was issued prior to our acquisition of this facility. This
facility is inspected at least quarterly or even more often by the Missouri
Department of Natural Resources. Occasionally, the EPA as well as other city and
county inspectors will perform inspections.





The
steps in the RCRA permitting process are complex and time consuming and consist
of the following:





Step
1 -- Starting the Process




Before a
business even submits a permit application, it must hold an informal meeting
with the public. The business must announce the "pre-application" meeting by
putting up a sign on or near the proposed facility property, running an
advertisement on radio or television, and placing a display advertisement in a
newspaper. At the meeting, the business explains the plans for the facility,
including information about the proposed processes it will use and wastes it
will handle. The public has the opportunity to ask questions and make
suggestions. The business may choose to incorporate the public's suggestions
into its application. The permitting agency uses the attendance list from the
meeting to help set up a mailing list for the facility.




51




Step
2 -- Applying for a Permit




After
considering input from the preapplication meeting, the business may decide to
submit a permit application. Permit applications are often lengthy. They must
include a description of the facility and address the following:





·
              How
      the facility will be designed, constructed, maintained, and operated to be
      protective of public health and the
environment.





·
              How
      any emergencies and spills will be handled, should they
    occur.





·
              How
      the facility will clean up and finance any environmental contamination
      that occurs.





·
              How
      the facility will close and clean up once it is no longer
      operating.





Step
3 -- Receipt and Review of the Application




When the
permitting agency receives a permit application, it sends a notice to everyone
on the mailing list. The notice indicates that the agency has received the
application and will make it available for public review. The permitting agency
must then place a copy of the application in a public area for
review.




Simultaneously,
the permitting agency begins to review the application to make sure it contains
all the information required by the regulations described above  under “The
Oklahoma Department of Environmental Quality and the Oklahoma Department of
Environmental Quality Land Management Division Rules and Regulations.”  
  The proposed design and operation of the facility are also evaluated
by the ODEQ and the Oklahoma Department of Environmental Quality Land to
determine if the facility can be built and operated safely.





Step
4 -- Revisions




After
reviewing the application, the permitting agency may issue a Notice of
Deficiency (NOD) to the applicant. NODs identify and request that the applicant
provide any missing information. During the application review and revision
process, the permitting agency may issue several NODs. Each time the permitting
agency receives a response from the applicant, it reviews the information and,
if necessary, issues another NOD until the application is complete. Given the
complex and technical nature of the information, the review and revision process
may take several years.




52




Step
5 -- Drafting the Permit for Public Review




When the
revisions are complete, the agency makes a preliminary decision about whether to
issue or deny the permit. If the agency decides that the application is complete
and meets appropriate standards, the agency issues a draft permit containing the
conditions under which the facility can operate if the permit receives final
approval. If the permitting agency determines that an applicant does not meet
the standards, the agency tentatively denies the permit and prepares a "notice
of intent to deny."




The
permitting agency announces its decision by sending a letter to everyone on the
mailing list, placing a notice in a local paper, and broadcasting it over the
radio. It also issues a fact sheet to explain the decision. Once the notice is
issued, the public has 45 days to comment on the decision. Citizens also may
request a public hearing by contacting the permitting agency. The permitting
agency may also hold a hearing at its own discretion. The agency must give
30-day public notice before the hearing.





Step
6 -- The End Result: A Final Permit Decision




After
carefully considering public comments, the permitting agency reconsiders the
draft permit or the notice of intent to deny the permit. The agency must issue a
"response to public comments," specifying any changes made to the draft permit.
The agency then issues the final permit, which is for a period of 10 years, or
denies the permit.




Even
after issuing a permit, the permitting agency continues to monitor the
construction and operation of the facility to make sure they are consistent with
state and federal rules and with the application.




Several
additional steps can also take place after the original permit is
issued:





·
              Permit
      Appeals. Facility owners and the public both have a right to appeal the
      final permit decision. The appeal is usually decided upon by
      administrative law judges.





·
              Permit
      Modifications. If a facility changes its management procedures, mechanical
      operations, or the wastes it handles, then it must secure a permit
      modification. For modifications that significantly change facility
      operations, the public must receive early notice and have a chance to
      participate and comment. For minor modifications, the facility must notify
      the public within a week of making the
change.




53





·
              Permit
      Renewals. The permitting agency can renew permits that are due to expire.
      Permit holders that are seeking a permit renewal must follow the same
      procedures as a facility seeking a new
permit.





·
              Permit
      terminations. If a facility violates the terms of its permit, the
      permitting agency can terminate the
permit.





Management
of Risks




We follow
a program of risk management policies and practices designed to reduce potential
liability, as well as to manage customers' ongoing regulatory responsibility.
This program includes employee training, environmental auditing, and policy
decisions restricting the types of wastes handled. Training of personnel
includes specialized training which is either performed in-house or at
accredited institutions. These include initially 40 hours of training in
hazardous waste operations and emergency response. The program curriculum is
provided by the U.S. Occupational Health and Safety Administration, commonly
referred to as OSHA. We are currently approved by OSHA to provide such training
as well as requisite annual 8-hour refresher courses. We also specialize in
training for awareness and entry into confined space for employees who may be
required to enter such areas. Our drivers are required to take a course in DOT
hazardous materials training and be in possession of valid specialized licensing
for the materials that they are carting and the type of vehicle that they are
operating. We evaluate all revenue opportunities and decline those which we
believe involve unacceptable risks. We avoid handling high-hazard waste
such as explosives, and frequently utilize specialty subcontractors to handle
such materials when confronted at a job site.




We only
dispose of wastes at facilities owned and operated by firms which we have
approved as prudent and financially sound. Typically, we apply established
technologies to the treatment, storage and recovery of hazardous wastes. We
believe our operations are conducted in a safe and prudent manner and in
substantial compliance with applicable laws and regulations.




Insurance




Federal
regulations require liability insurance coverage for all facilities that treat,
store or dispose of hazardous waste as well as pollution liability in the amount
of $2,000,000 per occurrence and $2,000,000 in aggregate per year.




Our
pollution liability insurance policies cover potential risk in three areas: as a
contractor performing services at customer sites, as a transporter of waste and
while we handle waste at our facilities. XL Insurance Company provides
contractor’s liability insurance of $1,000,000 per occurrence and $2,000,000 in
the aggregate, covering off-site remedial activities and associated liabilities,
and pollution liability coverage of waste in-transit with both single occurrence
and aggregate coverage of $2,000,000. This coverage includes liability of
$2,000,000 for pollution caused by sudden or accidental occurrences during
transportation of waste to our facilities, from the time waste is picked up form
the customer until its delivery to the final disposal site.  The total
insurance costs for 2007 were $429,464 and management anticipates that there
will be an immaterial rise in insurance costs in 2008.




54




Competition




The
market for industrial waste management services is highly competitive. We
compete with numerous large and small companies, which are able to provide one
or more of the industrial waste management services offered by us and have
substantially greater financial, management and marketing resources than we do.
Large competitors include Clean Harbors Environmental Services Inc., Duratek,
Inc. and Perma-Fix Environmental Services, Inc. There are also a large number of
smaller competing companies that provide services similar to ours. In the Tulsa
area some of these firms are Envirosolve, Inc,. Controlled Waste, Inc.,
American Waste Control, Inc. and Freeman Waste Management, Inc. In the Kansas
City area some of our local competitors are Baker Environmental Consulting,
Inc., A T Abatement Services, Mac Bestos, Inc., and Cornerstone Services
Group.




Competitive
factors include quality and diversity of services, technical qualifications,
reputation, geographic presence, price and the availability of key professional
personnel.




Under
applicable environmental laws and regulations (see “Business -- Environmental
Regulation”), generators of hazardous wastes retain potential legal liability
for the proper treatment of such wastes through and including their ultimate
disposal. In response to these potential liability concerns, many large
generators of industrial wastes and other purchasers of waste management
services (such as general contractors on major remediation projects) have
increasingly sought to decrease the number of providers of such services that
they utilize. Waste management companies which are selected as “approved
vendors” by such large generators and other purchasers are firms, such as us,
that possess sound collection, recycling, treatment, transportation, disposal
and waste tracking capabilities and have the expertise and financial ability
necessary to comply with applicable environmental laws and regulations. By
becoming an “approved vendor” of a large waste generator or other purchaser, we
are eligible to provide waste management services to the various plants and
projects of such generator or purchaser which are located in our service areas.
However, in order to obtain such “approved vendor” status, it may be necessary
for us to bid against other qualified competitors in terms of the services and
pricing to be provided. Furthermore, large generators or other purchasers of
waste management services often periodically audit a bidder’s facilities and
operations to insure that its waste management services are performed in
compliance with applicable laws and regulations and with other criteria
established by the bidder and by such customers.




Our
competitive advantage is our ability to offer a more comprehensive range of
industrial waste management services than any of our competitors in our service
territory, enhanced by the proximity of our facilities to hazardous waste
generators, and the barriers to enter this industry from significant capital and
licensing requirements.




There are
numerous methods of handling and disposing of hazardous and non-hazardous waste,
of which our facilities and technology are one of the available systems.
Different or new technology may supplant us in the market. Further, predominant
companies in the field, which have substantially greater resources and market
visibility than us, may try to develop systems similar to ours.





55





MANAGEMENT’S
DISCUSSION AND ANALYSIS




OVERVIEW




Amerex
Companies, Inc. and its subsidiaries are in the business of providing services
to customers who wish to efficiently manage their industrial and household
hazardous waste. These services consist primarily of collecting, treating,
storing and ultimately disposing of their hazardous and industrial waste. Amerex
Companies, Inc. also provides services to municipalities in managing collection
days on which residents of the sponsoring municipality may bring their household
hazardous waste such as paint, insect control chemicals, batteries, and light
bulbs to staging areas which Amerex establishes. Amerex would then collect and
sort the collected material and dispose of them properly. Amerex also provides
emergency response services to industrial and municipal clients to mitigate or
remove hazardous materials following motor vehicle accidents, industrial
mishaps, chemical spills and similar emergencies. These services are performed
from the Company’s Tulsa, Oklahoma location. Waste Express, Inc. an operating
subsidiary of Amerex Companies, Inc. has been issued a Part B license under the
Resource Conservation and Recovery Act and operates a treatment storage and
disposal facility for Amerex Companies, Inc. The majority of Amerex Companies,
Inc. revenues are currently derived from disposal and treatment of hazardous
waste. As of December 31, 2007, the company was  a party to a contract
with the United States Department of Justice, Drug Enforcement Administration.
In this project, we removed potentially hazardous chemicals and other materials
from methamphetamine production laboratories subsequent to their being shut down
by law enforcement agents of the Drug Enforcement Administration. After the
potentially hazardous materials were removed from the premises, Amerex personnel
transported them to our licensed facility in Kansas City, Missouri where they
were sampled, tested, and their components are characterized. Based upon these
characterizations, Amerex then treated and disposed of the components in
accordance with prevailing laws and regulations.  This contract ended
April 15, 2008.





56





RESULTS
OF OPERATIONS





The
following is a summary of the consolidated statements of operations at December
31, 2007 and 2006:





2007
            2006Operating
      revenue
            $8,305,496
            $7,726,099Cost
      of services provided
            -5,181,392
            -5,299,423Selling,
      general and administrative
            -2,532,992
            -2,653,961Professional
      fees
            -796,376
            -494,830Non
      cash compensation
            -1,056,896
            -609,125Depreciation
      and Amortization
            -395,954
            -302,762Operating
      Loss
            (1,658,114)
            (1,634,002)Interest
      expense
            -1,556,340
            -744,544Amortization
      of debt discount
            -1,604,333
            -1,424,067Amortization
      of capitalized finance fees
            -831,487
            -690,645Financing
      penalty fees
            -1,220,600
            -824,902Other
      expense
            151,684
            135,647Loss
      from continuing operations
            (6,719,190)
            (5,182,513)Loss
      from discontinued operations
            -394,908
            -35,931Net
      loss
            $(7,114,098)
            $(5,218,444)





57





Revenues




For the
year ended December 31, 2007, we had total revenues of $8,305,496, as compared
to revenue for the year ended December 31, 2006 of $7,726,099. This increase was
partially a result of the revenue provided by services under the Environmental
Quality Company, Inc. contract. This contract accounted for $2,160,000 or 26% of
our revenue for the year ended December 31, 2007, as compared to approximately
$851,000 for the year ended December 31, 2006. Also, during the current year we
billed approximately $2,800,000 or 34% of our revenue under the Drug Enforcement
Agency contract as compared to approximately $2,000,000 under this contract
during the previous year. Additionally, we billed approximately $933,000 under
the two contracts with our large industrial client for the year ended December
31, 2007 as compared to $773,000 for the year ended December 31, 2006. Together,
these three clients accounted for approximately $5,893,000 or 71% of our total
revenue for the most recent year as compared to $3,620,000 or 47% of total
revenue for the previous year ended December 31, 2006. We expect that the
Environmental Quality Company, Inc. contract and the large industrial client
contract will continue to contribute significant revenue during 2008.Waste
Express revenues were positively impacted during the year ending December 31,
2006 from one project that ran from June through December 2006. Revenue from
this project exceeded $1.1 million. Revenues from this project were not
replaced.




Management
currently anticipates that revenues under the Drug Enforcement Agency contract
will continue through the middle of the second quarter, after which revenues may
drop significantly as a result of this contract’s expiration. In February of
2008 the Department of Justice, Drug Enforcement Agency announced the award
of new two-year contract for these services. While not all of the contracts have
been awarded we have not been awarded, to date, any of these new
contracts.




Cost
of Services Provided




During
the year ended December 31, 2007, our total cost of services provided was
$5,181,392 or 62% of total revenues for a gross profit of $3,124,104 or 38% as
compared to the year ended December 31, 2006, where our total cost of services
provided was $5,299,423 or 69% of total revenues for a gross profit of
$2,426,676 or 31%. There were two main reasons for the increase in the gross
margin for the current period. First was the implementation of operating
efficiencies and the application of more economically favorable treatment
methods at our Waste Express, Inc. subsidiary. In January of 2007 we replaced
the plant manager at Waste Express, Inc. and hired a chemist to assist us in
more efficiently packaging our waste material prior to disposal. We began
implementing standard industry practices of consolidating similar waste
streams and treating certain waste streams in order that they may be rendered
innocuous and disposed of at non-hazardous waste sites rather than the more
costly hazardous waste sites. Also, by consolidating similar waste streams, we
were able to reduce the number of drums  disposed of and dispatched
more full truck loads rather than partial truckloads. The second reason was that
in the year ended December 31, 2006, the Company engaged in one major project
that began on June 28, 2006 and concluded in December 2006 that contributed
approximately $1,111,729 or 44% of total revenue. This project is




58




estimated
to have contributed to gross margin at a rate of less than 10%. This project was
a major contributor to the decline in gross margin for the previous twelve month
period. The Company is continuing to research more efficient protocols and
methodologies for the treatment and disposal of the waste streams that we
collect from our customers, and the Company does not anticipate any major
changes to its gross margin percentage in the foreseeable future at this
time. Despite the fact that fuel cost rose from $221,295 or 2.9% of revenues for
the fiscal year ended December 31, 2006 to $388,866 or 4.7% of revenues for the
most recently completed fiscal year, the Company does not anticipate that the
continued increase in the cost of fuel will materially impact our business, as
most of our contracts allow for fuel surcharges based on a baseline cost of
diesel fuel. Approximately 8% of our total direct costs thus far have come from
truck rental expenses. We currently do not always have a sufficient number of
vehicles to serve our customers at certain times, which requires us to rent
vehicles at a higher cost than the fully-burdened cost of running our own
trucks. We are evaluating the expansion of the fleet of our currently leased
fleet of vehicles.




SG&A
Expenses




During
the period ending December 31, 2007 our other operating expenses (which includes
selling, general and administrative, professional fees, non cash compensation,
amortization and depreciation expenses) were $4,782,218 resulting in an
operating loss of $1,658,114 compared to the year ended December 31, 2006 in
which our total operating expenses were $4,060,678 resulting in an operating
loss of $1,634,002. SG&A expenses for the year ended December 31, 2007
represented 30% of revenue as compared to 34% of revenue for the year ended
December 31, 2006. The increase in our operating losses occurred mainly as a
result of an increase of $591,081 in labor expenses, a $371,931 increase in
insurance costs, a $271,068 increase in professional fees and a $93,193 increase
in depreciation expenses which were partially offset by a $95,000 decrease in
management fees, a $91,047 decrease in consulting fees and a $56,741 decrease in
travel expenses. The increase in labor expenses were a result of increased
revenue from the previous year. The increase in professional fees were due to
increases in legal expenses associated with defending the Company in its various
legal disputes and the addition of an investor relations/public relations
consulting firm and a part-time general counsel. The decrease in management fees
occurred as a result of changing the status of several consultants from
consultants to employees, which also contributed to the offsetting increase in
labor expenses. The decrease in travel expenses was as a result of the
application of more prudent travel planning and by engaging in electronic
conferences and conference calls to replace some personal meetings. Management
had anticipated that costs associated with our independent auditors would
decrease from the previous period since the previous period required an initial
audit of Amerex Group and its subsidiaries. This, however, did not occur because
the complexities of subsequent financings and  ongoing legal
matters continued to require additional effort.




59





Non-Operating
Income and Expenses




During
the year ended December 31, 2007, our net non-operating expenses were $5,261,076
resulting in a loss from continuing operations of $6,719,190 as compared to the
year ended December 31, 2006, in which our net non-operating expenses were
$3,548,511 which resulted in a loss from continuing operations of $5,182,513.
During the year ended December 31, 2007 our net non-operating expenses rose due
to increased amortization of the debt discount, which rose by $180,266 from
$1,424,067 for the year ended December 31, 2006 as compared to $1,604,333 for
the current year. And, our net interest expense and interest income resulted in
an increase in interest expense of $770,101 in the current year as compared to
the previous year, as a result of the Company’s increased debt. The Company’s
debt increased with the addition of the CAMOFI accounts receivables line which
is near its limit of borrowing of $1,500,000 and the addition of the POOF loan
of $750,000. Also, discontinued operations related to the sale of assets held
for sale at the Pryor facility was (-$394,908) for the year ended December 31,
2007 as compared to (-$35,931) the year ended December 31, 2006.





Segment
Results of Operations




The
Company’s operating segments are defined as components for which separate
financial information is available that is evaluated regularly by the chief
operating decision maker. The Company’s reportable segments consist of Waste
Express and Amerex. revenues for the year ended December 31, 2007 consist
primarily of waste management services similar to those performed by Waste
Express. For the year ended December 31, 2007, the Amerex segment reported an
operating loss of $1,200,790 as compared to the year ended December 31, 2006 in
which the Amerex segment reported an operating loss of $1,895,994. During the
year ended December 31, 2007, the Waste Express segment recorded an operating
loss of $457,324 as compared to the year ended December 31, 2006 in which the
Waste Express segment recorded an operating profit of $261,992.  Waste
Express revenues were positively impacted during the year ending December 31,
2006 from one project that ran from June through December 2006. Revenue from
this project exceeded $1.1 million. Revenues from this project were not
replaced.




The
accounting policies of the operating segments are the same as those described in
the summary of significant accounting policies; however the majority of the
Company’s corporate expenses are included within the Amerex segment. These
expenses include professional fees for legal, accounting and information systems
consulting as well as insurance, administrative salaries, non cash
compensation and benefits and rent and repairs of its corporate
headquarters. In addition, the Amerex segment contains more depreciable assets
than that of the Waste Express segment which results in increased depreciation
expense for the Amerex segment compared to the Waste Express segment.
Inclusion of these expenses within the Amerex segment reduces the profitability
for that segment when compared to the Waste Express segment.





60





Liquidity
and Capital Resources





At
December 31, 2007 our cash and cash equivalents amounted to $19,588 as compared
to December 31, 2006 at which time our cash and cash equivalents amounted to
$60,267. Our accounts receivable (net of allowance for doubtful accounts) on
December 31, 2007 were $2,262,396 as compared to $2,638,897 on December 31,
2006. Our accounts receivable declined by $376,501 to $2,262,396 as of December
31, 2007, which included unbilled receivables of $327,039 as compared to
accounts receivable of $2,638,897 and unbilled receivables of $712,223 as of
December 31, 2006. Our total current assets as of December 31, 2007 were
$2,788,181 as compared to $4,205,738 on December 31, 2006. The decrease in the
total current assets occurred as a result of completing the asbestos abatement
on the Pryor facility which released restricted cash of $812,666, as well as,
the payment of $300,000 to Environmental Response Services which we refer to
herein as ERS. This payment was held in escrow during the previous
period.




At
December 31, 2007 the Company had current liabilities of $6,326,095 compared to
current liabilities of $12,838,806 at December 31, 2006, comprised principally
of the current portion of long term debt, accounts and notes payable, accrued
expenses and accrued share-based liabilities. Current liabilities decreased
$6,512,711 during the period due to the addition of short term debt associated
with the POOF Note which was offset by a decrease in obligations to issue equity
instruments, the decrease in the accrued remediation liability associated with
the removal of asbestos from the Pryor facility, and refinancing of the CAMOFI
notes payable. As such, the Company has a negative working capital of $3,537,914
as of December 31, 2007 and negative working capital of $8,633,068 as of
December 31, 2006.




For the
years ended December 31, 2006, and 2007, the Company used cash in operations of
$1,445,399 and $1,343,640, respectively. For the year ended December 31, 2006,
the Company realized an overall decrease in cash and cash equivalents primarily
due to cash provided by financing activities of $799,206 partially offset by net
cash used in investing activities of $23,411 and the aforementioned use of cash
in operating activities of $1,445,399. For the year ended December 31, 2007 the
Company realized a decrease in cash and cash equivalents of $440,679,
primarily due to cash provided by investing activities of $759,872 and the
aforementioned use of cash in operating activities of $1,338,541, partially
offset by cash provided by financing activities of $543,089. Future acquisitions
are going to have to be financed through sales of our equity.




We have
incurred significant losses since our inception and our stockholders’ deficit
and working capital deficit at December 31, 2006 and subsequent to that date are
also significant.  The majority of the Company’s debt matures in 2010
and the Company  was not in default of any financial or nonfinancial
debt covenants as of December 31, 2007.  Although we owed fees
for the extension of the indebtedness under the POOF note as of December 31,
2007, these obligations were subsequently paid in the first quarter of
2008.




61




The
continuation of our company as a going concern is dependent upon our company
attaining and maintaining profitable operations and raising additional
capital.  In addition, the loss of the DEA contract will have a
material adverse effect on the Company’s ability to continue as a going
concern.




The
Company's management has previously attracted additional funding in the form of
subordinated debt and a line of credit. However, there is no guarantee that the
capital raised is sufficient to execute its business plan. To the extent that
the capital raised is not sufficient, the Company's business plan and its plans
for operations will be required to be substantially modified. The Company is
currently addressing its liquidity and negative working capital issues as of
December 31, 2007 by the following actions:


·
                The
      Company continues to implement plans to increase
  revenues.
 
 ·
                The
      Company continues to implement plans to further reduce operating costs as
      a percentage of revenue by improved process control and greater
      productivity.
 
 ·
                The
      Company is seeking alternatives measures of financing which may include
      equity financing or additional subordinated
  debt.
 
 ·
                The
      Company is speaking with and providing information to a regional bank in
      Kansas City, MO to secure a $500,000 mortgage on the property that the
      Company owns and on which the Company operates its Waste Express, Inc.
      subsidiary. Such a transaction would require a release from CAMOFI which
      currently holds a senior lien on these
assets.
 ·
                  The
      Company has been actively marketing the sale of our property in Pryor, OK.
      We anticipate that the proceeds from this transaction will be utilized to
      reduce our obligations under the CAMOFI 12% Senior Convertible
      Notes.


However,
there is no guarantee that any of these strategies will enable the Company to
meet its financial obligations for the foreseeable future which could have a
material adverse effect on our business, results of operations and financial
condition.




Going
Concern




Due to
the losses, stockholders’ and working capital deficits, noncompliance with debt
covenants and debt maturing within one year as described above, our independent
public accounting firm included an explanatory paragraph in their report on our
financial statements regarding substantial doubt regarding our ability to
continue as a going concern.  The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.




62





DEBT AND
CREDIT FACILITIES




On
September 2, 2005, we issued Professional Traders Fund LLC, which we refer to
herein as PTF, a one-year promissory note in the amount of $450,000, in
consideration for $450,000. Under terms of the note, interest at the rate of
eight percent (8%) would accrue for the term of the note and the entire facility
would be payable along with accrued interest on September 1, 2006. $230,840 of
the note was repaid on November 29, 2005 with proceeds from the CAMOFI Master
LDC financing, and $233,778 was repaid on March 2, 2006, representing
principal and accrued interest.




On
September 12, 2005, we acquired all of the stock of Waste Express, Inc., a
Missouri corporation. Waste Express is in the business of transporting, storing
and disposing of hazardous and non-hazardous industrial and ousehold waste.
Waste Express operates from a single facility in Kansas City, Missouri and is
licensed to perform its services under Part B of the RCRA and the MHWML. Waste
Express is a wholly owned subsidiary of AMEREX Companies, Inc.




On
November 21, 2005, we executed an agreement with CAMOFI Master LDC, an affiliate
of Centrecourt Asset Management LLC, for a 10% Senior Convertible Note due on
November 21, 2007. Under the terms of this agreement (the “Senior Convertible
Notes Agreement”) we will pay interest only for the first 9 months of the
agreement and then will pay interest and principal through the remaining term of
the loan. The loan is collateralized by a first lien on all current and future
assets of the Company and its subsidiaries.  The principal amortizes
over 5 years and since the term of the loan is 2 years there is a terminal
balloon payment. We can draw down the total amount of the note in three tranches
(intervals). The first tranche of $2.5 million was drawn down at the
closing of the transaction and the proceeds were used to pay off then existing
indebtedness of the Company and for working capital. On February 23, 2006, this
agreement was modified to increase the principal balance from $6,000,000 to
$6,800,000, to cover additional costs associated with the purchase of the Pryor
Facility. On March 5, 2006 we drew down $2.6 million which was used to purchase
the Pryor Facility and for working capital. One April 28, 2006 we drew down the
remaining $1.65 million to fund the purchase of the ERS assets and for working
capital.




However,
the agreement provides for repayment of the principal according to the following
premiums and schedule:  102% of principal for monthly principal repayments
of 1/60 of stated principal beginning September 2006, 110% of optional
principal prepayments prior to November 21, 2006, 112.5% of optional
principal prepayments November 21, 2006 through April 20, 2007, 115%
of any principal prepayments thereafter including the required repayment at
November 21, 2007 maturity.   The effect of the premiums increases the
effective interest paid on the amounts borrowed.




63




On
December 31, 2007 we executed an agreement with CAMOFI Master LDC. Under the
terms of this new agreement (a) the Maturity Date of the Note was changed from
November 21, 2007 to November 21, 2010 (b) the interest payments have been
deferred until April 1, 2008, (c) the Interest Rate has been increased from 10%
payable in cash to 10% payable in cash and 2% payable in additional notes, and;
(d) we agreed to issue a new note in the amount of $2,027,123 with the same
terms as the existing Note, to settle liquidated damages and other amounts due
under the original note agreement, (e) the monthly redemption amount will be
changed to either $250,000 per month or $150 per month depending on the amount
of funds that are available to be applied to the principal amount of the Notes
from the sale of the Pryor, OK., and Leigh, TX. properties, and; (f) the monthly
redemption amount will now begin on August 1, 2008; (g) Amerex will use the
proceeds from the sale of the Pryor and Leigh properties, as well as the
proceeds from the release of the escrowed funds of $400,000 securing the closure
of the injection wells in Pryor, OK, to pay down the indebtedness; (h) we have
agreed to affirmative covenants to secure at least $2.5 million in additional
equity financing before March 31, 2008; (i) we have agreed to file a
registration statement prior to June 30, 2008; (j) CAMOFI shall maintain its
right to convert up to 100% of the outstanding indebtedness into Common Stock;
(k) the Company will issue CAMOFI that number of additional shares equal to 4.5%
of its outstanding stock; (l) Amerex will extend the term of CAMOFI’s warrants
to December 31, 2012; and (m) we will make our principal officers and
financial personnel available for an on-site review of the financial condition
of the Company.




The note
is convertible at any time into common stock at a fixed conversion price of
$0.50 per share, subject to downward adjustment for any subsequent equity
transactions at prices less than $0.50 per share. During third quarter 2007,
$100,000 of the principal balance of the note was converted into 200,000 shares
of common stock. During the fourth quarter of 2007, $100,000 of
the principal balance of the note was converted into 200,000 shares of
common stock.  In connection with the loan, the lender was issued
five-year warrants to purchase 2,000,000 shares of common stock at an exercise
price of $0.01 per share.  The warrants are exercisable on a cashless
basis and include certain anti-dilution provisions.




A
separate agreement with holder of the note provided that the Company would pay
liquidated damages to the holder if a registration statement was not filed and
declared effective by certain dates in 2006.  In 2006, the Company agreed
to issue 984,000 shares of common stock to the holder of the note to settle such
damages, assuming the registration statement was effective by October 30,
2006.  The holder of the note is entitled to additional liquidated
damages for delays in the effectiveness of the registration statement to
register the warrants and conversion shares beyond October 30, 2006.
 Accordingly, the Company has accrued financing penalty fees due to non
compliance which are a part of the principal sum of the new CAMOFI note, having
a principal balance of $2,027,123 at December 31, 2007, for delays in the
effectiveness of the registration statement to register the warrants and
conversion shares beyond October 30, 2006. Additional fees at the rate of
approximately $3,400 per day will be required to be accrued for the period
subsequent to December 31, 2007, until such time the Company has an effective
registration statement under the terms of its agreement. All penalties and
defaults were incorporated into the principal balance of the new CAMOFI note
financing the amount of $2,027,123.




64




On August
31, 2006 we entered into an agreement with CAMOFI Master LDC for a line of
credit in consideration for the issuance to CAMOFI Master LDC of a five-year
warrant to purchase 750,000 shares of our common stock at an exercise price of
$0.01 per share. This line of credit closed on September 21, 2006 and is secured
by our accounts receivable. The maximum borrowing on this line is the
lesser of $1.5 million or 80% of accounts receivable aged less than 90
days. We are also required to register shares in the amount of 125% of the
number of shares underlying the warrant.  The revolving notes provided
the Company with the right to prepay in cash all or a portion of the revolving
notes at 115% of the principal amount plus accrued interest. The credit facility
agreement contains debt covenants similar to those contained in the Senior
Secured Convertible Notes Agreement. The Company was in noncompliance with
certain of these covenants as of September 30, 2007, and is now in default
under the credit line agreement.




On
August 14, 2007, the Company entered into a loan with Professional Offshore
Opportunity Fund, Ltd (“POOF”), for $750,000.  The financing was used to
fulfill vendor and other obligations.  As disclosed in the Company’s
Current Report on Form 8-K filed on August 16, 2007, the financing is in
the form of a Secured Promissory Note payable in monthly installments commencing
on September 14, 2007, and on the 10thday of
each month thereafter through February 10, 2008.  The loan bears
interest at five percent per annum and is payable in cash or with shares or the
Company’s common stock discounted at 30 percent from the average bid price
for the five trading days preceding the installment.  The Company also is
obligated to pay a monthly utilization fee of 10% of the monthly
installment.




The
Company also issued 500,000 shares of its common stock to POOF under a letter
agreement entered into in connection with the financing.  The Company has
agreed to register the shares for sale or to repurchase them at specified
amounts and times.  If the shares are not registered by the maturity date
of the loan or the date it is prepaid, the shares must be repurchased at
$200,000 if the note is repaid on or before September 14, 2007, and for an
additional $100,000 on the fifteenth of each month thereafter through
January 15, 2008. The maximum repurchase price is $700,000 for a repurchase
on or after January 15, 2008. As of December 31, 2007, and as of March
24, 2008, the loan remained outstanding and the shares had not been repurchased
and the term of the Note is being extended on a month-to-month basis. In the
event the Company does not pay the amounts due, the Company’s obligation under
the letter agreement will bear interest at the rate of two percent per annum.
The $750,000 proceeds has been allocated between the loan and related common
stock issued simultaneously, based on final determinations of the fair values of
the loan and common stock.




65




The
obligation of the Company also is secured by shares of the Company’s common
stock pledged to POOF by Ron Brewer and Richard Coody, former officers and
directors of the Company.  Each pledged 1,450,000 shares.  POOF can
exercise its rights as a secured party by selling the shares to apply against
the Company’s obligations to POOF in the event of a default by the Company under
the Secured Promissory Note.  POOF also has the right to direct the sale of
shares in the absence of a default at its discretion.  The pledge is
without recourse to the Company.  The Company has agreed to pay to
Mr. Coody and Mr. Brewer amounts equal to 22% of the proceeds of any
of their shares of common stock sold by POOF under the pledge. The funds will be
retained in an escrow account and paid in 2009.




We will
continue to evaluate additional funding options including equipment financing,
banking facilities, loans, government-funded grants and private and public
equity offerings. We may also require funds for future acquisitions that would
complement our existing business. Some of these financings may result in
substantial dilution to current equity holders.





CONTRACTUAL
OBLIGATIONS





We have a
Irrevocable Letter of Credit which is cash collateralized with the UMB bank in
Kansas City Missouri in the amount of $233,003.00. The Letter of Credit is
required by the State of Missouri to fund the closure of the Waste Express
facility.





The
following table sets forth our contractual obligations as of December 31,
2006:





Long
      Term
              Debt
            
            
            Interest
              Obligations
            
            
            Operating
              Lease
              Obligations2007
            
            $
            8,421,211
            
            
            $
            666,800
            
            
            $
            81,0002008
            
            
            0
            
            
            
            100,000
            
            
            
            81,0002009
            
            
            0
            
            
            
            0
            
            
            
            81,0002010
            
            
            0
            
            
            
            0
            
            
            
            81,000Total
            
            $
            8,421,211
            
            
            $
            766,800
            
            
            $
            324,000





66





The
following table sets forth our contractual obligations as of December 31,
2007:





Long
      Term
              Debt
            
            
            Interest
      Obligations
            
            
            Operating
              Lease
              Obligations2008
            
            $
            2,230,000
            
            
            $
            1,089,745
            
            
            $
            81,0002009
            
            
            3,025,000
            
            
            
            776,259
            
            
            
            81,0002010
            
            
            4,842,324
            
            
            
            387,303
            
            
            
            81,000Total
            
            $
            10,097,324
            
            
            $
            2,253,307
            
            
            $
            243,000





NEW
ACCOUNTING PRONOUNCEMENTS





In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities. This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings.  SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The Company is currently
assessing the impact of SFAS No. 159 on its financial position and results of
operations.





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measures. This
Statement defines fair value, establishes a framework for measuring fair value
in generally GAAP, expands disclosures about fair value measurements, and
applies under other accounting pronouncements that require or permit fair value
measurements. SFAS No. 157 does not require any new fair value
measurements. However, the FASB anticipates that for some entities, the
application of SFAS No. 157 will change current practice. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007.  The Company is currently evaluating the
impact of SFAS No. 157 on its financial statements.





In
December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS
141(R)"), which replaces SFAS No. 141. SFAS No. 141(R) establishes principles
and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill acquired. The
Statement also establishes disclosure requirements which will enable users to
evaluate the nature and financial effects of the business combination. SFAS
141(R) is effective for fiscal years beginning after December 15, 2008. The
adoption of SFAS 141(R) will have an impact on accounting for business
combinations once adopted, but the effect is dependent upon acquisitions at that
time.





67





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES




The
preparation of financial statements requires management to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues,
expenses and related disclosures. On an on-going basis, management evaluates our
estimates and assumptions, including but not limited to those related to revenue
recognition and the impairment of long-lived assets, goodwill and other
intangible assets. Management bases its estimates on historical experience and
various other assumptions that it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.




1.
Revenue recognition




The
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred and services have been provided, the price is fixed and
determinable, and collection is reasonably assured. The Company’s primary source
of revenue is through the treatment and disposal of hazardous waste. Revenue for
this service is recognized when the service has been provided.




2. Other
intangibles




Other
intangibles consist of permits acquired through acquisitions which are initially
recorded based upon their estimated fair value, and permits obtained through
operations which are stated at cost. Permit fair values are determined through
the use of external independent appraisals. Permits are amortized on a straight
line basis over their estimated useful lives, currently considered to be 10
years. The Company tests the intangibles for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable.




3.
Share-based compensation and multiple element transactions




The
Company records share-based payments to nonemployees based on the estimated
value of those payments, generally measured at the date performance is complete
and expensed over the performance period. The Company records share-based
payments to employees based on the estimated value of those payments, which are
expensed over the requisite service periods. The measurement date for
share-based payments to employees is the grant date for awards that qualify as
equity and the settlement date for awards considered as liabilities. The
estimated value of share-based payments for options, warrants and similar
obligations is determined using a Black-Scholes model and assumptions regarding
stock price volatility, discount rate and exercise period.  A discount
is applied to the values of stock not yet registered to account for the reduced
value associated with the shares not being liquid and readily
saleable.




68





The
Company engaged a third-party valuation expert to provide an opinion as to the
fair value, as of August 14, 2007, of 500,000 unregistered shares (the “Shares”)
of Amerex Group, Inc. (the “Company”) issued to a single investor in connection
with a $750,000 loan to the Company by the investor (the “POOF
Loan”).  The purpose of this opinion is to determine the appropriate
amount of debt discount to apply to the Note evidencing such loan. The third
party expert utilized the valuation guidelines provided by FASB 157. In
accordance with FASB 157, “fair value is the price that would be received to
sell an asset...in an orderly transaction between market participants at the
measurement date.”  The opinion of the third-party expert was thus
applied to property value this instrument. However, as with many financial
analyses it is not unlikely that experts may differ on the specific
methodologies applied and that these various methodologies may be populated with
different assumptions by different experts thereby making it likely that values
reported by different evaluators utilizing different methodologies and different
assumptions may yield different results.




4. Equity
obligations




The
Company has certain equity instruments and obligations to issue equity
instruments which do not meet the accounting criteria to be recorded as equity,
and therefore are recorded as liabilities and remeasured to their estimated fair
values until such time that the obligation is settled or the accounting criteria
for equity classification is met.  Such obligations are valued largely
using the methods and assumptions described in the preceding paragraphs as
applicable.




5. Accrued
Liabilities and Contingencies




The
Company accrues environmental remediation liabilities based on estimates of the
associated costs, as supported by assessments by external firms and specialists
as considered necessary.  The Company accrues liabilities and assesses
the adequacy of disclosures for litigation, assessments and related matters with
assistance from external attorneys to the extent considered
necessary.  Other accruals and contingencies are evaluated by
management for proper recording and disclosure, with external assistance
obtained when considered necessary.




ITEM
7.FINANCIAL
STATEMENTS





Our
consolidated financial statements, together with the reports thereon by our
independent registered public accounting firm, begin on page F-1 of this Form
10-KSB.





69




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  
 To the
Board of Directors and Stockholders
 Amerex
Group, Inc.
 
 We have
audited the accompanying consolidated balance sheets of Amerex Group, Inc. as of
December 31, 2007 and 2006 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the years then
ended.  These consolidated financial statements are the responsibility of
the Company’s management.  Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.  Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Amerex Group, Inc. as
of December 31, 2007 and 2006, and the consolidated results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As shown in the financial
statements, the Company incurred a net loss of $7,114,098 during the year ended
December 31, 2007, and, as of that date, had a working capital deficiency of
$3,537,914 and stockholders’ deficit of $7,688,449.  As discussed in
Note 1 to the financial statements, the Company has experienced significant cash
flow difficulties and, subsequent to December 31, 2007, was in default on its
note agreements, which causes them to become due on demand.  The
Company does not currently have alternative sources of capital sufficient to
meet such demands, if made. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern.  The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
 
 /s/
SARTAIN FISCHBEIN & CO.
 Tulsa,
Oklahoma
 April 14,
2008
 
 F-1
  Amerex
      Group, Inc. and SubsidiariesConsolidated
      Balance SheetsDecember
      31,Assets
              
              2007
              
              
              2006Current
      AssetsCash
      and cash equivalents
              
              $
              19,588
              
              
              $
              60,267Restricted
      cash
              
              
              0
              
              
              
              812,666Accounts
      receivable, trade, net of allowance for doubtful accounts of
                $15,000
      at December 31, 2007 and $32,000 at December 31, 2006
              
              
              2,262,396
              
              
              
              2,638,897Other
      current assets
              
              
              506,197
              
              
              
              693,908Total
      current assets
              
              
              2,788,181
              
              
              
              4,205,738Property
      and Equipment, at cost
              
              
              3,963,844
              
              
              
              3,744,259Less
      accumulated depreciation
              
              
              (629,382
              )
              
              
              (295,218
              )Net
      property, plant, and equipment
              
              
              3,334,462
              
              
              
              3,449,041Assets
      held for sale
              
              
              0
              
              
              
              363,948Other
      assets
              
              
              686,595
              
              
              
              1,456,746Total
      Assets
              
              $
              6,809,238
              
              
              $
              9,475,473Liabilities
      and Stockholders’ Equity (Deficit)Current
      Liabilities:Accounts
      payable
              
              $
              2,476,282
              
              
              $
              1,867,087Accrued
      expenses
              
              
              1,089,133
              
              
              
              1,488,464Current
      portion of long term debt
              
              
              2,230,000
              
              
              
              5,414,421Borrowings
      under line of credit
              
              
              0
              
              
              
              970,811Environmental
      remediation liability
              
              
              0
              
              
              
              876,036Obligations
      to issue equity instruments
              
              
              265,680
              
              
              
              1,971,987Accrued
      acquisition liability
              
              
              265,000
              
              
              
              250,000Total
      current liabilities
              
              
              6,326,095
              
              
              
              12,838,806Long
      term debt
              
              
              7,471,592
              
              
              
              0Total
      liabilities
              
              
              13,797,687
              
              
              
              0Redeemable
      common stock, 500,000 shares
              
              
              700,000
              
              
              
              0Stockholders’
      Equity (Deficit):Common
      stock - $0.001 par value, 100,000,000 shares authorized,15,709,683  and
      18,773,594 shares issued and outstanding in 2007 and
                2006,
      respectively, including redeemable common stock
              
              
              15,210
              
              
              
              18,774Additional
      paid in capital
              
              
              5,532,827
              
              
              
              2,740,281Accumulated
      deficit
              
              
              (13,236,486
              )
              
              
              (6,122,388
              )Total
      Stockholders’ Equity (Deficit)
              
              
              (7,688,449
              )
              
              
              (3,363,333
              )Total
      Liabilities and Stockholders’ Equity (Deficit)
              
              $
              6,809,238
              
              
              $
              9,475,473
  The
      accompanying notes are an integral part of the financial
      statements.
  F-2
  Amerex
      Group, Inc. and SubsidiariesConsolidated
      Statements of OperationsYears
      Ended December 31,2007
              
              
              2006Operating
      Revenue
              
              $
              8,305,496
              
              
              $
              7,726,099Operating
      Expenses:Cost
      of services provided
              
              
              5,181,392
              
              
              
              5,299,423Selling,
      general and administrative
              
              
              2,532,992
              
              
              
              2,653,961Professional
      fees
              
              
              796,376
              
              
              
              494,830Non
      cash compensation
              
              
              1,056,896
              
              
              
              609,125Depreciation
              
              
              359,789
              
              
              
              266,596Amortization
              
              
              36,165
              
              
              
              36,166Operating
      Loss
              
              
              (1,658,114
              )
              
              
              (1,634,002
              )Other
      Income (Expense):Interest
      expense
              
              
              (1,556,340
              )
              
              
              (744,544
              )Amortization
      of debt discount
              
              
              (1,604,333
              )
              
              
              (1,424,067
              )Amortization
      of capitalized finance fees
              
              
              (831,487
              )
              
              
              (690,645
              )Remeasurement
      of obligations to issue equity instruments
              
              
              227,307
              
              
              
              93,515Financing
      penalty fees
              
              
              (1,220,600
              )
              
              
              (824,902
              )Other
      income (expense)
              
              
              (75,623
              )
              
              
              42,132Loss
      from continuing operations
              
              
              (6,719,190
              )
              
              
              (5,182,513
              )Loss
      from discontinued operations
              
              
              (394,908
              )
              
              
              (35,931
              )Net
      loss
              
              $
              (7,114,098
              )
              
              $
              (5,218,444
              )Loss
      per share:Loss
      from continuing operations
              
              $
              (0.44
              )
              
              $
              (0.89
              )Net
      loss
              
              $
              (0.46
              )
              
              $
              (0.89
              )Average
      weighted shares outstanding
              
              
              16,734,251
              
              
              
              5,838,526
  The
      accompanying notes are an integral part of the financial
      statements.
  F-3
  Amerex
      Group, Inc. and SubsidiariesConsolidated
      Statements of Stockholders' Equity (Deficit)For
      the Years Ended December 31, 2007 and 2006Shares
              
              
              Common
                Stock
              
              
              Subscriptions
      Receivable
              
              
              Additional
                Paid-In
      Capital
              
              
              Treasury
                Stock
              
              
              Accumulated
      Deficit
              
              
              TotalsBalance
      at January 1, 2006
              
              
              1,000
              
              
              $
              1,000
              
              
              $
              (1,000
              )
              
              $
              1,355,834
              
              
              $
              0
              
              
              $
              (903,944
              )
              
              $
              451,890Recapitalization
      in connection with reverse acquisition
              
              
              642,594
              
              
              
              (456
              )
              
              
              1,000
              
              
              
              (544
              )
              
              
              
              
              
              
              
              
              
              
              0Increase
      in beneficial conversion feature of debt
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              130,778
              
              
              
              
              
              
              
              
              
              
              
              130,778Issuance
      of common stock in connection with reverse acquisition
              
              
              18,230,000
              
              
              
              18,230
              
              
              
              
              
              
              
              (18,230
              )
              
              
              
              
              
              
              
              
              
              
              0Purchase
      of shares from shareholder
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (185,000
              )
              
              
              
              
              
              
              (185,000
              )Cancellation
      of shares
              
              
              (100,000
              )
              
              
              
              
              
              
              
              
              
              
              (59,000
              )
              
              
              59,000
              
              
              
              
              
              
              
              0Stock
      compensation for shares issued
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              488,125
              
              
              
              
              
              
              
              
              
              
              
              488,125Compensation
      for stock warrants contributed to employee
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              121,000
              
              
              
              
              
              
              
              
              
              
              
              121,000Issuance
      of common stock warrants to lenders
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              722,318
              
              
              
              
              
              
              
              
              
              
              
              722,318Shares
      given to lender in settlement of obligations
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              126,000
              
              
              
              
              
              
              
              126,000Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (5,218,444
              )
              
              
              (5,218,444
              )Balance
      at December 31, 2006
              
              
              18,773,594
              
              
              
              18,774
              
              
              
              0
              
              
              
              2,740,281
              
              
              
              0
              
              
              
              (6,122,388
              )
              
              
              (3,363,333
              )Reclassification
      of warrants from liabilities to equity do to accounting
    change
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,479,000
              
              
              
              
              
              
              
              
              
              
              
              1,479,000Return
      and cancellation of common stock previously issued
              
              
              (4,805,000
              )
              
              
              (4,805
              )
              
              
              
              
              
              
              4,805
              
              
              
              
              
              
              
              
              
              
              
              0Issuance
      of common stock to lenders
              
              
              561,087
              
              
              
              561
              
              
              
              
              
              
              
              155,982
              
              
              
              
              
              
              
              
              
              
              
              156,543Increase
      in beneficial conversion feature of debt
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              156,543
              
              
              
              
              
              
              
              
              
              
              
              156,543Conversion
      of debt to common stock
              
              
              380,000
              
              
              
              380
              
              
              
              
              
              
              
              189,620
              
              
              
              
              
              
              
              
              
              
              
              190,000Stock
      options issued to employees
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              708,709
              
              
              
              
              
              
              
              
              
              
              
              708,709Fixed
      obligation to issue shares to consultants
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              192,937
              
              
              
              
              
              
              
              
              
              
              
              192,937Stock
      issued to employees
              
              
              300,002
              
              
              
              300
              
              
              
              
              
              
              
              154,950
              
              
              
              
              
              
              
              
              
              
              
              155,250Increase
      in value of redeemable common stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (250,000
              )
              
              
              
              
              
              
              
              
              
              
              (250,000
              )Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (7,114,098
              )
              
              
              (7,114,098
              )Balance
      at December 31, 2007
              
              
              15,209,683
              
              
              $
              15,210
              
              
              $
              0
              
              
              $
              5,532,827
              
              
              $
              0
              
              
              $
              (13,236,486
              )
              
              $
              (7,688,449
              )
  The
      accompanying notes are an integral part of the financial
      statements.
 
 F-4
  Amerex
      Group, Inc. and SubsidiariesConsolidated
      Statements of Cash FlowsYears
      Ended December 31,2007
              
              
              2006Cash
      Flows from Operating Activities:Net
      loss
              
              $
              (7,114,098
              )
              
              $
              (5,218,444
              )Adjustments
      required to reconcile net loss to cash flowsused
      by operating activities:Loss
      from discontinued operations
              
              
              394,908
              
              
              
              35,931Share
      based compensation and remeasurement of equity obligations
              
              
              1,056,896
              
              
              
              609,125Depreciation
      and amortization
              
              
              1,231,189
              
              
              
              993,407Amortization
      of debt discount
              
              
              1,604,333
              
              
              
              1,424,067Gain
      on sale of assets
              
              
              97,776
              
              
              
              (13,158
              )Changes
      in Operating Assets and LiabilitiesAccounts
      receivable
              
              
              376,501
              
              
              
              (2,498,219
              )Other
      current assets
              
              
              187,711
              
              
              
              (444,750
              )Other
      assets
              
              
              (2,500
              )
              
              
              123,141Accounts
      payable
              
              
              609,195
              
              
              
              1,771,196Other
      current liabilities
              
              
              214,449
              
              
              
              1,772,305Net
      cash used by operating activities
              
              
              (1,343,640
              )
              
              
              (1,445,399
              )Cash
      Flows from Investing Activities:Acquisition
      of property, plant and equipment
              
              
              (69,099
              )
              
              
              (448,891
              )Disposal
      of property, plant and equipment
              
              
              47,265
              
              
              
              32,681Restricted
      cash
              
              
              812,666
              
              
              
              2,287,334Cash
      paid for asset acquisitions
              
              
              0
              
              
              
              (1,917,716
              )Purchase
      of certificate of deposit
              
              
              0
              
              
              
              (233,003
              )Net
      cash used by investing activities – continuing operations
              
              
              790,832
              
              
              
              (279,595
              )Net
      cash provided by investing activities – discontinued
      operations
              
              
              (30,960
              )
              
              
              256,184Net
      cash provided (used) by investing activities
              
              
              759,872
              
              
              
              (23,411
              )Cash
      Flows from Financing Activities:Debt
      issue costs
              
              
              (94,901
              )
              
              
              (598,364
              )Proceeds
      from issuances of long term debt and related equity
              
              
              865,000
              
              
              
              800,000Net
      borrowings (repayments) on line of credit
              
              
              (91,410
              )
              
              
              1,277,810Repayments
      of debt
              
              
              (135,600
              )
              
              
              (680,240
              )Net
      cash provided by financing activities
              
              
              543,089
              
              
              
              799,206Net
      Decrease in Cash and Cash Equivalents
              
              
              (40,679
              )
              
              
              (669,604
              )Cash
      and Cash Equivalents, Beginning of Year
              
              
              60,267
              
              
              
              729,871Cash
      and Cash Equivalents, End of Year
              
              $
              19,588
              
              
              $
              60,267
  SUPPLEMENTAL
CASH FLOW DISCLOSURE INFORMATION:
  Interest
      Paid
              
              $
              1,028,371
              
              
              $
              725,586NONCASH
      TRANSACTIONSAccrual
      for additional contingent consideration

                related
      to the Waste Express acquisition
              
              $
              -
              
              
              $
              250,000Note payable issued
      as payment for accrued liabilities
              
              
              2,027,123
              
              
              
              -Conversion of debt
      to common stock
              
              
              190,000
              
              
              
              -
  The
accompanying notes are an integral part of the financial
statements.
 
 F-5
 
 AMEREX
GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 
 1. 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Nature of Operations: Amerex
Group, Inc. and Subsidiaries (the “Company”) is involved principally in
providing waste management services to private companies, government agencies
and municipalities located primarily in south central United
States.
 
 Going Concern:The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  The Company incurred a net loss of
$7,114,098 during the year ended December 31, 2007, and further losses are
anticipated.  As of December 31, 2007, the Company had a working
capital deficiency of $3,537,914 and stockholders’ deficit of
$7,688,449.  Furthermore, the Company has experienced cash flow
difficulties, and subsequent to December 31, 2007, was in default on its note
agreements, which causes them to become due on demand.  The Company
does not currently have alternative sources of capital sufficient to meet such
demands, if made.  These conditions raise substantial doubt about the
Company’s ability to continue as a going concern.  The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.The Company is currently
pursuing various alternatives to obtain additional funding to repay short-term
liabilities, including mortgaging and selling assets, and management is taking
steps to increase revenues, minimize costs and achieve profitable
operations.
 
 Basis of Presentation:
 On July 5, 2006, Airguide, Inc. (“Airguide”) acquired 100% of the issued
and outstanding capital stock of Amerex Companies, Inc. (“Amerex”), pursuant to
a Share Exchange Agreement dated July 5, 2006, whereby the stockholders of
Amerex (including those to whom commitments to receive Amerex shares had been
granted) received an equal number of shares of Airguide’s common stock in
exchange for all of the issued and outstanding capital stock of Amerex and all
commitments to receive Amerex capital stock, which amounted to 18,230,000
shares.  In connection therewith, the stockholders of Amerex beneficially
became the owners of 97.3% of Airguide’s issued and outstanding voting
securities. The acquisition of Amerex Companies, Inc. has been treated as a
reverse acquisition for accounting purposes and the Company’s financial
statements reflect Amerex as the accounting acquirer of Airguide Inc.
 Filings with the SEC will reflect the historical financial statements of
Amerex Companies, Inc. for periods prior to the acquisition. Therefore, unless
otherwise noted, consolidated financial information presented in this document
are of Amerex Companies, Inc. for the pre-acquisition
period.  Airguide subsequently changed its name to Amerex Group,
Inc.
 
 The
accompanying consolidated financial statements include the accounts of Airguide,
Amerex and its wholly-owned subsidiary, Waste Express, Inc. (“Waste Express’).
 All significant intercompany transactions and balances have been
eliminated in consolidation, including $9,516 of receivables due to and $97,438
of payables due from Amerex Companies, Inc. as of December 31, 2007 and 2006,
respectively.
 
 F-6
 
 1.
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Cash and Cash Equivalents, Including
Restricted Cash:  For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.  Cash equivalents
do not include restricted cash.
 
 Restricted
cash at December 31, 2006 consists of cash maintained as collateral for letters
of credit issued by financial institutions on behalf of the Company expected to
be released within one year.
 
 The
Company periodically maintains certain cash and restricted cash balances at
financial institutions in excess of federally insured amounts.  At December
31, 2006, such excess amounts were $0 for cash and $712,666 for restricted cash.
There were no such excess amounts at December 31, 2007.
 
 Under the
terms of the loan agreements with CAMOFI, the Company has established a lockbox
with North Fork Bank, whereby all of the receipts from accounts receivable are
deposited into the lockbox.  When these deposits clear the North Fork
Bank, a transfer of funds is made to CAMOFI, and the receipts are applied
against the Revolving Line of Credit.  The Company makes periodic draw
downs on the line of credit based on it’s applicable borrowing
base.
 
 Accounts Receivable:
 Accounts receivable consists of amounts due from customers for services
provided.  Accounts receivable are uncollateralized obligations due under
normal trade terms requiring payment within 30 days from the invoice date.
 The Company establishes an allowance for doubtful accounts based on its
best estimate of probable losses in the accounts receivable balance.  At
December 31, 2007 the allowance for uncollectible accounts was $15,000. The
allowance for doubtful accounts was $32,000 as of December 31, 2006. The Company
generally does not charge interest on delinquent accounts unless a contract
specifically indicates otherwise.
 
 The
Company accrues for unbilled receivables pertaining primarily to services
rendered in connection with a contract it was awarded by the United States
Department of Justice, Drug Enforcement Administration (“DEA”) for drug lab
clean ups in ten contract regions covering eleven states (North Texas, Oklahoma,
Kansas, Iowa, Missouri, Arkansas, Illinois, Indiana, Ohio, Tennessee and
Alabama).  This contract is a requirements contracts, meaning that the
customers place orders for the Companies services and supplies as they require
them. In these service transactions the Company has realized a time delay in the
timing of the services being provided and the actual billing due to the
involvement of third party contractors. In these situations all of the Company’s
accounting policies with respect to revenue recognition have been met at the
time of service including the existence of pervasive evidence of an arrangement,
the price is fixed and determinable, collection is reasonably assured and the
services have been provided. As a result the Company has accrued for this
revenue and recorded an unbilled receivable included within accounts receivable
on its balance sheet. The Company bills for these services at the time all the
appropriate information is received from third party contractors in conformity
with DEA billing requirements. This time lag in general, is approximately 45
days from the date of service until billing. Unbilled accounts receivable was
$561,926 at December 31, 2007 and $712,223 at December 31, 2006.
 
 Property and Equipment:
 Property and equipment are carried at cost and depreciated using the
straight-line method over their estimated useful lives ranging from 5 years for
vehicles, 5 to 8 years for equipment and fixtures, and 10 to 15 years for
buildings.  Gain or loss on disposal of such property and equipment is
reflected in other income.  Maintenance and repairs are charged to expense
as incurred, whereas major improvements are capitalized.
 
 Assets
not in service includes facilities and related equipment not yet placed in
service and the costs of construction in progress on such
facilities.
 
 F-7
 
 1.
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Assets
held for sale are recorded at the lower of cost or estimated fair value less
costs to sell and are not depreciated.
  The
Company accounts for any obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs in accordance with
SFAS No. 143, Accounting for
Asset Retirement Obligations.    The Company has
recorded an Asset Retirement Obligation of $325,000 at December 31, 2007, which
is reflected as land and accrued expenses in the accompanying consolidated
balance sheet.
 
 Permit Costs:  The cost
of the Company’s environmental permit is being amortized on a straight-line
basis over its estimated useful life of 10 years.
 
 Impairment of Long-Lived
Assets: 
 The Company evaluates its long-lived assets for impairment when events or
changes in circumstances indicate, in management’s judgment, that the carrying
value of such assets may not be recoverable.  The determination of whether
an impairment has occurred is based on management’s estimate of undiscounted
future cash flows attributable to the assets as compared to the carrying value
of the assets.  If an impairment has occurred, the Company determines the
amount of the impairment by estimating the fair value of the assets and
recording a loss for the amount that the carrying value exceeds the estimated
fair value.  No impairment was recorded in 2006 or 2007.
 
 Revenue Recognition:
 Revenue is recognized when persuasive evidence of an arrangement exists,
services are rendered, the price is fixed or determinable and collection is
reasonably assured.
 
 Income Taxes:  Income
taxes are provided for the tax effects of transactions reported in the
consolidated financial statements and consist of taxes currently payable plus
deferred taxes arising from the temporary differences between income for
financial reporting and income tax purposes.  Temporary differences giving
rise to deferred tax assets and liabilities consist primarily of differences
between the financial reporting bases and income tax bases of bank premises and
equipment and other assets, the allowance for loan losses, and net operating
losses. The Company has accrued no interest or penalties related to any
unrecognized tax benefits.
 
 Advertising
Costs:  The Company expenses the cost of advertising as
incurred.  Advertising expense was approximately $31,000 and $32,000
for the years ended December 31, 2007 and 2006, respectively.
 
 Debt Financing Costs and
Discounts:  Costs associated with the issuance of debt as well as
debt discounts are deferred and amortized over the term of the related debt
instrument using the interest method.
 
 Stock-Based Compensation:
 The Company records share-based payments to nonemployees based on the
estimated value of those payments, generally measured at the date performance is
complete and expensed over the performance period.
 
 The
Company records share-based payments to employees based on the estimated value
of those payments, which are expensed over the requisite service periods.
 The measurement date for share-based payments is the grant date for awards
that qualify as equity and the settlement date for awards considered as
liabilities.
 
 Prior to
September 2005, the Company agreed to issue 12,755,000 shares of the Company’s
common stock to three founding employees and 2,450,000 shares to a consultant
for work performed in organizing the Company.  Since these individuals were
legally entitled to receive the shares at that time as no further performance
was required and since the Company was considered to have minimal value at the
grant date, no compensation expense was recorded.  In 2006, the Company
agreed to issue 375,000 shares of common stock to employees and 1,000,000 shares
to nonemployees upon completion of a reverse merger
with a public company.  All of these shares were issued during third
quarter 2006.  The estimated value of awards at the grant date for
employeesand at the date of completion of performance for nonemployees is being
recorded to expense over the requisite service periods.
  F-8
 1.
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Mr.
Onody  assumed the position of Chief Operating Officer in June 2007 as
part of his initial four-month employment agreement he was provided with option
to purchase up to 100,000 shares. Subsequently on September 7, 2007 Mr. Onody
was issued another option to purchase up to 250,000 shares.
 
 Use of Estimates:  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.
 
 The
determination of the adequacy of the allowance for doubtful accounts is based on
estimates that are particularly susceptible to significant changes in the
economic environment and market conditions.  The determination of accruals
for environmental remediation costs is based on cost estimates to be incurred
that are susceptible to change as more information becomes available.  As a
result, it is reasonably possible that the estimated bad debt and environmental
expenses may change materially in the near future.  However, the amount of
the change that is reasonably possible cannot be estimated.
 
 The
estimated useful life of the permit and determination of whether an impairment
of the permit has occurred is based on management’s estimate of the cash flows
to be derived from the permit, which are based in part on management’s
assessment of the Company’s ability to maintain and renew its permit.
Determination as to whether an impairment of the Company’s other long-lived
assets has occurred is also based largely on management’s estimates of cash
flows and fair values of assets, which are subject to change.  It is
reasonably possible that an impairment of the permit could occur in the near
future.
 
 Exchanges
of goods and services without a readily determinable value for share-based
payments are based on the estimated values of the Company’s common stock and
applicable share-based payment, as determined by the Company, which involves
making certain assumptions and subjective judgments.  The estimated fair
value of the Company’s common stock used in its valuation of share-based
payments was $0.50 per share in 2006.  This value was based on negotiated
terms with a lender in late 2005 and early 2006, and on a third party valuation
analysis considering the Company’s results as compared to peer
companies.  The estimated fair values of the Company’s common stock
used in its valuation of share-based payments in 2007 was based in part on third
party valuation reports and the current trading price of the Company’s stock at
the measurement date, adjusted as considered necessary by management for changes
in conditions since the latest valuation report and other relevant
factors.  In valuations of stock warrants issued in 2006, the
risk-free interest rate assumed ranged from 4.31% to 4.55%.  Stock
options were valued using a Black-Scholes analysis and the assumptions discussed
in the preceding section.
 
 Multiple
Element Transactions:  The Company records transactions involving
multiple elements for cash proceeds by allocating the proceeds among the
elements based on the estimated fair values of the individual
elements.  Such elements are valued using acceptable valuation
methodologies, relying on market-based data where
possible.  Third-party specialists are utilized where considered
necessary to assist the Company in determining the estimated fair values of
individual elements.  The Company occasionally raises funds using a
combination of debt and equity financing, which requires an allocation of
proceeds between the debt and equity components, based on their estimated fair
values.
 
 New Accounting Pronouncements:  In December 2007, the FASB issued SFAS No. 141(R), "Business
Combinations" ("SFAS 141(R)"), which replaces SFAS No. 141. SFAS No. 141(R)
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any non-controlling interest in the acquiree and
the goodwill
acquired. The Statement also establishes disclosure requirements which will
enable users to evaluate the nature and financial effects of the business
combination. SFAS 141(R) is effective for fiscal years beginning after December
15, 2008. The adoption of SFAS 141(R) will have an impact on accounting for
business combinations once adopted, but the effect is dependent upon
acquisitions at that time.
  F-9
  1.
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 In
February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
159, The Fair Value Option for
Financial Assets and Financial Liabilities. This Statement permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings.  SFAS No. 159 is effective
for fiscal years beginning after November 15, 2007. The Company is
currently assessing the impact of SFAS No. 159 on its financial position and
results of operations.
 
 In
December 2006, the FASB issued Staff Position FSP EITF 00-19-2, "Accounting for
Registration Payment Arrangements" (FSP).  This pronouncement is
effective for existing registration payment arrangements as of January 1, 2007.
 The Company adopted the provisions of this FSP effective January 1,
2007.  We determined that application of the FSP required certain of
our outstanding warrants to be reclassified from a liability to equity as of
January 1, 2007.
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value Measures. This
Statement defines fair value, establishes a framework for measuring fair value
in generally GAAP, expands disclosures about fair value measurements, and
applies under other accounting pronouncements that require or permit fair value
measurements. SFAS No. 157 does not require any new fair value
measurements. However, the FASB anticipates that for some entities, the
application of SFAS No. 157 will change current practice. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007.  The Company is currently evaluating the
impact of SFAS No. 157 on its financial statements.
 
 In July
2006, the FASB issued Interpretation No. 48, “Accounting for Uncertain Tax
Positions, an Interpretation of FASB Statement No. 109,” (FIN 48), which
clarifies the criteria for recognition and measurement of benefits from
uncertain tax positions.  Under FIN 48, an entity should recognize a
tax benefit when it is more likely than not, based on technical merits, that the
position would be sustained upon examination by a taxing
authority.  The Company adopted FIN 48 as of January 1,
2007.  There were no adjustments required in 2007 as a result of
adopting this standard,
 
 In May
2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a
replacement of APB Opinion No. 20 and FASB SFAS No. 3,” to change the
requirements for the accounting for and reporting of a change in accounting
principle. The provisions of the Statement were effective and adopted as of
January 1, 2006.
 
 Loss per Share:  Loss per
share is presented in accordance with SFAS No. 128 “Earnings Per Share”.
 Weighted average outstanding shares for purposes of the loss per share
calculations reflect the one-for-one exchange of Amerex stock for the common
stock of Airguide, Inc., the legal acquirer of Amerex on July 5, 2006.
 Weighted average shares outstanding as of December 31, 2006 was 5,838,526.
 Weighted average shares outstanding for the year ended December 31, 2007
was 16,734,251 and reflect the effects of the merger with Airguide, Inc. on July
5, 2006 and the issuance of shares during 2007 and 2006 to employees,
consultants and lenders.
  No
outstanding stock obligations or warrants represent dilutive potential common
shares for the years ended 2007 and 2006.  As of December 31, 2005, the
Company had outstanding common stock warrants to issue approximately 5,500,000
shares of common stock.  In 2006, the Company issued additional warrants to
issue 266,667 shares of common stock and committed to issue 984,000 shares of
common stock to a lender (see Note 3).  Mr.Onody  our Chief
Operating Officer in June 2007 as part of his initial four-month employment
  F-10
  1.
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 .
  2. 
BUSINESS COMBINATION
 
 On
September 9, 2005, the Company acquired all of the outstanding stock of Waste
Express, a waste management service company.  Components of the purchase
price were as follows:
 
 Cash
      paid
              
              $
              296,281Acquisition
      costs
              
              
              63,073Purchase
      price
              
              $
              359,354
 
 The
excess of the fair value of the net assets acquired over the purchase price was
allocated among the noncurrent assets based on their estimated fair values.
 
 The
purchase agreement provided for contingent consideration to be paid to the prior
owner to the extent that quarterly revenues of Waste Express exceed $270,000,
with payments equal to 8% of any such excess up to a maximum amount of $235,000
plus 6% interest.  No amount was initially included in the purchase price
for this consideration since the outcome of this contingency was uncertain as of
December 31, 2005.  During the year ended December 31, 2006,
additional consideration had become probable, for which the purchase price was
increased by $250,000 and which was accrued as a current liability as of
December 31, 2006. The liability has subsequently increased to $265,000 at
December 31, 2007 due to the accrual of interest on the obligation.
 
 F-11
 
 3.
 NOTE PAYABLE AND LONG-TERM DEBT
 
 Long-term
debt consists of the following at December 31:
 
 2007
              
              
              2006Note
      payable to POOF due February 2008, bearing interest at 5%, secured by
      shares pledged by stockholders.
              
              $
              730,000
              
              
              $
              -Senior
      Secured Convertible Notes to CAMOFI
              
              
              6,444,989
              
              
              
              7,143,400Note
      payable to CAMOFI
              
              
              2,027,123
              
              
              
              --notes
      to CAMOFI bear interest at 12%, interest  payable beginning
      April 2008 with principal payments of $250,000per
      month, with final balloon payment due November 2010.Line
      of credit to CAMOFI, bearing interest at 12%, due November 2010 and
      collateralized by accounts receivable.
              
              
              1,186,401
              
              
              
              1,277,811Convertible
      note payable
              
              
              25,000
              
              
              
              -10,411,078
              
              
              
              8,421,211Unamortized
      debt discount on POOF note payable
              
              
              (112,500
              )Unamortized
      debt discount on CAMOFI notes payable
              
              
              (150,020
              )
 Unamortized
      debt discount on line of credit
              
              
              -
              
              
              
              (307,000
              )Unamortized
      debt discount on CAMOFI-beneficial conversion interest
              
              
              (150,020
              )Unamortized
      debt discount-premium on CAMOFI debt
              
              
              (296,946
              )Unamortized
      debt discount on Senior Secured Convertible Notes
              
              
              -
              
              
              
              (1,728,979
              )9,701,592
              
              
              
              6,385,232Less
      line of credit, net of debt discount
              
              
              0
              
              
              
              970,811Less
      current maturities of long-term debt
              
              
              2,230,000
              
              
              
              5,414,421Long-term
      debt
              
              $
              7,471,592
              
              
              $
              -
  F-12
 
 3.
 NOTE PAYABLE AND LONG-TERM DEBT (CONTINUED)
 
 A roll
forward of the total amortized debt discount is as follows:
 
 Balance
      at December 31, 2005
              
              $
              2,630,490Discount
      associated with premium on repayments of $800,000 increase
      in principal ofsenior
      secured convertible notes
              
              
              80,000Discount
      associated with increase in premium on repayments according to Notes
      agreements
              
              
              119,000Discount
      associated with additional warrants and beneficialconversion
      feature on increasein
      senior secured convertible notes
              
              
              261,556Discount
      associated with warrants on line of credit
              
              
              369,000Amortization
      of debt discount
              
              
              (1,424,067
              )Balance
      at December 31, 2006
              
              
              2,035,979Discount
      associated with note payable to POOF, 500,000 common shares
      issued
              
              
              450,000Net
      reduction in discount associated with premium on notes payable to
      CAMOFI
              
              
              (485,246
              )Discount
      associated with notes payable to CAMOFI, 561,087 common shares
      issued
              
              
              156,543Discount
      associated with notes payable to CAMOFI, beneficial conversion
      interest
              
              
              156,543Amortization
      of debt discount
              
              
              (1,604,333
              )Balance
      at December 31, 2007
              
              $
              709,486
 
 POOF Note
Payable and Related Redeemable Common Stock
 
 On August
14, 2007, the Company entered into a loan with Professional Offshore Opportunity
Fund, Ltd (“POOF”), for $750,000.  The financing was used to fulfill
vendor and other obligations.  The note was originally structured to
require monthly installments commencing on September 14, 2007, and on the
10th
day of each month thereafter through February 10, 2008.  The loan
bears interest at 5% per annum and is payable in cash or with shares of Company
common stock discounted at 30% from the average bid price for the five days
preceding the installment.  The Company was also obligated to pay a
monthly utilization fee of 10% of the monthly installment.  The
Company did not make the scheduled payments on the POOF loan, and verbally
agreed to monthly extensions of the amount due and paying monthly interest and
$10,000 principal.  As of December 31, 2007 the Company had not paid
the amounts due for the monthly extension. However, subsequently these amounts
were paid in the first quarter of 2008 for the period ending December 31,
2007.
 
 The
Company has also issued 500,000 shares of common stock to POOF in connection
with this loan.  The Company has agreed to register the shares for
sale or to repurchase them at specified amounts and times.  If the
shares were not registered by January 15, 2008, the Company is obligated to
repurchase the shares for $700,000.  If the Company does not pay the
amounts due, the Company’s obligation to repurchase shares will bear interest at
2% per annum.  In accordance with EITF Topic D-98, since the
redemption feature is not entirely within the Company’s control, the redeemable
common stock is presented as temporary equity and has been recorded at December
31, 2007 at its redemption value, considering that it was probable at that date
that the shares would not be registered by January 15, 2008, which did not
happen.
 
 The
$750,000 loan was initially recorded as $300,000 of notes payable (net of debt
discount) and $450,000 as redeemable common stock, based on the estimated fair
values of the notes and common stock.  The
redeemable common stock has been adjusted to its expected redemption value of
$700,000 as of December 31, 2007.
 
 F-13
 
 3.
 NOTE PAYABLE AND LONG-TERM DEBT (CONTINUED)
 
 The POOF
note payable is secured by shares of the Company’s common stock pledged by Ron
Brewer and Richard Coody, former officers and directors of the
Company.  Each pledged 1,450,000 shares of stock.  POOF can
exercise its rights by selling the shares to apply against the Company’s
obligations to POOF.  POOF also has the right to sell the shares
directly in the absence of a default.  The pledge is without recourse
to the Company.  The Company has agreed to pay Mr. Coody and Mr.
Brewer amounts equal to 22% of the proceeds of any of their shares of common
stock sold by POOF under the pledge.  The funds would be retained in
escrow and paid in 2009.
 
 CAMOFI
Notes Payable
 
 -Senior
Secured Convertible Notes
 
 The
Company entered into 10% Senior Secured Convertible Notes (the “Notes”) dated
November 21, 2005 with CAMOFI MASTER LDC and a limited number of Qualified
Institutional Investors.  Interest is payable monthly in arrears, in cash
or, at the option of the Company and subject to certain conditions being met, in
registered common stock.  The Notes are collateralized by a first lien on
all current and future assets of the Company and its current and future
subsidiaries.  The Notes are guaranteed by the current and future
subsidiaries of the Company.  The agreement requires the Company to comply
with certain nonfinancial covenants, including restricting the payment of
dividends.
 
 The
stated principal of the Notes was $6,000,000, which was increased to $6,800,000
on February 23, 2006.  However, the original agreement provided for
repayment of the principal according to the following premiums and schedule:
 102% of principal for monthly principal repayments of 1/60 of stated
principal beginning September 2006, 110% of optional principal prepayments prior
to November 21, 2006, 112.5% of optional principal prepayments November 21, 2006
through April 20, 2007, 115% of any principal prepayments thereafter including
the required repayment at November 21, 2007 maturity.  The effect of the
premiums increases the effective interest paid on the amounts borrowed.
 The Convertible Notes  are stated at the amount due with the
debt discount being amortized by the interest method and adjusted over time to
equate the amount initially borrowed to the amount scheduled to be
repaid.
 
 The Notes
are convertible at any time into common stock at a fixed conversion price. The
fixed conversion price to convert the debt to equity is set at $0.50 per share,
subject to downward adjustment for any subsequent equity transactions at prices
less than $0.50 per share.  In connection with the issuance of the
Notes, the holders of the Notes were issued five-year warrants to purchase
2,000,000 shares of common stock at an exercise price of $0.01 per share.
 The warrants are exercisable on a cashless basis and include certain
anti-dilution provisions.  When the Notes were amended to increase the
outstanding principal to $6,800,000, the number of warrants issued was increased
to 2,266,667.
 
 In
accordance with EITF Issue No. 98-5 and No. 00-27, the $6 million proceeds
received were allocated to the Notes and warrants based on their estimated fair
values, resulting in the recording of a debt discount. The allocated value of
the warrants, which was $980,834, resulted in recording of a debt discount and a
liability to issue equity instruments.  The additional warrants issued
in February 2006 increased this value by $130,778.  The determination
of the fair value assumed exercise at the end of 5 years and 17.44% stock price
volatility.  Since the Notes possess a beneficial conversion feature, an
additional debt discount and increase to additional paid-in capital of $980,834
at November 2005 and $130,778 at February 2006 were recorded based on the
intrinsic value of the conversion feature.  Since the shares of the
Company’s common stock were not readily convertible to cash at December 31,
2006, neither the warrants nor beneficial conversion feature were subject to
SFAS 133 derivative accounting through December 31, 2006. Due to the liquided
damages discussed in the following paragraph, the warrants were recorded as a
liability through December 31, 2006 based on the guidance in EITF
00-19.
  F-14
 3.
 NOTE PAYABLE AND LONG-TERM DEBT (CONTINUED)
 
 In
December 2006, the FASB issued Staff Position FSP EITF 00-19-2, "Accounting for
Registration Payment Arrangements". This pronouncement was adopted by the
Company effective January 1, 2007, which
resulted in reclassification of these warrants, valued at $1,479,000 at January
1, 2007, from liabilities to equity.
 
 A
separate agreement with holders of the Notes provided that the Company would pay
liquidated damages to the holders of the Notes if a registration statement was
not filed and declared effective by certain dates in 2006.  In 2006, the
Company agreed to issue 984,000 shares of common stock to the holders of the
Notes to settle such damages, assuming the registration statement was effective
by October 30, 2006.  We recorded the estimated fair value of these shares
of $1,971,987 as a liability and nonoperating expense as of December 31, 2006.
  This obligation was adjusted to its estimated fair value of $265,680 as
of December 31, 2007.  Holders of the Notes are entitled to additional
liquidated damages for delays in the effectiveness of the registration statement
to register the warrants and conversion shares beyond October 30, 2006.
 Accordingly, the company has accrued financing penalty fees due to non
compliance in the amount of $207,400 for delays in the effectiveness of the
registration statement to register the warrants and conversion shares beyond
October 30, 2006. Additional  liquidated damages continued to accrue
through December 31, 2007, which were settled as discussed below.
 
 On
February 23, 2006, the 10% Senior Secured Convertible Notes Agreement was
amended and restated.  In connection therewith, the aggregate outstanding
principal balance of the Notes increased by $800,000 to $6,800,000 and
additional five-year warrants for the purchase of 266,667 shares of common stock
were issued.  The warrants were valued at $130,778 and the intrinsic value
of the Notes’ beneficial conversion feature was $130,778.  The percentages
and timing of premiums on principal repayment as originally stated were not
changed.  The Company’s amortization of debt discounts was adjusted
accordingly.
 
 On
December 19, 2007, the Company executed an agreement with CAMOFI to modify the
terms of all of the notes payable to CAMOFI.  The agreement specifies,
among other things, that a new note payable in the amount of $2,027,123 would be
issued to CAMOFI for registration rights penalties and accrued
interest.  The new agreement requires monthly payment of interest of
10% cash beginning April 1, 2008 and 2% increase in notes
payable.  Principal payments are $250,000 beginning August 1, 2008,
with the remaining balance due November 10, 2010.  The agreement also
provided for the issuance of 561,087 shares of common stock to
CAMOFI.  The issuance of the stock has been recorded at its estimated
fair value of $156,543 at December 19, 2007, and resulted in a beneficial
conversion feature with an intrinsic value of $156,543, which was recorded
consistent with the preceding discussion.  The agreement also extended
the exercise period for the warrants for an additional five years, and required
the Company to raise additional equity by March 31, 2008.  The Company
was in violation of this covenant as of April 1, 2008. However, since the
definitive documents are still being negotiated it is possible that the
amendment can be modified to allow more time for the equity to be raised and
avoid the default.   The documents effectuating the modification
described in the Letter of Intent were executed and delivered by the Company and
dated as of December 31, 2007.
 
 Line of
Credit to CAMOFI
 
 On August
31, 2006, the Company entered into an agreement with CAMOFI Master LDC for a
line of credit secured by the Company’s accounts receivable.  The maximum
borrowing on the line of credit is the lesser of $1.5 million or 80% of total
accounts receivable outstanding less than 90 days.  The line of credit
bears interest at prime plus 4%. The Letter of Intent with CAMOFI discussed
above also extended the maturity date of the line of credit to November 10,
2010.
 
 In
connection with the line of credit, the Company issued 750,000 warrants to
purchase registered shares of the Company’s common stock, exercisable for 5
years at a price of $0.01 per share which was recorded as debt discount and
obligations to issue equity instruments.  The credit facility
agreement contains debt covenants similar to those contained in the Senior
Secured Convertible Notes Agreement.
  F-15
 The
scheduled maturities of long-term debt at December 31, 2007 are as
follows:
 
 Year
      ended December 31,
                
                Amount2008
                
                $
                2,230,0002009
                
                
                3,025,0002010
                
                
                4,842,324Total
                
                $
                10,097,324
  4. 
Property and Equipment
 
 Components
of property and equipment consist of:
 
 December
      31,
                2007
              
              
              December
      31,
                2006Land
              
              $
              1,071,765
              
              
              $
              746,765Buildings
              
              
              513,045
              
              
              
              495,682Equipment
              
              
              1,008,561
              
              
              
              1,006,793Vehicles
              
              
              960,448
              
              
              
              1,052,655Office
      furniture and equipment
              
              
              53,514
              
              
              
              41,896Assets
      not in service
              
              
              356,511
              
              
              
              400,4683,963,844
              
              
              
              3,744,259Accumulated
      Depreciation
              
              
              (629,382
              )
              
              
              (295,218
              )Net
      Property and Equipment
              
              $
              3,334,462
              
              
              $
              3,449,041
 
 F-16
 
 5.
 OTHER ASSETS
 
 Other
current assets consist of the following at December 31:
 
 2007
              
              
              2006Prepaid
      expenses
              
              $
              264,533
              
              
              $
              460,905Certificate
      of deposit maturingMay
      6, 2008, required by Missouri Department of Environmental
      Quality
              
              
              241,664
              
              
              
              233,003Total
      other current assets
              
              $
              506,197
              
              
              $
              693,908Other
      long-term assets consist of the following:2007
              
              
              2006Permit,
      net of accumulated amortization of $80,051 and $43,886
      respectively
              
              $
              281,595
              
              
              $
              317,760Debt
      financing costs, net of accumulated amortization of $0 and $726,678,
      respectively
              
              
              0
              
              
              
              736,486Deposit
      held in escrow account as required by state in connection with certain
      environmental obligations
              
              
              400,000
              
              
              
              400,000Other
              
              
              5,000
              
              
              
              2,500Total
      other assets
              
              $
              686,595
              
              
              $
              1,456,746
 
 Permit
represents an intangible asset for the unamortized cost of environmental permits
held by the Company.  This permit is amortized over an estimated life of 10
years.  The permit is currently in the process of being renewed for a 10
year period.  Amortization expense was $36,165 and $36,166 for the years
ended December 31, 2007 and 2006, respectively.
 
 The above
certificate of deposit and a corresponding letter of credit are required by the
Missouri Department of Environmental Quality to ensure that any environmental
contamination that may occur on the Company’s Waste Express property will be
remediated.
 
 Capitalized
debt financing costs are amortized over the term of the related debt.  Debt
financing costs include cash payments of $598,364 for the year ended December
31, 2006, for professional fees and closing costs associated with the Senior
Secured Convertible Notes, subsequent amendment and line of credit agreement.
 Debt financing costs also include the estimated value of warrants to
purchase approximately 3,500,000 shares of common stock at an exercise price of
$0.50 per share with a 5-year term, issued to Capitoline Financial Group, which
is owned by a director of the Company. Amortization expense was $831,487 and
$690,645 for the years ended December 31, 2007 and 2006,
respectively.
 
 F-17
 
 6.  NON
CASH COMPENSATION – STOCK OPTIONS
  On
November 13, 2007, the Board of Directors approved the 2007 Incentive Stock Plan
(the “Plan”), which provided for the issuance of stock options, stock
appreciation rights, restricted stock, performance shares and performance units
to key employees, directors and consultants.  A Committee of the Board
of Directors was established to administer the Plan.  The maximum
number of shares that may be issued under the Plan is 3,000,000 shares, and
200,000 shares per year to each participant.  For Incentive Stock
Options (“ISO”), the exercise price is based on the fair market value of the
common stock at the date the options are granted.
  The
Company has granted options under the Plan to purchase 1,691,250 shares of
common stock at an exercise price of $0.75 to $0.76 per share.  The
options granted vest in one year and expire in November 2013.
  In 2007,
the Company also granted options to the Company’s chief operating officer to
purchase 100,000 and 250,000 shares of common stock at an exercise price of $.50
and $1.50, respectively.  The options vested immediately and expire 10
years from the date granted.  These options were recorded at their
estimated fair value of $315,000, and expensed in 2007.
  The
Company has adopted the fair value recognition provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 123R, “Share Based Payment”, which
requires the expensing of the fair value of stock-based compensation
awards.  As permitted by SFAS 123R, the expense related to the options
granted in 2007 has been allocated over the vesting period.  The
option expense has been reflected in Non Cash Compensation Expense in the
accompanying Consolidated Statement of Operations.  As of December 31,
2007, there was $292,027 of total unrecognized compensation cost related to
nonvested stock options under the Plan.  That cost will be recognized
in 2008.
 
 The
weighted-average fair values at date of grant for all stock options granted
during 2007 was $0.47, and was estimated using the Black-Scholes option pricing
model with the following weighted-average assumptions:
  Expected
      volatility
              57%Expected
      life in years
              5Dividend
      yield
              0%Risk
      free interest rate
              2.38
      to 4.92%
 
 The
Company uses the Black-Scholes valuation model to value stock
options.  Historical stock prices were used as the basis for the
volatility assumption.  The assumed risk-free rate was based on US
Treasury rates in effect at the time of the grant.  The expected
option life represents the period of time that the options granted are expected
to be outstanding.
 
 The
Company has accounted for the stock options granted in 2007 by amortizing the
expense over the vesting period of the options.  In 2007, $708,709 has
been reflected as Non Cash Compensation Expense in the accompanying consolidated
statement of operations.  The remaining amount of $249,922 will be
expensed in 2008.  All of the options that were granted during 2007
were outstanding at December 31, 2007, no options had been forfeited, expired or
exercised during 2007.
  F-18
 
 The
following table summarizes the options outstanding at December 31,
2007:
  Exercise
      Price
              Number
      of
                SharesOutstanding
              Weighted-AverageRemaining
                Contractual
      Life in Years
              Weighted-Average
                Exercise
      PriceNon
      vested options:$.75
      - $.76
              720,625
              5.9
              $0.75Vested
      options:$.75
      - $1.50
              1,320,625
              6.9
              $0.87
 
 7.
 COMMITMENTS AND CONTINGENCIES
 
 The
Company is a party to various legal and regulatory proceedings arising in the
ordinary course of its business, none of which, in management’s opinion, will
result in judgments which would have a material adverse effect on the Company’s
financial position.
  On
December 11, 2006, a complaint was filed by a former employee and his company,
alleging unjust termination and seeking payment of his monthly salary of $10,000
for an additional 23 months and other unquantifiable damages.  Based
upon the Company’s initial investigation of the circumstances of the action,
management believes that the suit is without merit.  An estimate of
the possible loss ranges from $0 to $230,000.  No amount has been
accrued for this contingency at December 31, 2007.
  On July
18, 2007 a complaint was filed in the district court of Tulsa County, in the
State of Oklahoma naming Amerex Companies Inc. by two former employees who were
terminated for cause in February 2007. The complaint alleges that these
employees were entitled to incentive bonuses based on their performance during
the twelve month period ending December 31, 2006. Amerex does not believe that
any amounts are owed to these employees under their agreements and has responded
to the complaint and filed counterclaims. Based upon the Company’s initial
investigation of the circumstances of the action, management believes that the
suit is without merit.  An estimate of the possible loss ranges from
$0 to $40,000.  No amount has been accrued for this contingency at
December 31, 2007.
  On August
23, 2007 a complaint was filed in the district court of Tulsa County in the
State of Oklahoma naming Amerex Companies Inc. by Yaffe Metals, Inc. The
complaint alleges that Yaffe had an exclusive right to purchase the metal
salvaged from the Pryor facility and that Amerex breached the agreement in
selling a portion of the metal to other companies. The case is currently in
discovery and management does not believe that Yaffe was entitled to purchase
the metal on an exclusive basis and has filed counterclaims. Yaffe has not
indicated the amount of damages that it is seeking. Based upon the Company’s
investigation of the circumstances of the action, management believes that the
suit is without merit.  An estimate of the possible loss ranges from
$0 to $200,000. No amount has been accrued for this contingency at December
31, 2007.
  F-19
  On
December 15, 2005 a complaint was filed in the district court of Tulsa County,
State of Oklahoma naming Amerex Companies, Inc. along with Universal Wireline
Equipment, LLC, a Company controlled by Richard Coody a director, South Bridge
Business Resources, Inc., a Company controlled by Ronald Brewer, one of our
former directors and our former Chief Operating Officer, and Mr. Coody, Mr.
Brewer and Mr. McMahon as individuals. Mr. McMahon is our Vice President of
Operations by Envirosolve, LLC.
  The
complaint alleges, among other things, that Amerex Companies, Inc., was a party
to a confidentiality agreement signed on July 24, 2004 by Mr. Coody on behalf of
an unrelated company, Universal Wireline Equipment, LLC. The plaintiff who is a
direct competitor of Amerex alleges that Amerex was obligated by the terms of
the Universal/Envirosolve Confidentiality Agreement and that Amerex violated the
terms of the Confidentiality Agreement and utilized proprietary information
shared during Universal’s due diligence process resulting in damages to
Envirosolve, LLC. Amerex was not informed of the existence of the
Universal/Envirosolve Confidentiality Agreement, but notwithstanding such
knowledge denies that it utilized any confidential information neither to the
detriment or Envirosolve nor the benefit of Amerex. Based upon the Company’s
investigation of the circumstances of the action, management believes that the
suit is without merit.  An estimate of the possible loss ranges from
$0 to $500,000.  No amount has been accrued for this contingency at
December 31, 2007.
  8.
 FAIR VALUE OF FINANCIAL INSTRUMENTS
 
 For
certain of the Company’s financial instruments, including cash and cash
equivalents, restricted cash, accounts receivable, accounts payable and other
accrued liabilities, the carrying amounts approximate fair market value due to
their short maturities.  The following table shows the fair value and
carrying amount of debt at December 31, 2007 and 2006.
 
 2007Fair
      Value
              Carrying
      AmountPOOF
      Note Payable
              $292,000
              $617,500Notes
      payable to CAMOFI
              8,472,691
              8,472,691Line
      of credit to CAMOFI
              1,186,401
              1,186,401Convertible
      note payable
              25,000
              25,000
 
 
 2006Fair
      Value
              Carrying
      AmountNote
      payable to CAMOFI
              $5,414,421
              $5,414,421Line
      of credit to CAMOFI
              970,811
              970,811
  At
December 31, 2007 and 2006, the estimated fair values of the notes and line of
credit to CAMOFI approximated their carrying amounts.  The estimated
fair value of the POOF debt was based on an independent appraisal.
  The fair
values of the Company’s debt instruments were estimated by the Company.  
Fair values of the CAMOFI Senior Secured Convertible Notes, notes payable and
line of credit were estimated considering that the debt was issued or amended
relatively recently (i.e. within two weeks to two months of the applicable
balance sheet date), and the absence of significant changes in interest rates or
the Company’s credit risk during that time.  Fair values of the other
notes payable were estimated to be its face value based on the terms of the
agreement and its recent issuance. The estimated fair values may not be
representative of actual values of the financial instruments that could have
been realized at year-end or may be realized in the future.
  F-20
 9.
 OTHER LIABILITIES
 
 In
connection with issuance of a note payable, the Company had agreed, as of
December 31, 2005, to issue $400,000 in unrestricted shares and $125,000 in
restricted shares of common stock.  This obligation was subsequently
settled through an agreement to issue 500,000 shares of common stock to be
registered for resale and 400,000 restricted shares and through delivering
252,000 shares of common stock currently trading, valued at $126,000, which had
been purchased from the principal shareholder of Airguide prior to the merger in
July 2006. The proceeds from the note payable were allocated between the note
and obligation to issue stock based on their estimated fair values with $242,498
assigned to the stock obligation and recorded as a liability.  The
liability was converted to equity through the issuance of shares of stock in
September 2006.
 
 In
connection with financing consulting services performed in 2005 (see additional
information in Note 14), the Company agreed to issue to a consultant a certain
number of warrants based on the number of shares of common stock that may be
directly or indirectly issued as a result of the consultant’s involvement.
 The initial fair value of the estimated number of warrants to be issued
was estimated to be $322,318 and recorded as debt finance costs - other assets
and obligations to issue equity securities in 2005.  The liability was
remeasured until the warrants were issued in December 2006.
 
 The
Company failed to pay certain payroll taxes to the Internal Revenue Service
during 2007 and various states for 2006 and 2007.  The payroll taxes
due at December 31, 2007 amounted to approximately $475,000 and estimated
penalties and interest amounted to approximately $130,000.  These
amounts have been recorded in accrued expenses at December 31,
2007.
 
 10.
STOCKHOLDERS’ EQUITY
 
 During
2007, the Company agreed to issue 245,000 shares of common stock to nonemployees
in exchange for consulting services rendered, which has been recorded at their
estimated fair value of $192,937.  During 2007, the Company issued
300,000 shares of common stock to employees for discretionary bonuses, which
were recorded at their estimated fair value of $155,250.  These
amounts are reported as non cash compensation in the accompanying consolidated
statement of operations.
 
 11.
SEGMENT REPORTING
 
 The
Company’s operating segments are defined as components for which separate
financial information is available that is evaluated regularly by the chief
operating decision maker. The Company’s reportable segments consist of Waste
Express and Amerex.  Amerex revenues consist primarily of waste management
services similar to those performed by Waste Express.
 
 The
accounting policies of the operating segments are the same as those described in
the summary of significant accounting policies.  The Company manages its
business segments primarily based on earnings before income taxes.
 
 Selected
financial information for reportable segments for the year ended December 31,
2007 is as follows:
 
 Waste Express
              
              
              Amerex
              
              
              Eliminations
              
              
              ConsolidatedRevenues
              $
              1,970,107
              
              
              $
              6,335,389
              
              
              
              -
              
              
              $
              8,305,496Operating
      income (loss)
              
              (457,324
              )
              
              
              (1,200,790
              )
              
              
              -
              
              
              
              (1,658,114
              )Other
      income (expense)
              
              847
              
              
              
              150,837
              
              
              
              -
              
              
              
              151,684Interest
      expense, penalties and amortization of debt costs and debt
      discount
              
              (19,250
              )
              
              
              (5,193,510
              )
              
              
              -
              
              
              
              (5,612,760
              )Income
      (loss) from continuingoperations
              
              (475,727
              )
              
              
              (6,243,463
              )
              
              
              -
              
              
              
              (6,719,190
              )Income
      from discontinued operations
              
              -
              
              
              
              (394,908
              )
              
              
              -
              
              
              
              (394,908
              )Net
      income (loss)
              
              (475,727
              )
              
              
              (6,638,371
              )
              
              
              -
              
              
              
              (7,114,098
              )Segment
      assets
              
              1,513,989
              
              
              
              5,719,698
              
              
              
              (424,449
              )
              
              
              6,809,238Expenditures
      for property and equipment
              
              -
              
              
              
              69,099
              
              
              
              -
              
              
              
              69,099
  F-21
 Selected
financial information for reportable segments for the year ended December 31,
2006 is as follows:
 
 Waste Express
              
              
              Amerex
              
              
              Eliminations
              
              
              ConsolidatedRevenues
              
              $
              3,585,939
              
              
              $
              4,140,160
              
              
              
              -
              
              
              $
              7,726,099Operating
      income (loss)
              
              
              261,992
              
              
              
              (1,895,994
              )
              
              
              -
              
              
              
              (1,634,002
              )Other
      income (expense)
              
              
              (1,165
              )
              
              
              136,812
              
              
              
              -
              
              
              
              135,647Interest
      expense, penaltiesand amortization of debt costs and debt
      discount
              
              
              (702
              )
              
              
              (3,683,456
              )
              
              
              -
              
              
              
              (3,684,158
              )Income
      (loss) from continuingOperations
              
              
              260,484
              
              
              
              (5,442,997
              )
              
              
              -
              
              
              
              (5,182,513
              )Income
      from discontinued operations
              
              
              -
              
              
              
              (35,931
              )
              
              
              -
              
              
              
              (35,931
              )Net
      income (loss)
              
              
              260,484
              
              
              
              (5,478,928
              )
              
              
              -
              
              
              
              (5,218,444
              )Segment
      assets
              
              
              1,826,358
              
              
              
              7,911,031
              
              
              
              (261,916
              )
              
              
              9,475,473Expenditures
      for property and equipment
              
              
              153,955
              
              
              
              294,936
              
              
              
              -
              
              
              
              448,891
  12.
INCOME TAXES
 
 The
Company had no income tax expense for the years ended December 31, 2007
and  2006.
 
 Significant
components of the net deferred tax asset are as follows:
 
 December
      31,
                2007
              
              
              December
      31,
                2006Deferred
      tax assets:Estimated
      net operating loss carryforwards
              
              $
              3,442,103
              
              
              $
              1,620,081Allowance
      for bad debts
              
              
              5,700
              
              
              
              8,558Property
      and equipment
              
              
              127,618
              
              
              
              0Start-up
      costs deferred for tax purposes
              
              
              24,869
              
              
              
              27,468Gross
      deferred tax assets
              
              
              3,600,290
              
              
              
              1,656,107Valuation
      allowance
              
              
              (3,569,743
              )
              
              
              (1,582,229
              )30,547
              
              
              
              73,878Deferred
      tax liabilities -Property
      and equipment
              
              
              0
              
              
              
              (38,529
              )Intangible
      assets
              
              
              (30,547
              )
              
              
              (35,349
              )Gross
      deferred tax liabilities
              
              
              (30,547
              )
              
              
              (73,878
              )Net
      deferred tax asset
              
              $
              -
              
              
              $
              -
 
 F-22
 
 12.
 INCOME TAXES (CONTINUED)
 
 The
valuation allowance serves to reduce net deferred tax assets to an amount that
will more likely than not be realized.
 
 Estimated
net operating losses generated in 2005, 2006 and 2007 of $9,058,166 will expire
in 2025, 2026, and 2027.
 
 A
reconciliation of income taxes at the federal statutory rate to income tax
expense for the years ended December 31, 2007 and 2006 is as
follows:
 
 2007
              
              
              2006Income
      tax benefit at statutory rate
              
              $
              2,418,793
              
              
              $
              1,826,455Debt
      discount amortization andremeasurement
      of equity obligations
              
              
              (626,341
              )
              
              
              (508,874
              )Penalties
              
              
              (48,943
              )
              
              
              (50,570
              )Meals
      and entertainment
              
              
              (8,979
              )
              
              
              (14,019
              )State
      income taxes
              
              
              281,718
              
              
              
              203,521Other
              
              
              (29,990
              )
              
              
              -Impact
      of acquisition on valuation allowance
              
              
              -
              
              
              
              -Increase
      in valuation allowance
              
              
              (1,986,258
              )
              
              
              (1,456,513
              )$
              -
              
              
              $
              -
 
 
 13.
 CONCENTRATIONS
 
 Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of trade receivables with a variety of customers.
 The Company generally does not require collateral related to receivables.
 During the year ended December 31, 2007 and 2006, the Company had revenue
from three and four customers comprising approximately 71% and 61% of total
revenues, respectively, as summarized by segment in the following
tables:
 
 2007
              Waste
      Express
              AmerexCustomer
      A
              $2,809,499
              $0Customer
      B
              0
              2,162,346Customer
      C
              0
              932,650
 
 2006Customer
      A
              $1,997,404
              $0Customer
      B
              101,500
              923,107Customer
      C
              0
              851,048Customer
      D
              0
              773,808
 
 At
December 31, 2007 and December 31, 2006, accounts receivable from these three
customers comprised approximately 61% and 69% of total accounts receivable,
respectively.
 
 F-23
  14.
 RELATED PARTY TRANSACTIONS
 
 During
the period from inception (May 2, 2005) through December 31, 2005, the Company
agreed to issue warrants to purchase shares of common stock at an exercise price
of $0.50 per share initially valued at $322,318, to a company for which the
principal of that company also serves on the Company’s board of directors.
  The warrants were issued in December 2006. The consulting company agreed
to give half of these warrants to the president of the Company as compensation
for work performed by the president to the Company in 2006.  In
accordance with SEC Staff Accounting Bulletin Topic 5T, the Company has recorded
additional compensation expense based on the estimated fair value of these
warrants at the grant date.
  During
the year ended December 31, 2006, the Company recorded $558,000 in consulting
fees plus expenses as debt finance costs paid to this consulting company as well
as $6,000 in rent and $15,000 in other consulting fees.  In 2007 we
paid 3,000 to this consultant for rent.
 During
the year ending December 31, 2006, the Company paid consulting fees of $43,000
to a board member of the Company. The Company incurred expenses of $30,664 for
miscellaneous goods and services provided by a company partially owned by a
director of the Company. There were no payments to this board member or the
related company in 2007.
 
 During
the year ended December 31, 2007, the Company paid consulting fees of $15,000 to
a board member of the Company. The Company incurred expenses of $4,143 for
miscellaneous goods and services provided by a company partially owned by a
director of the Company during the year ended December 31, 2007.
 
 In August
2006, the Company entered into a month-to-month lease with Tulsa Equipment
Sales, Inc. for use of a 25 ton crane in connection with the demolition and
salvage of materials at our Pryor, OK facility. The cost per month is $5,000.
One of the Company’s directors is an owner of Tulsa Equipment Sales Inc. During
the years ended December 31, 2007 and 2006, the Company incurred expenses of
$15,000 and $25,000, respectively, under this lease. This lease was terminated
in March 2007.
 
 During
2007, the Company agreed to issue 20,000 shares of common stock to a former
director of the Company for consulting services rendered for a total value of
$15,750.
 
 In 2007,
the Company entered agreements with Mr. Richard Coody, a former director, and
Mr. Ron Brewer, a former director and officer, in which Mr. Coody and Mr. Brewer
agreed to return 4,805,000 shares and 2,750,000 shares, respectively, of the
Company’s stock which they owned to the Company in exchange for indemnification
against any claims that may be brought against them in their prior roles with
the Company.  Mr. Coody’s 4,805,000 shares were returned and retired
in 2007, while Mr. Brewer’s shares were returned and canceled in February
2008.  Considering the nature of the transactions involving a
nonreciprocal transfer of nonmonetary assets to owners, the Company determined
that no income recognition was appropriate and to record the transfers based on
the book value of the indemnification given, which resulted in no net entry
apart from retirement of the stock against paid-in capital.
 
 On August
2, 2007, the Company entered into agreements with Mr. Richard Coody and Mr.
Ronald Brewer in which they each agreed to pledge 1,450,000 shares of stock
which they own to collateralize a $750,000 6-month bridge loan to the Company
from Professional Offshore Opportunity Fund, LTD (see Note 4). In addition to
the pledge of the stock as collateral, Mr. Coody and Mr. Brewer agreed to pay
the Company $850,000 each in exchange for a full release from any and all future
claims the Company may have against them as a result of a dispute among the
parties with regard to management of daily operations. Messrs. Coody and Brewer
will receive credit against their respective obligations to the Company for any
shares of theirs that are sold under the pledge.  The Company has
agreed to pay to Mr. Coody and Mr. Brewer amounts equal to 22% of the proceeds
of any of their shares sold by POOF under the pledge.  The funds will
be retained in an escrow account and disbursed during 2009.
 
 F-24
 
 15.
 SIGNIFICANT ASSET ACQUISITIONS AND DISCONTINUED OPERATIONS
 
 On
February 1, 2006, the Company acquired certain fixed assets located in Pryor,
Oklahoma from Kaiser Aluminum and Chemical Company for $700,000 plus related
costs of $12,070. Properties acquired contain asbestos, which the Company
initially estimated the cost to remove to be $875,000, such estimate being
recorded as an environmental remediation liability. The total cost to remediate
the asbestos was estimated to be $923,000 at December 31, 2006.  As
part of the asset purchase agreement, the Company assumed all obligations for
removing the asbestos within 18 months, and was required to provide an $800,000
letter of credit to the seller.  If the asbestos obligations have not been
settled within the required period, the seller may draw upon the letter of
credit for any costs incurred by the seller to complete the asbestos removal and
any damages permitted to be recovered under the agreement.  The Company
placed approximately $800,000 in a separate bank account as collateral to the
bank issuing the letter of credit.  The $1,587,070 fixed asset cost was
allocated to the individual assets based on their estimated fair values. The
Company identified selected assets to sell, to which it assigned a cost of
$656,062.  As a result of sales, this amount had been reduced to
$363,948, which was presented as assets held for sale at December 31, 2006 and
included in the Amerex segment. Since these assets are considered as a separate
asset group to be disposed, they were classified as a discontinued operation.
The Company sold all of these assets held for sale by the end of 2007. Net
proceeds from the disposal of these assets are included in the caption “loss
from discontinued operations”.  Loss from discontinued operations was
$0.03 per share and less than $0.01 per share in 2007 and 2006,
respectively.  The Company is now currently attempting to sell the
Pryor real estate and remaining assets not previously identified as held for
sale.
 
 On April
27, 2006, the Company acquired trucks, vehicles and certain equipment from
Environmental Remediation Specialists, Inc. (ERS) for $1,200,000 plus related
costs of $5,645.
 
 16. 
SUBSEQUENT EVENT
 
 In March
2008, the Company has entered into an agreement to acquire X-Interchange Corp, a
provider of transportation and industrial consulting services with expertise in
railroad transportation.  The proposed acquisition remains subject to
successful completion of due diligence, financing and agreement on other
terms.
  
  Item
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
 
 Item
8A. CONTROLS AND PROCEDURES
 
 As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end
of the period covered by the annual report, we have carried out an evaluation of
the effectiveness of the design and operation of our company’s disclosure
controls and procedures. This evaluation was carried out under the supervision
and with the participation of our company officers and directors. Based upon
that evaluation disclosure controls and procedures are deemed adequate as of the
end of the period covered by this report. There have been no significant changes
in our internal controls over financial reporting that occurred during our most
recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
 
 Disclosure
controls and procedures and other procedures that are designed to ensure that
information required to be disclosed in our reports or submitted under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time period specified in the Securities and Exchange Commission’s
rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed in our reports filed under the Securities Exchange Act of 1934 is
accumulated and communicated to management including our president and financial
officer as appropriate, to allow timely decisions regarding required
disclosure.
  70
 Management’s
Report of Internal Control over Financial Reporting.
  We are
responsible for establishing and maintaining adequate internal control over
financial reporting in accordance with Exchange Act Rule 13a-15. With the
participation of our Chief Executive Officer and Chief Financial Officer, our
management conducted an evaluation of the effectiveness of our internal control
over financial reporting as of December 31, 2007 based on the criteria
established in Internal
Control-Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management
concluded that our internal control over financial reporting was effective as of
December 31, 2007, based on those criteria.  Management is currently
addressing several issues which may be material weaknesses in its internal
control over financial reporting – a.) The Company is currently without a
Controller, CFO, or senior financial expert. Our former controller, who was a
CPA, left the Company in December of 2007. We are currently soliciting
candidates for the position and are speaking with two promising prospects.
Management anticipates that the position will be filled during Q2 of 2008. b.)
Management believes that the Company is in need of another bookkeeper with
experience in Quickbooks. Invoicing is often slow and receivables con be
collected sooner with adequate staffing. c.) During 2007, we had difficulty
matching payments to invoices because of the inability of the Lockbox to provide
timely information. In 2008 this may have been rectified as the Bank is now
scanning fronts and back of checks and making them available on line the day
following their receipt.
  A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.
  This
annual report does not include an attestation report of the Company’s registered
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission
 
 71
 
 ITEM
8B. OTHER INFORMATION
 
 Subsequent
Events:
  In
February of 2008 the Department of Justice Drug Enforcement Agency awarded new
contracts for these services covering [xx] contract areas including [xx] of
Amerex’s contract areas. We were not awarded any of these contracts. There are,
however, [xx] areas which have not yet been awarded, although management does
not expect that the Company will be awarded any of these remaining contracts.
Despite the loss of this contract, management expects to continue to receive
most of the DEA waste from the successful contractors. See Pat II, Item 6,
above, “Subcontractors”.
 
 PART
III
 
 ITEM
9. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
 (a)Our directors and
executive officers are:
 
 Name
              
              Age
              
              Year
      Became An
                Executive
                Officer
      or Director*
              
              PositionsNick
      Malino
              
              57
              
              2005
              
              Director
      and CEOStephen
      K. Onody
              
              55
              
              2007
              
              Director
      and Chief Operating OfficerRobert
      Roever
              
              49
              
              2006
              
              DirectorPhilip
      Getter
              
              70
              
              2007
              
              DirectorJohn
      J. Smith
              
              57
              
              2007
              
              DirectorAlexander
      Ruckdaeschel
              
              35
              
              2007
              
              Director
 
 Set forth
below is a brief description of the background and business experience of our
executive officers and directors:
  Nick Malino –
Director and Chief Executive Officer.  Nick Malino became a member
of our board of directors and our Chief Executive Officer on July 5, 2006 in
connection with our acquisition of Amerex.  He has been a member of the
board of directors of Amerex and its Chief Executive Officer since September
2005.  Since July 2001 he has been the Managing Director of Tango Equity,
Inc., a New York City based financial advisory firm.  From November 1998
until November 2000, he was COO and CFO of Streamedia Communications, Inc., a
New York City based Internet based media and media services firm .   From
October 1992 to November 1998 he held the positions of president and CEO of ATC
Group Services, Inc., a $160 million environmental engineering services company
based in New York City. During Mr. Malino’s tenure at ATC, the company grew from
$9 million in revenues and eight offices to $160 million in revenues and 73
offices, and led the environmental engineering and consulting sector in
operating income for 12 consecutive quarters, with stockholder return exceeding
150% CAGR. From November 1981 to November 1992, he held the position of General
Manager in the Laboratory Sciences division of MetPath, Inc., a subsidiary of
Corning Inc., based in Teterboro, New Jersey and engaged in the business of
providing clinical laboratory procedures for health care practitioners.  At
MetPath, Mr. Malino was primarily involved in mergers and
acquisitions.
  72
  Mr.
Malino has raised over $250 million in various debt and equity offerings and has
been directly involved in mergers and acquisitions both on the buy and sell side
of public and private companies with total revenues of over half a billion
dollars. He also has experience in management buyouts, leverage buyouts, initial
public offerings, and public and private placements of debt and equity. Mr.
Malino received a Master’s Degree in Biology in 1976 and an MBA in Finance
in1981, both from the University of Bridgeport.
  Stephen K. Onody
– Director and Chief Operating Officer.   Mr. Onody became
the Chief Operating Officer and a Director of the Company in
2007.  Mr. Onody is a Chairman of the Board, Chief Executive and life
science entrepreneur in both publicly traded NASDAQ and privately held
companies. He has over 30 years of corporate and entrepreneurial leadership in
creating, commercializing and building value of medical technology companies in
multiple medical disciplines as well as extensive experience in turn-around
situations. Mr. Onody has a proven ability to increase financial performance and
shareholder wealth. Mr. Onody is founder, Chief Executive Officer of MEDdevice
Acquisition Corporation, a company formed to acquire medical device companies
and technologies and Onody Associates LLC, a venture backed strategic partner
life science companies providing guidance and leadership from development
through commercialization. Onody Associates also specializes in developing and
implementing strategies for accelerating corporate growth and valuation through
networks, distribution, partnerships, mergers and acquisitions and financing
strategies.  In addition, Mr. Onody is a CEO Operating Healthcare
Executive for various investment funds and private merchant banks. Mr. Onody has
been a founding partner in orthopedic, biologics, biotech and cardiovascular
company’s (Microphage, Scandius Medical, iBalance, Inc., Cascade Medical). Mr.
Onody was formerly Chairman of the Board, President and Chief Executive Officer
of Colorado MEDtech, Inc., an end-user medical imaging and minimally invasive
products company and a provider of advanced medical and biotechnology design,
software, product development and manufacturing services.
  Craig McMahon –
Vice President.Mr. McMahon is our Vice President of Operations and is
responsible for the day to day technical operations of the Company. He as a key
leader at two major competitors over 20 yrs of  Environmental Services
and Water Plant Experience. He also managed the largest waste fuel terminal and
a key manger for the largest hazardous waste processing facility in the country.
Mr. McMahon has a track record of providing exceptional customer service through
coordinated management of his operations team and has made key improvements in
engineering, maintenance, transportation as well as all other areas of
operations. Mr. McMahon held management positions previously with Safety-Kleen,
Rineco Chemical and Pollution Control Industries and has a Bachelor’s Degree in
Mechanical Engineering and is well versed in all aspects of environmental
regulations and operations.
  73
  Robert Roever –
Director.Robert Roever was made a member of the board of directors of the
company in July 5 2006. Mr. Roever has spent the last ten years in investment
banking and finance in New York City.  Currently as President of Capitoline
Advisors, Inc.(2003-Present), and investment banking firm headquartered in New
York City that specializes in consulting small to mid cap public companies in
all facets of business development including strategic financing alternatives,
mergers and acquisitions , developing business plans , consult on corporate
finance and investment banking. Additionally, Mr. Roever has served as an
independent contractor for Dodge Clark since June, 2006 – present. Prior to
Capitoline advisors, (June 2002 to present) he operated Madison Equity, Inc.,
a  entity which he wholly-owned and which operating in the investment
banking business and was headquartered in New York City, and was an independent
contractor to Gunn Allen financial services in 2004 and 2005 and for Spencer
Clark during 2003. He served as a Senior Vice President and Managing Director at
multiple Broker Dealers with highlights at Invest Private (2001-2002) running
the Private Equity Group and a Senior Vice President at Prime Charter
(1999-2001) a boutique New York brokerage company. Mr. Roever has provided
strategic advisory and financial service for companies in the apparel, energy,
specialty construction, real estate and technology industries. Mr. Roever brings
an expertise in strategic planning, product design and development, management
with an emphasis on business development
  Philip M. Getter
– Director.  Mr. Getter is
the Managing Member of GEMPH Development LLC, an advisory firm. Recently he was
head of Investment Banking and a member of the Board of directors of Prime
Charter, Ltd. He was Administrative Assistant to the Director of U.S. Atomic
Energy Commission (1958-1959), and began his Wall Street career as an analyst at
Bache & Co. He was a partner with Shearson, Hammill & Company
(1961-1969) and a Senior Partner of Devon Securities, an international
investment banking and research boutique (1969-1975). Getter was President and
CEO of Generics Corporation of America, one of the largest generic drug
manufacturers in the U.S (1975- 1983). As Chairman and CEO of Wolins Pharmacal
(1977-1983), he led the reorganization and restructuring of one of the largest
direct to the profession distributors of pharmaceuticals. He has produced for
Broadway, television and film, has been a member of The League of American
Theatres and Producers, the Tony Administration Committee and Trustee of The
Kurt Weill Foundation for Music. Mr. Getter received his B.S. in Industrial
Relations from Cornell University. He serves on various boards of both public
and private organizations and is Chairman of the Audit Committees of EVCI Career
Colleges, International Consultants on Targeted Security, and Inksure
Technologies, Inc.
  John J. Smith –
Director.  Mr. Smith has an extensive background in both law
and management. Prior to joining the company, John served as General Counsel of
the South Dakota Public Utilities Commission. Before that he served as General
Counsel for Streamedia Communications a publicly-traded NASDAQ company which
provided B2B Internet-based content delivery and management systems. Prior to
that, he was General Counsel and head of the M&A due diligence team for ATC
Group Services, a $160 million publicly-traded (NASDAQ:NMS) environmental
engineering and consulting firms based in New York City. ATC had 73 offices and
2,000 employees. He has represented these public corporations in numerous
successful acquisition transactions. John also had a successful tenure as an
operations manager, having maintained consistent profitability in the operations
under his control. In addition to his business experience, John served as
Department Secretary of the South Dakota Department of Environment and Natural
Resources and his legal experience includes environmental, utility, natural
resources, business, transaction, employment and contract law.
  74
  Alexander
Ruckdaeschel – Director.  Mr. Ruckdaeschel has been a member of
the board of directors since 2007.  He brings extensive experience in
successful development of emerging growth companies. He is an investment
professional and portfolio manager who specializes in the identification of
small and midcap growth and value companies both in the US and Europe. Mr.
Ruckdaeschel is co-founder and principal of Blue Rock-AG, an investment
management company based in Switzerland. He is also a partner at Alpha Plus
Advisors, a US and Swiss-based hedge fund.  Mr. Ruckdaeschel has
served on the Boards of Directors of several public and private companies in
such sectors as new technology and electronics recycling companies and other
Green technology companies. From 1992 to 2000, he served in the German Military
where he participated in NATO and UN missions, and won various honors for
service.
  Potential
Conflicts of Interest
 
 There are
no material proceedings, business activities or relationships known to us to
which any of our directors, officers or affiliates, or any owner of record or
beneficially of more than 5% of any class of our voting securities, or any
affiliate of such persons is a party adverse to us or has a material interest
adverse to our interests. There are no family relationships known to us between
the directors and executive officers. We do not know of any legal proceedings
that are material to the evaluation of the ability or integrity of any of the
directors or executive officers.
 
 Although
we are not subject to the rules or requirements of the American Stock Exchange
(“AMEX”), we have, generally, looked to those rules for guidance as to which
members of our Board qualify as “independent directors.” Under these rules, an
“independent director” is a person, other than an officer or employee of the
Company or any parent or subsidiary, who has been affirmatively determined by
our Board of Directors not to have a material relationship with us that would
interfere with the exercise of independent judgment. As determined by AMEX, the
following persons would not be deemed independent:
  a)
              a
      director who is, or during the past three years was, employed by the
      Company or by any parent or subsidiary of the Company, other than prior
      employment as an interim Chairman or CEO;b)
              a
      director who accepts or has an immediate family member who accepts any
      payments from the Company or any parent or subsidiary of the Company in
      excess of $100,000 during the current or any of the past three fiscal
      years, other than compensation for board service, compensation paid to an
      immediate family member who is a non-executive employee, non-discretionary
      compensation, certain requirement payments and a limited number of other
      specified types of payments;
  75
  c)
              a
      director who is an immediate family member of an individual who is, or has
      been in any of the past three years, employed by the Company or any parent
      or subsidiary of the Company as an executive officer;d)
              a
      director who is, or has an immediate family member who is, a partner in,
      or a controlling shareholder or an executive officer of, any organization
      to which the Company made, or from which the Company received, payments
      (other than those arising solely from investments in the Company’s
      securities or payments under non-discretionary charitable contribution
      matching programs) that exceed 5% of the organization’s consolidated gross
      revenues for that year, or $200,000, whichever is more, in any of the most
      recent three fiscal years;e)
              a
      director who is, or has an immediate family member who is, employed as an
      executive officer or any other entity where at any time during the most
      recent three fiscal years any of the Company’s executive officers serve on
      that entity’s compensation committee; andf)
              a
      director who is, or has an immediate family member who is, a current
      partner of the Company’s outside auditor, or was a partner or employee of
      the Company’s outside auditor who worked on the Company’s audit at any
      time during any of the past three
years.
  Our Board
has determined that each of Messrs. Roever, Smith, Getter and Ruckdaeschel
is an “independent director.”
  Board of Composition and
Compensation
  Our board
of directors presently consists of six members: One executive, Nicholas Malino,
our CEO and Robert Roever, who own approximately 12.2% and 16.2% respectively,
of the current outstanding shares. Our COO, Stephen Onody has no shares, but
holds options to purchase up to 350,000 of common shares of stock. John Smith,
Phil Getter have no stock but have options to purchase 250,000 shares each. We
intend to pay the members of the board of directors $1,000 per
meeting.  In addition the Chairman of The Audit Committee receives
$1500 per meeting of the Audit Committee and the Chairman of the Compensation
Committee receives $1250 per meeting of the Compensation
Committee.  Committee members who are not chairpersons receive $1,000
per meeting.  Retainers of $17,000 per year are also paid to
independent directors. Cash fees and retainers are only paid to independent
directors and no cash compensation is provided for officers, employees or
affiliates who are board members.
  Term
of Office
 
 Our
Directors are appointed for a one-year term to hold office until the next annual
general meeting of our stockholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.
  76




Board Committees
  The Board
of Directors has standing Audit and Compensation Committees.
  The Audit
Committee reviews with our independent accountants the scope and timing of the
accountants' audit services and any other services they are asked to perform,
their report on our financial statements following completion of their audit and
our policies and procedures with respect to internal accounting and financial
controls. In addition, the Audit Committee reviews the independence of the
independent public accountants and makes annual recommendations to the Board of
Directors for the appointment of independent public accountants for the ensuing
year. The Audit Committee consists of two independent directors. The committee
consists of Mr. Getter, who serves as a chairman and Mr. Smith who serves as a
member.
  The
Compensation Committee reviews and recommends to the Board of Directors the
compensation and benefits of all our officers, reviews general policy matters
relating to compensation and benefits of our employees and will review and make
recommendations with regard to any employee stock option plans that may be
considered.  The Committee adopted an employee stock option plan in the
forth quarter of 2007. The Committee consists of Mr. Smith who serves as
chairman and Mr. Getter who serves as a member.
  The Board
of Directors appoints other committees as needed.
 
 Code
of Ethics
 
 We are in the process of adopting a
formal Code of Ethics at this time.
 
 ITEM
10. EXECUTIVE
COMPENSATION
 
 Summary
Compensation Table
 
 The table
below summarizes all compensation awarded to, earned by, or paid to our
executive officers  for all services rendered in all capacities to us
through and including the date of this report.
 
 SUMMARY
COMPENSATION TABLE
  Name
      and PrincipalPosition
              
              Year
              
              Salary
              
              Bonus
              
              Stock
                Awards
              
              Stock
                Options
              
              Non-Equity
                Incentive
                Compensation
                (a)
              
              AllOther
                Compensation
                (b)
              
              TotalNicholas
      J. Malino,
                Chief
      Executive Officer (1)
              
              2007
                2006
              
              180,000
                180,000
              
              0
                0
              
              0
                0
              
              198,663
              
              0
                0
              
              0
                0
              
              180,000
                180,000Steve
      Onody,
                Chief
      Operating Officer (2)
              
              2007
              
              94,108
              
              0
              
              0
              
              315,000
              
              0
              
              0
              
              94,108Craig
      McMahon,
                V.P.
      of Operations (3)
              
              2007
                2006
              
              132,000
                132,000
              
              0
                0
              
              0
                0
              
              
              
              0
                0
              
              0
                0
              
              132,000
                132,000
  77
 
  (a)  Stock
options to purchase up to 500,000 shares of our stock were issued to Mr. Malino
and and stock option awards to purchase up to 315,000 shares of our stock were
issued to Mr. McMahon.
  (b) There
were no perquisites or other personal benefits provided to these employees that
exceeded $10,000 in the aggregate, and there were no company contributions to
any defined contribution plans, life insurance premiums paid by the company for
the benefit of the employee or other compensation.
  (1)
 Mr. Malino receives an annual salary of $180,000. See “Employee
Agreements”.  In August 2005, Mr. Malino received a stock award
whereby he would receive 1,850,000 shares of common stock of Amerex, which were
issued in 2006.  Vesting occurred immediately.  The fair
value of the Company’s stock at the time of the award was minimal, since
operations had not commenced and assets owned at that time were
insignificant.
  (2)
 Mr.Onody  assumed the position of Chief Operating Officer in
June 2007 as part of his initial four-month employment agreement he was provided
with option to purchase up to 100,000 shares. Subsequently on September 7, 2007
Mr. Onody was issued another option to purchase up to 250,000
shares.
  (3)
 Mr. McMahon receives an annual salary of $132,000. See “Employment
Agreements.”  In January 2006, Mr. McMahon received a stock award
whereby he would receive 160,000 shares of common stock of Amerex, which were
subsequently issued in 2006.
 
 The
following table summarizes the options outstanding at December 31,
2007:
  Exercise
      Price
              Number
      of Shares
                Outstanding
              Weighted-Average
                Remaining
                Contractual
      Life in
                Years
              Weighted-Average
                Exercise
      PriceNon
      vested options:$.75
      - $.76
              720,625
              5.9
              $0.75Vested
      options:$.75
      - $1.50
              1,320,625
              6.9
              $0.87
  78
  Name
      andPrinicipalPosition
              
              Year
              
              Salary
              
              Bonus
              
              Stock
                Awards
              
              StockOptions
                (a)
              
              All
      Other Compensation
                (b)
              
              TotalRobert
      Roever
              
              2007
              
              0
              
              0
              
              0
              
              169325
              
              0
              
              169,3252006
              
              0
              
              0
              
              0
              
              0
              
              0
              
              0Philip
      Getter
              
              2007
              
              0
              
              0
              
              0
              
              21,656
              
              0
              
              21,656John
      J. Smith
              
              2007
              
              0
              
              0
              
              0
              
              73,325
              
              0
              
              74,325
   ITEM
11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 The
following table sets forth certain information regarding the beneficial
ownership of our common stock, our only class of outstanding voting securities
as of December 31, 2007, based on 15,148,596 aggregate shares of common stock
outstanding as of such date, by: (i) each person who is known by us to own
beneficially more than 5% of our outstanding common stock with the address of
each such person, (ii) each of our present directors and executive officers, and
(iii) all executive officers and directors as a group:


79




Name
      and Address of
                Beneficial
      Owner(1)(2)(3)
              Amount
       of
                Common Stock
                Beneficially
      Owned(1)
              Percentage of
                Common Stock
                Beneficially
      Owned(1)CAMOFI
      Master LDC
                350
      Madison Avenue
                New
      York, NY 10017
              18,911,754(4)
              53.6%Nicholas
      J. Malino(5)
              3,876,413(6)
              11.0%Robert
      Roever(7)
              4,421,213(8)
              12.5%John
      Smith(9)
              150,000
              0.4%Philip
      Getter(10)
              100,000
              0.3%Alexander
      Ruckdaeschel(11)
              -0-
              0.0%All
      officers and directors as a group (7) persons)
              26,109,180
              77.7%
 
 (1)
                Beneficial
      ownership as reported in the table above has been determined in accordance
      with Instruction (1) to Item 403(b) of Regulation S-B of the Securities
      Exchange Act of 1934.
 
 (2)
                Each
      stockholder, director and executive officer has sole voting power and sole
      dispositive power with respect to all shares beneficially owned by
      him.
 
 (3)
                All
      addresses are c/o AMEREX Companies, Inc., 1105 N. Peoria, Tulsa, Oklahoma,
      74106 ,unless
      otherwise indicated.
 
 (4)
                Represents
      13,400,000 shares of common stock issuable upon conversion of a 10% senior
      convertible note due November 21, 2007 and 4,000,667 shares of common
      stock issuable upon the exercise of warrants at an exercise price of $0.01
      per share, and, 200,000 shares issued upon the conversion of the 10%
      senior convertible note due November 21, 2007 (as amended) and 561,087
      shares issued in association with the extension of this same Note, and
      750,000 warrants issued in association with the Accounts Receivable Line
      of Credit.
 
 (5)
                Nicholas
      J. Malino is our Chief Executive Officer and a member of our board of
      directors.
 
 (6)
                Includes
      2,281,213 shares issuable upon exercise of a warrant issued to Mr. Malino.
       All of our securities owned by Mr. Malino are subject to a lock-up
      as required by the provisions of the December 19, 2007 extension of the
      10% senior convertible note (as
amended).
 
 (7)
              A
      member of our board of directors.
 
 (8)
                Represents
      2,450,000 shares issued to First Equity Trust, a trust for the benefit of
      Mr. Roever, and 1,781,213 shares issuable upon exercise of a warrant
      issued to Capitoline Advisory Group, Inc., an entity wholly-owned by Mr.
      Roever.  All of our securities owned directly or indirectly by Mr.
      Roever are subject to a one-year lock-up commencing on the effectiveness
      of the registration statement filed
on.
 
 (9)
                A
      member of our Board of
Directors.
 
 (10)
                A
      member of our Board of
Directors.
 
 (11)
                A
      member of our Board of
Directors.
 
 80
 
 The
persons named above have full voting and investment power with respect to the
shares indicated. Under the rules of the Securities and Exchange Commission, a
person (or group of persons) is deemed to be a “beneficial owner” of a security
if he or she, directly or indirectly, has or shares the power to vote or to
direct the voting of such security, or the power to dispose of or to direct the
disposition of such security. Accordingly, more than one person may be deemed to
be a beneficial owner of the same security. A person is also deemed to be a
beneficial owner of any security, which that person has the right to acquire
within 60 days, such as options or warrants to purchase our common
stock.
 
 ITEM 12.CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
 
 Except as
set forth below, no transactions have occurred since the beginning of our last
fiscal year or are proposed with respect to which a director, executive officer,
security holder owning of record or beneficially more than 5% of any class of
our securities or any member of the immediate families of the foregoing persons
had or will have a direct or indirect material interest:
  On April
26, 2005 we entered into an agreement with Capitoline Advisory Group, Inc. to
provide consulting services for capital raising for our business operations,
pursuant to which we agreed to pay 10% of any funding actually closed with any
capital providers referred to us by Capitoline Advisory Group, Inc. and related
fees and expenses. We paid Capitoline $10,313 in expenses on April 10, 2006 and
$15,000 in fees on May 17, 2006 for other consulting services.  No
fees were paid to Capitoline Advisory Group, Inc..
  On
November 1, 2005 we entered in a month-to-month lease with Capitoline Advisory
Group, Inc. for one office, including use of all office equipment and furniture,
in New York City at a monthly rent of $1,500.  Capitoline Advisory Group is
wholly-owned by Robert Roever, a member of our board of
directors.  During 2007, $3,000 in rent was paid by the Company to
Capitoline.
 
 ITEM
13. EXHIBITS
 
 (a) Financial
Statements: included in Item 7 above.
  81
  (b)Exhibits
  EXHIBIT
              DESCRIPTION
              STATUSExhibit
      No.
              Document2.1
              Share
      Exchange Agreement dated as of July 5, 2006 among Amerex Group, Inc.,
      James P. Frack, AMEREX Companies, Inc., and the Stockholders of AMEREX
      Companies, Inc. (incorporated by reference to Exhibit 2.1 of Form 8-K
      filed July 11, 2006)2.2
              Agreement
      of Merger between CDX.com Colorado and CDX.com Merger Co (Oklahoma) dated
      July 28, 2005 (incorporated by reference to Exhibit 2.1of Form 10-QSB for
      the quarter ended September 30, 2004).2.3
              Stock
      Purchase Agreement between United Assurance and Amerex Group, Inc. dated
      August 1, 2005 (incorporated by reference to Exhibit 2.2 of  Form
      10-QSB for the quarter ended September 30, 2004)2.4
              Agreement
      and Plan of Merger between Amerex Group, Inc, and CDX.com Merger, Inc.,
      and CDX.com (Oklahoma), dated July 28, 2005 (incorporated by reference to
      Exhibit 2.3 of  Form 10-QSB for the quarter ended September 30,
      2004)3.1
              Restated
      Articles of Incorporation filed 7/27/2005 (incorporated by reference to
      Exhibit 3.1 of  Form 10-QSB for the quarter ended September 30,
      2004)3.2
              Certificate
      of Incorporation of Amerex Group, Inc. (incorporated by reference to
      Exhibit 3.4 of Form 10-QSB for the quarter ended September 30,
      2004)3.3
              Bylaws
      of Amerex Group, Inc. (incorporated by reference to Exhibit 3.6 of
       Form 10-QSB for the year ended September 30, 2004)4.1
              10%
      Senior Convertible Note issued to CAMOFI Master LCD in the acquisition on
      July 5, 2006 (incorporated by reference to Exhibit 4.1of Amendment to Form
      SB-2 filed on January 17, 2007).4.2
              Warrant
      issued to CAMOFI Master LCD in the acquisition on July 5, 2006
      (incorporated by reference to Exhibit 4.2 of Amendment to Form 10-SB filed
      on January 17, 2007).4.3
              Form
      of warrant issued to former AMEREX Companies, Inc. warrant holders in the
      acquisition on July 5, 2006 (incorporated by reference to Exhibit 4.3 of
      Amendment to Form 10-SB filed on January 17, 2007).4.4
              AMEREX
      Companies, Inc. 8% Secured Promissory Note, dated September 2, 2005, in
      the amount of $450,000 issued to Professional Traders Fund,
      LLC.(incorporated by reference to Exhibit 4.6 of Form 8-K filed July 11,
      2006)4.5
              Warrant
      issued to CAMOFI Master LCD in connection with a line of credit on
      November 10, 2006 (incorporated by reference to Exhibit 4.2 of Amendment
      to Form 10-SB filed on January 17, 2007)..5.1
              Opinion
      of Sichenzia Ross Friedman Ference LLP (incorporated by reference to
      Exhibit 5.1 of Amendment to Form 10-SB filed on January 17, 2007).
  82
  10.1
              Securities
      Purchase Agreement, dated November 21, 2005, between AMEREX Companies,
      Inc. and CAMOFI Master LDC. (incorporated by reference to Exhibit 10.1 of
      Amendment to Form 10-SB filed on January 17, 2007).10.2
              Form
      of Lock-Up Agreement dated November 21, 2005, between CAMOFI Master LCD
      and each of Richard Coody, Nick Malino, Ron Brewer, Robert Roever, John
      Smith, and Marwaan Karame. (incorporated by reference to Exhibit 10.2 of
      Form 8-K filed on July 11, 2006)10.3
              Registration
      Rights Agreement, dated November 21, 2005, between AMEREX Companies, Inc.
      and CAMOFI Master LDC. (incorporated by reference to Exhibit 10.3 of Form
      8-K filed on July 11, 2006)10.4
              Escrow
      Agreement, dated November 21, 2005, between AMEREX Companies, Inc. and
      CAMOFI Master LDC. (incorporated by reference to Exhibit 10.4 of Form 8-K
      filed on July 11, 2006)10.5
              Subsidiary
      Guarantee, dated November 21, 2005, of Waste Express to CAMOFI Master LDC.
      (incorporated by reference to Exhibit 10.5 of Form 8-K filed on July 11,
      2006)10.6
              Subsidiary
      Agreement, dated November 21, 2005, between Amerex Acquisition Corp. and
      CAMOFI Master LDC. (incorporated by reference to Exhibit 10.6 of Form 8-K
      filed on July 11, 2006)10.7
              Intercreditor
      Agreement, dated November 21, 2005, between CAMOFI and PTF. (incorporated
      by reference to Exhibit 10.7 of Form 8-K filed on July 11,
      2006)10.8
              Loan
      Agreement, dated August 12, 2005 between DCI USA Inc. and AMEREX
      Companies, Inc. (incorporated by reference to Exhibit 10.8 of Form 8-K
      filed July 11, 2006)10.9
              Amendment,
      dated June 30, 2006 to Contract for Sale and Purchase of Business Assets,
      dated September 1, 2005, between Enhanced Operating Co., LLC and AMEREX
      Companies, Inc. (incorporated by reference to Exhibit 10.10 of Form 8-K
      filed on July 11, 2006)10.11
              Amendment,
      dated November 13, 2005, to Contract for Sale and Purchase of Business
      Assets, dated September 13, 2005, among NES Technology LLC, Industrial
      Waste Services LLC and AMEREX Companies, Inc. (incorporated by reference
      to Exhibit 10.13 of Form 8-K filed on July 11, 2006)10.12
              Employment
      Agreement, dated October 1, 2005, between AMEREX Companies, and Richard
      Coody.  (incorporated by reference to Exhibit 10.23 of Form 8-K
      filed on July 11, 2006)10.13
              Lease
      Agreement, dated December 1, 2005, between Amerex Companies, Inc. and
      Capitoline Advisors, Inc. (incorporated by reference to Exhibit 10.29 of
      Form 8-K filed on July 11, 2006)10.14
              Lease
      Agreement, dated December 30, 2005, between Amerex Companies, Inc. and
      CDI, Inc. (incorporated by reference to Exhibit 10.30 of Form 8-K filed on
      July 11, 2006)
  83
  10.15
              Line
      of Credit with CAMOFI Master LCD. (incorporated by reference to Exhibit
      10.15 of Amendment No. 1 to Form SB-2 filed on March 20,
    2007)10.16
              Secured
      Loan Agreement with Professional Offshore Opportunity Fund, Ltd.
      (incorporated by reference to Exhibit 10.16 of Form 8-K filed August 16,
      2007)10.17
              Letter
      Agreement with Professional Offshore Opportunity Fund, Ltd. (incorporated
      by reference to Exhibit 10.17 of Form 8-K filed August 16,
      2007)10.18
              Pledge
      Agreement between Richard Coody and Ron Brewer and Professional Offshore
      Opportunity Fund, Ltd. (incorporated by reference to Exhibit 10.18 of Form
      8-K filed August 16, 2007)10.19
              Indemnification
      Agreement with Richard Coody (incorporated by reference to Exhibit 10.19
      of Form 8-K filed August 16, 2007)10.20
              Agreement
      with Richard Coody (incorporated by reference to Exhibit 10.20 of Form 8-K
      filed August 16, 2007)10.21
              Indemnification
      Agreement with Ron Brewer (incorporated by reference to Exhibit 10.21 of
      Form 8-K filed August 16, 2007)10.22
              Agreement
      with Ron Brewer (incorporated by reference to Exhibit 10.22 of Form 8-K
      filed August 16, 2007)10.23
              Conformed
      Letter of Intent to purchase Perma-Fix Treatment Solutions, Inc.
      (“Perma-Fix”) of Tulsa, OK from Perma-Fix Environmental Services, Inc.
      (incorporated by reference to Exhibit 10.23 of Form 8-K filed August 29,
      2007)10.31
              Letter
      Agreement between Amerex Group, Inc. and CAMOFI Master LDC dated
      December 19, 2007 (incorporated by reference to Exhibit 10.31 of Form
      8-K filed January 7, 2008)21.1
              Subsidiaries
      of Registrant (incorporated by reference to Exhibit 21 of Form 8-K filed
      on July 11, 2006).23.1
              Consent
      of Independent Registered Public Accounting Firm (filed
      herewith)31.1
              Certification of Chief Executive
      Officer pursuant to Rule 13a-14(a), filed herewith31.2
              Certification of Chief Financial
      Officer pursuant to Rule 13a-14(a), filed herewith32.1
              Certification of Chief Executive
      Officer pursuant to 18 U.S.C. Section 1350, filed
      herewith32.2
              Certification of Chief Financial
      Officer pursuant to 18 U.S.C. Section 1350, filed
      herewith
 
 84
 
 ITEM
14. PRINCIPAL ACCOUNTANT FEES AND
 
 The
following is a summary of the fees billed to the Company by Sartain Fischbein +
Co. for professional services rendered for the fiscal years ended December 31,
2007 and 2006.
   Fee
      Category
              
              2007
      Fees
              
              
              2006
      FeesAudit Fees
    (1)
              
              $
              153,059
              
              
              $
              193,377Audit-Related
      Fees
              
              
              0
              
              
              
              0Tax Fees
    (2)
              
              
              6,050
              
              
              
              2,140All Other
    Fees
              
              
              0
              
              
              
              0Total Fees
              
              $
              159,109
              
              
              $
              195,517
  (1) Audit
Fees consist of  fees billed and estimated to be billed for
professional services rendered for the audit of the Company’s annual
consolidated financial statements and fees billed for review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by Sartain Fischbein + Co. in connection with
statutory and regulatory filings or engagements.
 
 (2) Tax
fees for 2006 consist of fees billed for professional services for preparation
of 2005 income tax returns for the Company’s Waste Express
subsidiary.  Tax fees for 2007 relate to work performed in 2007 for
preparation of the Company’s 2005 income tax returns.
 
 The
Company’s audit committee, pre-approves all accounting-relating activities,
including both audit and non-audit services, prior to the performance of any
services by an accountant or auditor.
 
 The
percentage of hours expended on the principal accountant’s engagement to audit
Company’s financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal accountant’s
full time permanent employees was 0%.
 
 * * * *
*
  85




SIGNATURES
 In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  AMEREX GROUP, INC.
                    RegistrantDate:
      April 15, 2008
                  By:
                  /s/ Nicholas
      J. MalinoNicholas
      J. Malino, President, Chief ExecutiveOfficer
      and Director
 In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
    Signature
                
                Title
                
                Date/s/  Nicholas J.
      Malino
                
                President, Chief
      Executive Officer, Director
                
                April 15,
      2008Nicholas J.
      Malino/s/  Stephen K.
      Onody
                
                Chief Operating
      Officer, Director
                
                April 15,
      2008Stephen
      K. Onody/s/  Robert
      Roever
                
                Director
                
                April 15,
      2008Robert
      Roever/s/  Philip
      Getter
                
                Director
                
                April 15,
      2008Philip
      Getter/s/  John J.
      Smith
                
                Director
                
                April 15,
      2008John
      J. Smith/s/  Alexander
      Ruckdaeschel
                
                Director
                
                April 15,
      2008Alexander
      Ruckdaeschel
   86