##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009.
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-53287
 Pure Earth, Inc.
  Delaware
    
    84-1385335(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 One Neshaminy Interplex, Suite 201, Trevose, Pennsylvania 19053
 (215) 639-8755  (Registrants telephone number, including area code)
 N/A  (Former name, former address and former fiscal year, if
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
 o þ




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##### 



PURE EARTH, INC.
 QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2009
 TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    1Item 1. Condensed Consolidated Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 4T. Controls and Procedures
    
    
    44PART II  OTHER INFORMATION
    
    
    45Item 1. Legal Proceedings
    
    
    45Item 1A. Risk Factors
    
    
    45Item 6. Exhibits
    
    
    45SIGNATURES
    
    
    46Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
      i




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 PURE EARTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 ASSETS
 March 31, 2009
    
    
    December 31, 2008(Unaudited)CURRENT ASSETSCash and cash equivalents
    
    $
    528,774
    
    
    $
    900,744Accounts receivable, less allowance for doubtful accounts
of $997,645 and $986,324
    
    
    10,907,498
    
    
    
    11,034,564Restricted cash
    
    
    461,103
    
    
    
    813,164Due from joint venture
    
    
    473,295
    
    
    
    342,552Inventories
    
    
    634,482
    
    
    
    538,943Prepaid expenses
    
    
    613,478
    
    
    
    798,629Other current assets
    
    
    1,296,865
    
    
    
    1,069,892Deferred income tax asset
    
    
    306,073
    
    
    
    306,073Total Current Assets
    
    
    15,221,568
    
    
    
    15,804,561PROPERTY AND EQUIPMENTLand
    
    
    1,085,940
    
    
    
    1,085,940Buildings and improvements
    
    
    7,125,309
    
    
    
    7,125,309Leasehold improvements
    
    
    211,875
    
    
    
    211,875Machinery and equipment
    
    
    8,100,926
    
    
    
    8,078,035Trucks and automobiles
    
    
    1,922,246
    
    
    
    1,922,246Office furniture, fixtures and computer software
    
    
    334,380
    
    
    
    323,16018,780,676
    
    
    
    18,746,565Less: accumulated depreciation and amortization
    
    
    (5,033,429
    )
    
    
    (4,435,569
    )Property and Equipment, Net
    
    
    13,747,247
    
    
    
    14,310,996OTHER ASSETSDeposits and other assets
    
    
    839,301
    
    
    
    923,335Deferred financing costs, net of accumulated amortization of $284,108 and $199,663
    
    
    738,544
    
    
    
    747,989Goodwill
    
    
    759,694
    
    
    
    759,694Permits
    
    
    2,200,000
    
    
    
    2,200,000Other intangible assets, net of accumulated amortization
    
    
    3,454,261
    
    
    
    3,587,210Idle machinery
    
    
    7,176,850
    
    
    
    7,176,850Total Other Assets
    
    
    15,168,650
    
    
    
    15,395,078TOTAL ASSETS
    
    $
    44,137,465
    
    
    $
    45,510,635
   1




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##### Table of Contents



PURE EARTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 LIABILITIES AND STOCKHOLDERS EQUITY
 March 31, 2009
    
    
    December 31, 2008(Unaudited)CURRENT LIABILITIESLine of credit
    
    $
    1,081,076
    
    
    $
    407,822Notes payable
    
    
    
    
    
    
    25,068Note payable  related party
    
    
    333,000
    
    
    
    333,000Current portion of long-term debt
    
    
    1,590,663
    
    
    
    1,556,494Accounts payable
    
    
    5,009,763
    
    
    
    5,615,708Accrued expenses
    
    
    1,213,137
    
    
    
    907,428Accrued payroll and payroll taxes
    
    
    403,797
    
    
    
    297,039Other current liabilities
    
    
    1,131,423
    
    
    
    1,323,452Accrued disposal costs
    
    
    121,338
    
    
    
    262,815Total Current Liabilities
    
    
    10,884,197
    
    
    
    10,728,826LONG-TERM LIABILITIESLong-term debt, net of current portion
    
    
    8,020,067
    
    
    
    8,426,740Mandatorily
redeemable Series B preferred stock, $.001 par value; authorized 20,000
shares; issued and outstanding 6,300 and
6,300 shares
    
    
    4,581,926
    
    
    
    4,447,437Note payable  related party
    
    
    667,033
    
    
    
    650,296Accrued disposal costs
    
    
    269,310
    
    
    
    78,023Contingent consideration
    
    
    2,683,991
    
    
    
    2,683,991Warrants with contingent redemption provisions
    
    
    1,112,164
    
    
    
    1,112,164Deferred income taxes
    
    
    3,391,193
    
    
    
    4,047,236Deferred income taxes  permits
    
    
    880,000
    
    
    
    880,000Total Long-Term Liabilities
    
    
    21,605,684
    
    
    
    22,325,887TOTAL LIABILITIES
    
    
    32,489,881
    
    
    
    33,054,713COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYCommon stock, $.001 par value; authorized
25,000,000 shares; issued and  outstanding
17,626,799 and 17,626,799 shares
    
    
    17,627
    
    
    
    17,627Additional paid-in capital
    
    
    13,803,474
    
    
    
    13,803,474Accumulated deficit
    
    
    (2,173,517
    )
    
    
    (1,365,179
    )TOTAL STOCKHOLDERS EQUITY
    
    
    11,647,584
    
    
    
    12,455,922TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    44,137,465
    
    
    $
    45,510,635
 
  2




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##### Table of Contents



PURE EARTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months EndedMarch 31,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)REVENUES
    
    $
    12,067,145
    
    
    $
    14,616,556COST OF REVENUES (including depreciation and amortization
expense of $574,260 and $627,683 for the three months
ended March 31, 2009 and 2008)
    
    
    9,791,058
    
    
    
    12,359,320GROSS PROFIT
    
    
    2,276,087
    
    
    
    2,257,236OPERATING EXPENSESSalaries and related expenses
    
    
    1,442,379
    
    
    
    1,247,677Occupancy and other office expenses
    
    
    268,667
    
    
    
    291,970Professional fees
    
    
    560,812
    
    
    
    506,197Other operating expenses
    
    
    373,359
    
    
    
    502,283Insurance
    
    
    247,980
    
    
    
    242,575Depreciation and amortization
    
    
    157,450
    
    
    
    116,434Gain on sale of equipment
    
    
    
    
    
    
    (252,942
    )TOTAL OPERATING EXPENSES
    
    
    3,050,647
    
    
    
    2,654,194LOSS FROM OPERATIONS
    
    
    (774,560
    )
    
    
    (396,958
    )OTHER INCOME (EXPENSES)Interest income
    
    
    6,708
    
    
    
    14,564Interest expense
    
    
    (576,678
    )
    
    
    (331,328
    )Loss from equity investment
    
    
    (103,597
    )
    
    
    Other income (loss)
    
    
    (16,254
    )
    
    
    15,173TOTAL OTHER INCOME (EXPENSES)
    
    
    (689,821
    )
    
    
    (301,591
    )LOSS BEFORE INCOME TAXES
    
    
    (1,464,381
    )
    
    
    (698,549
    )BENEFIT FROM INCOME TAXES
    
    
    (656,043
    )
    
    
    (289,808
    )NET LOSS
    
    
    (808,338
    )
    
    
    (408,741
    )Less: preferred stock dividends
    
    
    
    
    
    
    25,000NET LOSS AVAILABLE FOR
COMMON STOCKHOLDERS
    
    $
    (808,338
    )
    
    $
    (433,741
    )NET LOSS PER COMMON SHAREBasic and Diluted
    
    $
    (0.05
    )
    
    $
    (0.03
    )WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDINGBasic and Diluted
    
    
    17,626,799
    
    
    
    17,223,021
   3




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##### Table of Contents



PURE EARTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 31,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (808,338
    )
    
    $
    (408,741
    )Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation and amortization
    
    
    598,761
    
    
    
    637,160Other intangible assets amortization
    
    
    132,949
    
    
    
    85,542Deferred financing cost amortization
    
    
    84,445
    
    
    
    21,415Interest expense for accretion of warrant and debt discount
    
    
    69,386
    
    
    
    18,069Interest expense for Series B preferred stock payment-in-kind
    
    
    65,104
    
    
    
    Provision for doubtful accounts
    
    
    11,321
    
    
    
    41,647Gain on sale of property and equipment
    
    
    
    
    
    
    (252,942
    )Change in fair value of derivatives and other assets and liabilities
measured at fair value
    
    
    16,254
    
    
    
    Restricted stock grant
    
    
    
    
    
    
    15,000Deferred income taxes
    
    
    (656,043
    )
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    115,745
    
    
    
    1,998,895Inventories
    
    
    (95,539
    )
    
    
    38,587Prepaid expenses and other current assets
    
    
    (41,822
    )
    
    
    23,121Deposits and other assets
    
    
    84,035
    
    
    
    (39,397
    )Restricted Cash
    
    
    352,061
    
    
    
    Accounts payable
    
    
    (605,945
    )
    
    
    (267,835
    )Accrued expenses and other current liabilities
    
    
    219,534
    
    
    
    (1,310,446
    )Accrued disposal costs
    
    
    49,809
    
    
    
    (277,759
    )Due from affiliates
    
    
    (130,743
    )
    
    
    Income taxes payable
    
    
    
    
    
    
    (1,024,603
    )TOTAL ADJUSTMENTS
    
    
    269,312
    
    
    
    (293,546
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (539,026
    )
    
    
    (702,287
    )CASH FLOWS FROM INVESTING ACTIVITIESPayments for pending acquisitions
    
    
    
    
    
    
    (321,761
    )Acquisitions of property and equipment
    
    
    (34,111
    )
    
    
    (354,254
    )Proceeds from sale of equipment
    
    
    
    
    
    
    555,041NET CASH USED IN INVESTING ACTIVITIES
    
    
    (34,111
    )
    
    
    (120,974
    )CASH FLOWS FROM FINANCING ACTIVITIESRepayment of (advances for) related party loans
    
    
    16,737
    
    
    
    (63,741
    )Net borrowings on line of credit
    
    
    673,254
    
    
    
    84,422Repayment of notes payable
    
    
    (25,068
    )
    
    
    (277,601
    )Repayment of long-term debt
    
    
    (388,756
    )
    
    
    (611,880
    )Financing fees incurred
    
    
    (75,000
    )
    
    
    (510,123
    )Private placements of common and preferred stock
    
    
    
    
    
    
    6,300,000Dividends paid on Series A preferred stock
    
    
    
    
    
    
    (50,000
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    201,167
    
    
    
    4,871,077NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (371,970
    )
    
    
    4,047,816CASH AND CASH EQUIVALENTS   BEGINNING OF PERIOD
    
    
    900,744
    
    
    
    1,885,014CASH AND CASH EQUIVALENTS  END OF PERIOD
    
    $
    528,774
    
    
    $
    5,932,830SUPPLEMENTARY INFORMATIONCash paid during the periods for:Interest
    
    $
    351,377
    
    
    $
    272,872Income taxes
    
    $
    11,900
    
    
    $
    941,439Non-cash investing and financing activities:Property and equipment financed with debt
    
    $
    
    
    
    $
    52,800
   4




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PURE EARTH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Business Operations and Consolidation
   Basis of Presentation and Summary of Significant Accounting Policies
 Basis of Presentation
    5




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##### Table of Contents



Use of Estimates
  Inventories
  March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)Recycled oil
    
    $
    259,470
    
    
    $
    248,151Crushed rock
    
    
    182,398
    
    
    
    64,500Concrete fiber
    
    
    192,614
    
    
    
    226,292Totals
    
    $
    634,482
    
    
    $
    538,943
 Earnings Per Share
   Recently Issued Accounting Pronouncements
 Business Combinations.
  6




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##### Table of Contents



Noncontrolling Interests
 Derivative Instruments
 Hierarchy of GAAP.
 Intangible Assets.
 Convertible Debt Instruments.
  7




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##### Table of Contents



Instruments Indexed to Stock.
 Conforming Changes to EITF 98-5.
 Share Based Payments.
 Postretirement Plans.
 Impairment.
  8




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##### Table of Contents



Fair Value.
     Nycon Acquisition and Pro Forma Results
   9




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##### Table of Contents



For the Three Months EndedMarch 31, 2008(unaudited)Pro FormaCombined (a) (b) (c) (d)Revenue
    
    $
    14,882,669Loss from operations
    
    $
    (593,279
    )Loss before income tax benefit
    
    $
    (864,946
    )Net loss
    
    $
    (506,083
    )Per common share dataNet loss from operations  Basic and
Diluted
    
    $
    (0.03
    )Weighted Average SharesBasic and Diluted
    
    
    17,248,021
 (a)
    
    Historical information includes the operating results of Pure Earth for
the three months ended March 31, 2008.(b)
    
    Pro forma information and the pro forma adjustments include the operating
results of Nycon for the three months ended March 31, 2008.(c)
    
    There were no pro forma adjustments to be presented for the three months
ended March 31, 2009, as the historical information includes the operating results
of Nycon for this period.(d)
    
    The pro forma adjustments consist of additional depreciation and
amortization expense in relation to the step-up in basis of the property and
equipment and intangible assets of Nycon and the corresponding adjustments to the
income tax benefit. Concentrations of Credit Risk
    10




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##### Table of Contents



Three Months
    
    
    
    
    
    
    Three MonthsEnded March 31,
    
    
    Percentage
    
    
    Ended March 31,
    
    
    Percentage2009
    
    
    of Revenue
    
    
    2008
    
    
    of RevenueCustomer A
    
    $
    
    
    
    
    
    
    
    $
    2,203,451
    
    
    
    15
    %Customer B
    
    
    
    
    
    
    
    
    
    
    1,447,446
    
    
    
    10
    %Customer C
    
    
    
    
    
    
    
    
    
    
    993,456
    
    
    
    7
    %Customer D
    
    
    2,030,992
    
    
    
    17
    %
    
    
    
    
    
    
    Customer E
    
    
    1,528,164
    
    
    
    13
    %
    
    
    
    
    
    
    Total
    
    $
    3,559,156
    
    
    
    30
    %
    
    $
    4,644,053
    
    
    
    32
    %
 Intangible Assets
  Balance as of March 31, 2009 (Unaudited)
    
    
    Balance as of December 31, 2008Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Net
    
    
    Cost
    
    
    Amortization
    
    
    NetFinite Lives:Customer lists
    
    $
    2,117,552
    
    
    $
    (549,454
    )
    
    $
    1,568,098
    
    
    $
    2,117,552
    
    
    $
    (490,683
    )
    
    $
    1,626,869Other intangible assets
    
    
    2,273,001
    
    
    
    (386,838
    )
    
    
    1,886,163
    
    
    
    2,273,001
    
    
    
    (312,660
    )
    
    
    1,960,3414,390,553
    
    
    
    (936,292
    )
    
    
    3,454,261
    
    
    
    4,390,553
    
    
    
    (803,343
    )
    
    
    3,587,210Infinite Lives:Permits
    
    
    2,200,000
    
    
    
    
    
    
    
    2,200,000
    
    
    
    2,200,000
    
    
    
    
    
    
    
    2,200,000Total
    
    $
    6,590,553
    
    
    $
    (936,292
    )
    
    $
    5,654,261
    
    
    $
    6,590,553
    
    
    $
    (803,343
    )
    
    $
    5,787,210
   Twelve Months Ending March 31,2010
    
    $
    531,7972011
    
    
    531,7972012
    
    
    531,7972013
    
    
    464,6472014
    
    
    330,346Thereafter
    
    
    1,063,877$
    3,454,261
 Line of Credit
   11




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##### Table of Contents



Long-Term Debt and Notes Payable
  March 31, 2009
    
    
    December 31, 2008(Unaudited)Casie Group term loan
    
    $
    7,710,222
    
    
    $
    7,927,349Equipment term loan
    
    
    1,482,975
    
    
    
    1,603,204Various equipment notes payable
    
    
    44,849
    
    
    
    50,062Casie Group notes payable
    
    
    297,684
    
    
    
    327,619Nycon assumed liabilities
    
    
    75,000
    
    
    
    75,000Total
    
    
    9,610,730
    
    
    
    9,983,234Less current portion
    
    
    (1,590,663
    )
    
    
    (1,556,494
    )Long-term portion
    
    $
    8,020,067
    
    
    $
    8,426,740
  Twelve Months Ending March 31,2010
    
    $
    1,590,6632011
    
    
    1,766,9042012
    
    
    1,595,8452013
    
    
    1,197,8672014
    
    
    1,231,409Thereafter
    
    
    2,228,042$
    9,610,730
  12




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##### Table of Contents



Officer Loans and Related Party Transactions
  Twelve Months Ending March 31,2010
    
    
    333,0002011
    
    
    667,033$
    1,000,033
   Fair Value Measurements
   
    
    Level 1  Inputs to the valuation are unadjusted quoted prices in active markets
for identical assets or liabilities.
    
    Level 2  Inputs to the valuation may include quoted prices for similar assets
and liabilities in active or inactive markets, and inputs other than quoted prices,
such as interest rates and yield curves, that are observable for the asset or
liability for substantially the full term of the financial instrument.
    
    Level 3  Inputs to the valuation are unobservable and significant to the fair
value measurement. Level 3 inputs shall be used to measure fair value only to the
extent that observable inputs are not available.
   13




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##### Table of Contents



Fair Value Measurements Using:
    
    
    Assets / LiabilitiesLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    at Fair ValueAssets:
    
    
    
    
    
    
    
    
    
    
    
    Liabilities:Interest-rate swaps
    
    
    
    
    
    $
    445,317
    
    
    
    
    
    
    $
    445,317Susquehanna term loan
    
    
    
    
    
    
    
    
    
    
    7,264,905
    
    
    
    7,264,905
  Income Taxes
   14




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##### Table of Contents



Commitments and Contingencies
 Collective Bargaining Agreements
  Leases
   Twelve Months Ending March 31,2010
    
    $
    1,440,7982011
    
    
    997,9442012
    
    
    469,4352013
    
    
    339,9472014
    
    
    6,804Thereafter
    
    
    $
    3,254,928
  Government Regulation, State and Local Compliance
  Employment Agreements
   15




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##### Table of Contents



Twelve Months Ending March 31,2010
    
    
    2,004,4002011
    
    
    1,689,8992012
    
    
    832,8622013
    
    
    576,5202014
    
    
    145,861$
    5,249,542
 Litigation
       16




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##### Table of Contents



Other Legal Matters
    17




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##### Table of Contents



Segment Reporting
   Three Months Ended
    
    Transportation
    
    
    
    
    
    
    Environmental
    
    
    Treatment and
    
    
    Concrete
    
    
    Corporate andMarch 31, 2009
    
    and Disposal
    
    
    Materials
    
    
    Services
    
    
    Recycling
    
    
    Fibers
    
    
    Other (a), (b)
    
    
    Total (d)Third Party Revenues
    
    $
    4,538,999
    
    
    $
    605,918
    
    
    $
    247,713
    
    
    $
    6,366,000
    
    
    $
    308,515
    
    
    $
    
    
    
    $
    12,067,145Intercompany Revenues (b)
    
    
    
    
    
    
    204,579
    
    
    
    
    
    
    
    263,294
    
    
    
    
    
    
    
    (467,873
    )
    
    
    Total Revenues
    
    
    4,538,999
    
    
    
    810,497
    
    
    
    247,713
    
    
    
    6,629,294
    
    
    
    308,515
    
    
    
    (467,873
    )
    
    
    12,067,145Third Party Cost of Revenues
    
    
    3,273,414
    
    
    
    672,469
    
    
    
    208,027
    
    
    
    5,386,440
    
    
    
    250,708
    
    
    
    
    
    
    
    9,791,058Intercompany Cost of Revenues
    
    
    466,742
    
    
    
    
    
    
    
    1,131
    
    
    
    
    
    
    
    
    
    
    
    (467,873
    )
    
    
    Total Cost of Revenues
    
    
    3,740,156
    
    
    
    672,469
    
    
    
    209,158
    
    
    
    5,386,440
    
    
    
    250,708
    
    
    
    (467,873
    )
    
    
    9,791,058Gross Profit Margin
    
    
    798,843
    
    
    
    138,028
    
    
    
    38,555
    
    
    
    1,242,854
    
    
    
    57,807
    
    
    
    
    
    
    
    2,276,087Operating Expenses
    
    
    725,352
    
    
    
    113,968
    
    
    
    119,563
    
    
    
    982,850
    
    
    
    242,636
    
    
    
    866,278
    
    
    
    3,050,647Income (Loss) from Operations
    
    $
    73,491
    
    
    $
    24,060
    
    
    $
    (81,008
    )
    
    $
    260,004
    
    
    $
    (184,829
    )
    
    $
    (866,278
    )
    
    $
    (774,560
    )Adjusted EBITDA
    
    $
    242,889
    
    
    $
    67,723
    
    
    $
    (63,988
    )
    
    $
    585,017
    
    
    $
    (139,711
    )
    
    $
    (854,630
    )
    
    $
    (162,700
    )Reconciliation to Consolidated
Statement of Operations:Depreciation and Amortization (c)
    
    
    169,398
    
    
    
    43,663
    
    
    
    17,020
    
    
    
    444,862
    
    
    
    45,119
    
    
    
    11,648
    
    
    
    731,710Interest Expense (Income)
    
    
    
    
    
    
    
    
    
    
    1,040
    
    
    
    137,590
    
    
    
    442
    
    
    
    430,898
    
    
    
    569,970Income (Loss) before Provision
for Income Taxes
    
    
    73,491
    
    
    
    24,060
    
    
    
    (82,048
    )
    
    
    2,565
    
    
    
    (185,272
    )
    
    
    (1,297,177
    )
    
    
    (1,464,381
    )Capital Expenditures (e)
    
    $
    
    
    
    $
    22,891
    
    
    $
    
    
    
    $
    
    
    
    $
    11,220
    
    
    $
    
    
    
    $
    34,111Total Assets
    
    $
    9,572,640
    
    
    $
    1,461,406
    
    
    $
    1,716,508
    
    
    $
    27,034,343
    
    
    $
    1,944,938
    
    
    $
    2,407,630
    
    
    $
    44,137,465Goodwill
    
    $
    
    
    
    $
    
    
    
    $
    759,694
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    759,694
 
 (a)
    
    Corporate operating results reflect the costs incurred for various support services that are
not allocated to our five operating segments. These support services include, among other
things, treasury, legal, information technology, tax, insurance, and other administrative
functions. It also includes eliminations of intersegment revenues and costs of sales.(b)
    
    Intercompany operating revenues reflect each segments total intercompany sales, including
intercompany sales within a segment and between segments. Transactions within and between
segments are generally made on a basis intended to reflect the market value of the service.(c)
    
    Includes depreciation and amortization expense classified above as a component of cost of
sales and operating expenses.(d)
    
    The Consolidated Total Assets above reflects the elimination of $5,029,775 of the Companys
investment in subsidiaries and intersegment receivables.(e)
    
    Includes non-cash items and assets acquired through acquisition. Capital expenditures are
reported in the Companys operating segments at the time they are recorded within the
segments property, plant and equipment balances and, therefore, may include amounts that have
been accrued but not yet paid.  18




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##### Table of Contents



CorporateThree Months Ended
    
    Transportation
    
    
    
    
    
    
    Environmental
    
    
    Treatment and
    
    
    Concrete
    
    
    and OtherMarch 31, 2008
    
    and Disposal
    
    
    Materials
    
    
    Services
    
    
    Recycling
    
    
    Fibers
    
    
    (f), (g)
    
    
    Total (i)Third Party Revenues
    
    $
    7,214,023
    
    
    $
    402,648
    
    
    $
    807,159
    
    
    $
    6,192,726
    
    
    $
    
    
    
    $
    
    
    
    $
    14,616,556Intercompany Revenues (f)
    
    
    278,072
    
    
    
    488,219
    
    
    
    5,239
    
    
    
    322,336
    
    
    
    
    
    
    
    (1,093,866
    )
    
    
    Total Revenues
    
    
    7,492,095
    
    
    
    890,867
    
    
    
    812,398
    
    
    
    6,515,062
    
    
    
    
    
    
    
    (1,093,866
    )
    
    
    14,616,556Third Party Cost of Revenues
    
    
    4,589,552
    
    
    
    1,127,655
    
    
    
    598,605
    
    
    
    6,043,508
    
    
    
    
    
    
    
    
    
    
    
    12,359,320Intercompany Cost of Revenues
    
    
    970,717
    
    
    
    11,159
    
    
    
    104,990
    
    
    
    7,000
    
    
    
    
    
    
    
    (1,093,866
    )
    
    
    Total Cost of Revenues
    
    
    5,560,269
    
    
    
    1,138,814
    
    
    
    703,595
    
    
    
    6,050,508
    
    
    
    
    
    
    
    (1,093,866
    )
    
    
    12,359,320Gross Profit (Loss) Margin
    
    
    1,931,826
    
    
    
    (247,946
    )
    
    
    108,802
    
    
    
    464,554
    
    
    
    
    
    
    
    
    
    
    
    2,257,236Operating Expenses
    
    
    562,399
    
    
    
    179,593
    
    
    
    135,624
    
    
    
    891,397
    
    
    
    
    
    
    
    885,180
    
    
    
    2,654,194Income (Loss) from Operations
    
    $
    1,369,427
    
    
    $
    (427,539
    )
    
    $
    (26,822
    )
    
    $
    (426,843
    )
    
    
    
    
    
    $
    (885,180
    )
    
    $
    (396,958
    )Adjusted EBITDA
    
    $
    1,555,774
    
    
    $
    (340,521
    )
    
    $
    (9,981
    )
    
    $
    11,349
    
    
    
    
    
    
    $
    (854,288
    )
    
    $
    362,332Reconciliation to
Consolidated Statement of
Operations:Depreciation and
Amortization (h)
    
    
    186,347
    
    
    
    87,017
    
    
    
    16,841
    
    
    
    423,020
    
    
    
    
    
    
    
    30,892
    
    
    
    744,117Interest Expense (Income)
    
    
    
    
    
    
    
    
    
    
    1,746
    
    
    
    121,791
    
    
    
    
    
    
    
    193,228
    
    
    
    316,764Income (Loss) before
Provision for Income Taxes
    
    $
    1,369,427
    
    
    $
    (427,538
    )
    
    $
    (28,568
    )
    
    $
    (533,462
    )
    
    
    
    
    
    $
    (1,078,408
    )
    
    $
    (698,549
    )Capital Expenditures (j)
    
    $
    847
    
    
    $
    90,008
    
    
    $
    341,940
    
    
    $
    208,833
    
    
    $
    
    
    
    $
    48,422
    
    
    $
    690,050Total Assets (i)
    
    $
    10,823,196
    
    
    $
    1,660,194
    
    
    $
    2,236,487
    
    
    $
    29,480,340
    
    
    $
    
    
    
    $
    6,800,649
    
    
    $
    51,000,686Goodwill
    
    $
    
    
    
    $
    
    
    
    $
    759,964
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    759,964
 
 (f)
    
    Corporate operating results reflect the costs incurred for various support services that are
not allocated to our four operating segments. These support services include, among other
things, treasury, legal, information technology, tax, insurance, and other administrative
functions. It also includes eliminations of intersegment revenues and costs of sales.(g)
    
    Intercompany revenues reflect each segments total intercompany sales, including intercompany
sales within a segment and between segments. Transactions within and between segments are
generally made on a basis intended to reflect the market value of the service.(h)
    
    Includes depreciation and amortization expense classified above as a component of cost of
revenues and operating expenses.(i)
    
    The Consolidated Total Assets above reflects the elimination of $4,888,271 of the Companys
investment in subsidiaries and intersegment receivables.(j)
    
    Includes non-cash items and assets acquired through acquisition. Capital expenditures are
reported in the Companys operating segments at the time they are recorded within the
segments property, plant and equipment balances and, therefore, may include amounts that have
been accrued but not yet paid. .
  19




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Subsequent Event
   20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
     
    
    industry competition, conditions, performance and consolidation;
    
    our ability to grow our business through the formation and acquisition of
complementary businesses;
    
    our ability to integrate the companies, assets and operations we have previously
acquired;
    
    legislative and regulatory developments;
    
    weather conditions, including extremely harsh weather or natural disasters which
may cause us to temporarily cease some or all of operations;
    
    the effects of adverse general economic conditions, both within the United
States and globally; and
    
    other factors described in Item 1A. Risk Factors of our Annual Report on Form
10-K (File No. 0-53287) for the fiscal year ended December 31, 2008, as filed with
the SEC on March 31, 2009, or in our other filings made with the SEC.
  Overview and Strategy
   21




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##### Table of Contents




    
    Transportation and Disposal We provide transportation and disposal services
for excavated clean and contaminated soils from urban construction projects in the
mid-Atlantic region and the New York metropolitan area.
    
    Treatment and Recycling We remove, process, treat, recycle and dispose of
residual waste from a variety of different industrial and commercial sources,
targeting customers along the U.S. eastern seaboard. We also plan to recycle waste
products with high BTU value into alternative fuels for consumers and other end
users.
    
    Environmental Services We provide a wide range of environmental consulting and
related specialty services, including:
 
    
    environmental investigation, consulting and engineering
services to commercial and residential customers; and
    
    locating and acquiring Brownfield sites for subsequent
development, restoration and potential resale, using capping material from
our existing facilities or directly from our customer base.
 
    
    Materials We produce and sell recycled construction materials for a variety of
construction and other applications, including crushed stone and recycled
aggregate. Our construction materials are produced to meet all prevailing
specifications for their use.
    
    Concrete Fibers Concrete Fibers is our newest segment, which was created with
our acquisition of Nycon effective April 2008. We recycle used carpet fibers into
environmentally sustainable, or green, fiber material. We also repack and
distribute various other fibers as additives to concrete products.
   22




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##### Table of Contents




    
    Transportation and Disposal Revenues and cash are derived generally from fees
charged to our customers for the collection, transportation and disposal of
contaminated and clean soils from urban construction projects in the mid-Atlantic
region and the New York metropolitan area.
 
    
    Treatment and Recycling Our revenues and cash are earned primarily through the
following channels:
 
    
    fees earned as a disposal facility for treatment by
thermal desorption of contaminated soils; and
 
    
    performing recycling services, such as oil recycling,
decontamination, wastewater cleanup, and laboratory analysis.
 
    
    Environmental Services We generate revenues from fees charged for our
environmental consulting and related specialty services,including well-drilling
and the disposal of medical waste.We have recently acquired our first Brownfield
site and plan to take steps to cap this property with soils from our Transportation
and Disposal segment. We estimate that we will begin generating revenues from our
Brownfield operations in the fourth quarter of 2009.
 
    
    Materials Revenues and cash are generated by charging fees to customers for
the removal of construction materials, such as rock and aggregate, from jobsites.
These fees are based upon the quantity and weight of material removed and the
distance of the jobsite from our rock crushing facility. We then process the
material at our rock crushing facility into various crushed stone products, which
are then resold to customers for use in other construction projects. We sell our
crushed stone products by weight and at a unit price that varies depending on the
product type. Our Materials revenues are primarily dependent upon the high level
of construction services in and around New York City and the New York-New
Jersey-Connecticut tri-state area, as well as the demand for crushed stone products
used in those construction projects.
 
    
    Concrete Fibers We generate revenues and cash through the sale of packaged
concrete fibers to construction companies, concrete manufacturers and wholesalers
in the domestic and foreign marketplace. The price at which we sell these fibers
is determined based upon the type of fiber, the quantity of the order and the
pricing of our competitors for similar products. Our Concrete Fibers revenues are
largely dependent upon the demand from the commercial and residential construction
industries and prices set by the large companies that purchase our concrete fiber
output. Also, this segments ability to generate revenue depends upon our ability
to negotiate favorable sales agreements with these companies and our ability to
manage the costs of obtaining raw materials and selling our concrete fiber
products.
     23




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Critical Accounting Policies and Estimates
   24




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##### Table of Contents



Results of Operations  Three Months Ended March 31, 2009 Compared to Three Months Ended March 31,
2008
  Three Months Ended 
March 31,(in thousands, except share and per share data)
    
    2009
    
    
    2008(unaudited)
    
    
    (unaudited)Revenues
    
    $
    12,067
    
    
    $
    14,617Cost of revenues
    
    
    9,791
    
    
    
    12,359Gross profit
    
    
    2,276
    
    
    
    2,257Operating expenses:Salaries and related expenses
    
    
    1,442
    
    
    
    1,248Occupancy and other office expenses
    
    
    269
    
    
    
    292Professional fees
    
    
    561
    
    
    
    506Other operating expenses
    
    
    373
    
    
    
    502Insurance
    
    
    248
    
    
    
    243Depreciation and amortization
    
    
    157
    
    
    
    116(Gain) on sale of equipment
    
    
    
    
    
    
    (253
    )Total operating expenses
    
    
    3,051
    
    
    
    2,654Loss from operations
    
    
    (775
    )
    
    
    (397
    )Interest expense, net
    
    
    (570
    )
    
    
    (317
    )Loss from equity investment
    
    
    (103
    )
    
    
    Other income
    
    
    (16
    )
    
    
    15Loss before provision for (benefit from) income taxes
    
    
    (1,464
    )
    
    
    (699
    )Benefit from income taxes
    
    
    (656
    )
    
    
    (290
    )Net loss
    
    
    (808
    )
    
    
    (409
    )Less preferred stock dividends
    
    
    
    
    
    
    25Loss available for common stockholders
    
    $
    (808
    )
    
    $
    (434
    )Loss available for common stockholders
per share (basic and diluted)
    
    $
    (0.05
    )
    
    $
    (0.03
    )Weighted average shares of common stock outstanding
during the period (basic and diluted)
    
    
    17,626,799
    
    
    
    17,223,021Earnings (loss) before interest, taxes, depreciation
and amortization (EBITDA)
    
    $
    (163
    )
    
    $
    362
  
    
    to review and assess the operating performance of our company and our reporting
segments, as permitted by SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information;
 
    
    to compare our current operating results with corresponding periods and with the
operating results of other companies in our industry;
 
    
    as a basis for allocating resources to various segments or projects;
 
    
    as a measure to evaluate potential economic outcomes of acquisitions,
operational alternatives and strategic decisions; and
 
    
    to evaluate internally the performance of our personnel.
   25




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##### Table of Contents




    
    we believe EBITDA is a useful tool for investors to assess the operating
performance of our business without the effect of interest and income taxes, which
are non-operating expenses, and depreciation and amortization, which are non-cash
expenses;
 
    
    we believe that it is useful to provide to investors with a standard operating
metric used by management to evaluate our operating performance;
 
    
    we believe that the use of EBITDA is helpful to compare our results to other
companies by eliminating non-cash depreciation and amortization charges and the
effects of differences in intangible asset valuation, which are often incurred with
significant acquisitions of operations; and
 
    
    EBITDA is commonly used by companies in the waste management and environmental
industries as a performance measure, and we believe that providing this information
allows investors to compare our operating performance to that of our competitors in
these industries.
  
    
    EBITDA does not reflect our cash expenditures or future requirements for capital
expenditures or contractual commitments;
 
    
    EBITDA does not reflect changes in, or cash requirements for, our working
capital needs;
 
    
    EBITDA does not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on our debt;
 
    
    although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and EBITDA
does not reflect any cash requirements for such replacements;
 
    
    EBITDA does not reflect income or other taxes or the cash requirements to make
any tax payments; and
 
    
    other companies in our industry may calculate EBITDA differently than we do,
thereby potentially limiting its usefulness as a comparative measure.
   26




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##### Table of Contents



Three Months EndedMarch 31,(in thousands)
    
    2009
    
    
    2008(unaudited)
    
    
    (unaudited)EBITDA
    
    $
    (163
    )
    
    $
    362Depreciation and amortization, including
$574 and $628 of depreciation and
amortization classified as a component of
cost of revenues
    
    
    731
    
    
    
    744Interest expense, net
    
    
    570
    
    
    
    317Benefit from income taxes
    
    
    (656
    )
    
    
    (290
    )Net loss
    
    $
    (808
    )
    
    $
    (409
    )
 Revenues
  Three Months Ended March 31,2009
    
    
    2008% of
    
    
    
    
    
    % of(unaudited) (in thousands, except percentages)
    
    Amount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesTransportation and Disposal
    
    $
    4,539
    
    
    
    38
    %
    
    $
    7,214
    
    
    
    49
    %Treatment and Recycling
    
    
    6,366
    
    
    
    53
    %
    
    
    6,193
    
    
    
    42
    %Environmental Services
    
    
    248
    
    
    
    2
    %
    
    
    807
    
    
    
    6
    %Materials
    
    
    606
    
    
    
    5
    %
    
    
    403
    
    
    
    3
    %Concrete Fibers
    
    
    308
    
    
    
    3
    %
    
    
    
    
    
    
    Total
    
    $
    12,067
    
    
    
    100
    %
    
    $
    14,617
    
    
    
    100
    %
    27




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28




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##### Table of Contents



Cost of Revenues
  Cost of Revenues - By SegmentThree Months Ended March 31,2009
    
    
    2008% of
    
    
    
    
    
    % of(unaudited) (in thousands)
    
    Amount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesTransportation and Disposal
    
    $
    3,273
    
    
    
    27
    %
    
    $
    4,589
    
    
    
    31
    %Treatment and Recycling
    
    
    5,386
    
    
    
    45
    %
    
    
    6,043
    
    
    
    41
    %Environmental Services
    
    
    208
    
    
    
    2
    %
    
    
    599
    
    
    
    4
    %Materials
    
    
    673
    
    
    
    6
    %
    
    
    1,128
    
    
    
    8
    %Concrete Fibers
    
    
    251
    
    
    
    2
    %
    
    
    
    
    
    
    Total
    
    $
    9,791
    
    
    
    81
    %
    
    $
    12,359
    
    
    
    84
    %
  
    
    growing our Transportation and Disposal segment and increasing the number of
disposal outlets accessible to us that are located closer to customer job sites,
which would decrease our transportation costs and provide alternative disposal
options to landfills;
 
    
    decreasing our direct costs across all of our segments and in particular within
the Treatment and Recycling and Materials segments through cost-cutting
initiatives, including decreasing personnel costs through salary reductions,
reduced headcount and modification of employee benefits;
 
    
    decreasing our transportation and disposal costs through the addition of new
transportation providers, negotiation of long-term contracts at more favorable
prices, and the use of Brownfield properties that we own or operate as additional
disposal outlets.
  Operating Expenses
  
    
    salaries and related expenses (other than direct labor costs and union benefits
described above);
 
    
    occupancy and other office expenses;
 
    
    professional fees;
 
    
    insurance;
 
    
    depreciation and amortization (other than amounts included as a component of
cost of revenues as described above);
 
    
    gain recognized on our sale of certain equipment; and
 
    
    other miscellaneous operating expenses.
  29




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##### Table of Contents



Three Months Ended March 31,
    
    
    Period to Period Change(unaudited) (in thousands, except percentages)
    
    2009
    
    
    2008
    
    
    Amount
    
    
    PercentageSalaries and related expenses
    
    $
    1,442
    
    
    $
    1,248
    
    
    $
    194
    
    
    
    16
    %Occupancy and other office expenses
    
    
    269
    
    
    
    292
    
    
    
    (23
    )
    
    
    (8
    )%Professional fees
    
    
    561
    
    
    
    506
    
    
    
    55
    
    
    
    11
    %Other operating expenses
    
    
    373
    
    
    
    502
    
    
    
    (129
    )
    
    
    (26
    )%Insurance
    
    
    248
    
    
    
    243
    
    
    
    5
    
    
    
    2
    %Depreciation and amortization
    
    
    158
    
    
    
    116
    
    
    
    42
    
    
    
    36
    %Gain on sale of equipment
    
    
    
    
    
    
    (253
    )
    
    
    253
    
    
    
    (100
    )%Total operating expenses
    
    $
    3,051
    
    
    $
    2,654
    
    
    $
    397
    
    
    
    15
    %
     30




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##### Table of Contents




    
    consulting fees paid for sales;
 
    
    audit and accounting fees related to the audit of our consolidated financial
statements;
 
    
    legal costs associated with litigation;
 
    
    legal and other related costs associated with the preparation and filing of our
quarterly, annual and periodic reports and other SEC filings;
 
    
    legal and other fees incurred in connection with our acquisitions; and
 
    
    fees paid to third parties and regulatory agencies to monitor safety and
compliance with respect to certain of our operations.
    Loss from Operations
  Three Months Ended March 31,
    
    
    Period to Period Change(unaudited) (in thousands, except percentages)
    
    2009
    
    
    2008
    
    
    Amount
    
    
    PercentageTransportation and Disposal
    
    $
    73
    
    
    $
    1,369
    
    
    $
    (1,296
    )
    
    
    (95
    )%Treatment and Recycling
    
    
    260
    
    
    
    (427
    )
    
    
    687
    
    
    
    161
    %Environmental Services
    
    
    (81
    )
    
    
    (27
    )
    
    
    (54
    )
    
    
    (200
    )%Materials
    
    
    24
    
    
    
    (427
    )
    
    
    451
    
    
    
    106
    %Concrete Fibers
    
    
    (185
    )
    
    
    
    
    
    
    (185
    )
    
    
    *Corporate and Other
    
    
    (866
    )
    
    
    (885
    )
    
    
    19
    
    
    
    2
    %Total
    
    $
    (775
    )
    
    $
    (397
    )
    
    $
    (378
    )
    
    
    (95
    %)
 
 *
    
    Not meaningful.  31




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##### Table of Contents



Interest Income and Expense
  
    
    approximately $0.3 million of additional interest expense incurred in relation
to our Series B preferred stock offering and related amortization of deferred
financing costs;
 
    
    approximately $15,000 increase in interest expense within the Treatment and
Recycling segment as a result of the Casie Group term loan refinancing completed in
November of 2008; and
 
    
    an increase of approximately $0.1 million in interest expense relating to our
revolving line of credit, equipment term loan and insurance financing; offset by
 
    
    a decrease in interest income of approximately $0.1 million.
   32




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##### Table of Contents



Income from Equity Investment
  Other Income
  Benefit From Income Taxes
  Liquidity and Capital Resources
 Cash and Cash Equivalents
   33




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##### Table of Contents



Summary of Cash Flows
  For the Three Months EndedMarch 31,(in thousands)
    
    2009
    
    
    2008Net cash used in operating activities
    
    $
    (539
    )
    
    $
    (702
    )Net cash used in investing activities
    
    $
    (34
    )
    
    $
    (121
    )Net cash provided by financing activities
    
    $
    201
    
    
    $
    4,871
 Net Cash Used in Operating Activities
  
    
    Decrease in income from operations Our income from operations, excluding
depreciation and amortization, decreased by $0.4 million, or 113%, on a
period-to-period basis, which negatively impacted our cash flows from operations
for the three months ended March 31, 2009.
 
    
    Decrease in accounts receivable Sources of cash from changes in accounts
receivable were approximately $0.1 million and $2.0 million for the three months
ended March 31, 2009 and 2008, respectively. The decrease in accounts receivable
at March 31, 2009 is the result of the timing in collections of cash from our
larger customers within the Transportation and Disposal segment coupled with a
decline in revenues during that period. Our average days outstanding for our
receivables at March 31, 2009 has also increased, which is a result of the overall
economic environment and current trends in the construction industry which we
expect will continue in the near term. The decrease in accounts receivable as of
March 31, 2008, is the result of the timing of collections from two large
Transportation and Disposal segment projects.
 
    
    Increase in inventories Sources and (uses) of cash from changes in inventories
were approximately $(0.1) million and $0.1 million for the three months ended March
31, 2009 and 2008, respectively. The increase in inventories during the three
months ended March 31, 2009 is the result of increased volumes of incoming rock
products within our Materials segment. The decrease for the three months ended
March 31, 2008 is the result of timing of sales of our crushed rock products from
the Materials segment and our recycled oil inventory from the Treatment and
recycling segment.
 
    
    Decrease in accounts payable Uses of cash for accounts payable were $(0.6)
million and $(0.3) million for the three months ended March 31, 2009 and 2008,
respectively. The decrease in accounts payable during the three months ending
March 31, 2009 is the result of a decline in the sales and related cost of sales
from the Transportation and Disposal segment and the payment of aged payables from
the addition of Casie Group and other borrowers into the borrowing base under our
revolving line of credit during the first quarter of 2009. The decrease in
accounts payable during the three months ended March 31, 2008 is the result of our
use of cash from the Series B preferred stock offering to pay some of our vendors,
as well as normal fluctuations due to timing of specific payables.
  34




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##### Table of Contents




    
    Increase in accrued expenses and other current liabilities Sources and (uses)
of cash for accrued expenses and other current liabilities were $0.2 million and
$(1.3) million for the three months ended March 31, 2009 and 2008, respectively.
The increase in accrued expenses and other liabilities during the three months
ended March 31, 2009, is primarily the result of the timing of the payment for
corporate insurance, and other accrued liabilities including payroll and accruals
for certain operating expenses for which we were not yet invoiced. The decrease in
accrued expenses and other current liabilities during the three months ended March
31, 2008 is primarily the result of the timing of the payment for corporate
insurance and a decrease in accrued expenses relating to our Treatment and
Recycling segment.
 
    
    Increase in accrued disposal costs During the three months ended March 31,
2009, our accrued disposal costs increased by approximately $0.1 million as a
result of an increase in production within our Treatment and Recycling segment.
Uses of cash for accrued disposals costs were $(0.3) million for the three months
ended March 31, 2008, resulting from the transportation of processed material from
our Treatment and Recycling operations.
 
    
    Decrease in income taxes payableUses of cash relating to income taxes payable
were $(1.0) million for the three months ended March 31, 2008 as compared to $0 for
the three months ended March 31, 2009. The decrease in cash used to pay income
taxes was the result of having earned taxable income for the year ended December
31, 2007, as compared to being in a net loss position for the year ended December
31, 2008.
    35




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##### Table of Contents



Three Months EndedMarch 31,(in thousands)
    
    2009
    
    
    2008(unaudited)
    
    
    (unaudited)EBITDA
    
    $
    (163
    )
    
    $
    362Adjustments to reconcile EBITDA to net cash
used in operating activities:Interest expense, net
    
    
    (570
    )
    
    
    (317
    )Benefit from income taxes
    
    
    656
    
    
    
    290Deferred financing cost amortization
    
    
    85
    
    
    
    Interest expense for accretion of warrant
discount and Series B paid-in-kind interest
    
    
    134
    
    
    
    18Provision for doubtful accounts
    
    
    11
    
    
    
    42(Gain) loss on sale of property and equipment
    
    
    
    
    
    
    (253
    )Change in fair value of derivatives and other
assets and liabilities measured at fair
value
    
    
    16
    
    
    
    Restricted stock grant
    
    
    
    
    
    
    15Deferred income taxes
    
    
    (656
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    116
    
    
    
    1,999Inventories
    
    
    (95
    )
    
    
    38Prepaid expenses and other current assets
    
    
    (42
    )
    
    
    23Deposits and other assets
    
    
    84
    
    
    
    (39
    )Restricted Cash
    
    
    352
    
    
    
    Accounts payable
    
    
    (606
    )
    
    
    (268
    )Accrued expenses and other current liabilities
    
    
    220
    
    
    
    (1,310
    )Accrued disposal costs
    
    
    50
    
    
    
    (278
    )Due to affiliates
    
    
    (131
    )
    
    
    Income taxes payable
    
    
    
    
    
    
    (1,024
    )Total adjustments
    
    
    (376
    )
    
    
    (1,064
    )Net cash used in operating activities
    
    $
    (539
    )
    
    $
    (702
    )
 Net Cash Used in Investing Activities
  Net Cash Provided by Financing Activities
  
    
    Private placements of securities 
  36




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##### Table of Contents



For the three months ended March 31, 2008:
 
    
    In March 2008, we received approximately $5.8 million
in proceeds, net of financing fees and offering expenses of approximately
$0.5 million, from the private placement of 6,300 shares of our Series B
preferred stock and a related warrant, at a purchase price of $1,000 per
share.
    
    We paid $50,000 in dividends relating to our then
outstanding Series A preferred stock.
 
    
    Other indebtedness During the three months ended March 31, 2009, we had net
borrowings of approximately $0.7 million under our revolving line of credit as
compared to net borrowings of $0.1 million for the three months ended March 31,
2008. These borrowings were offset by the repayment of approximately $0.4 million
and $0.9 million of long-term debt and notes payable during the three months ended
March 31, 2009 and 2008, respectively. We also incurred $0.1 million in financing
fees during the three months ended March 31, 2009 in relation to the amendment of
our revolving line of credit and $0.5 million in financing fees during the three
months ended March 31, 2008 in relation to the Series B preferred stock offering.
 Capital Resources
      37




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##### Table of Contents




    
    approximately $0.5 million in cash dividend payments relating to the outstanding
Series B preferred stock;
 
    
    approximately $1.8 million in principal and interest payments relating to our
outstanding debt, revolving line of credit, term loans and notes payable;
 
    
    approximately $0.5 million of uncommitted but planned capital expenditures
within our Treatment and Recycling segment for additional equipment and or site
improvements;
 
    
    approximately $0.5 million for working capital needs at New Nycon, PE Energy,
and other new business initiatives; and
 
    
    general operating and administrative expenses of $9.0 million.
   
    
    delayed payment or non-payment of receivables on certain material accounts;
 
    
    the loss of any of our major customers;
  38




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##### Table of Contents




    
    our inability to comply with any of the covenants or restrictions on our
indebtedness or the Series B preferred stock;
 
    
    the enactment of new regulatory or environmental laws;
 
    
    our inability to grow our business as we anticipate whether internal growth, by
acquisition, through joint ventures or by forming new subsidiaries;
 
    
    any other changes in the cost structure of our underlying business model; and
 
    
    any of the other risks and uncertainties described in Item 1A. Risk Factors
of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008,
filed with the Commission on March 31, 2009.
  Revolving Lines of Credit
  Maximum
    
    
    Balance
    
    
    Interest
    
    
    Maturity/Revolving Line of Credit
    
    Outstanding
    
    
    Outstanding
    
    
    Rate
    
    
    Termination Date(in thousands)Pure Earth, Inc.
    
    $
    7,500
    (1)
    
    $
    1,081
    
    
    
    7.75%
    (2)
    
    October 23, 2009
 
 (1)
    
    Subject to reduction for (i) a borrowing base limitation; (ii) outstanding letters of
credit; and (iii) other loan reserves. As of March 31, 2009, the borrowing base limitation
was approximately $4.7 million, and we had aggregate required loan reserves and outstanding
letters of credit of $1.7 million.(2)
    
    As of March 31, 2009, this line of credit bore interest at the lenders prime rate,
subject to a minimum of 5.0%, plus 2.75%.   39




---



##### Table of Contents




    
    The net proceeds from the Casie Group refinancing, after the repayment of the
existing Casie Group debt and the establishment of the $0.7 million principal and
interest payment reserve, were used to repay $1.9 million of the outstanding
indebtedness under our revolving line of credit.
 
    
    The rate of interest under our floating rate borrowings was changed to equal the
greater of 5.0% or the lenders prime rate, plus 2.75%, and the rate of interest to
be charged under a LIBOR Advance shall be equal to the LIBOR rate, as specified in
the credit agreement, plus 3.00%.
 
    
    We established an additional permanent reserve in the amount of $0.9 million.
 
    
    This amendment also provides for additional covenants and amendments to existing
covenants, including financial covenants that require us to have or maintain a
minimum adjusted net income (beginning with the quarter ended June 30, 2009),
minimum availability under the revolving line of credit, a minimum debt service
coverage ratio (beginning with the six months ended June 30, 2009), a minimum
tangible net worth and a maximum amount of unfinanced capital expenditures. The
Pure Earth revolving line of credit agreement also contains certain restrictions
and negative and affirmative covenants intended to regulate our level of
indebtedness, our ability to pay dividends on and make distributions with respect
to our capital stock, and salaries of our employees and consultants.
  Off-Balance Sheet Arrangements
   Related Party Transactions
    40




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##### Table of Contents



Seasonality and Inflation
   Recently Issued Accounting Pronouncements
 Business Combinations
 Fair Value
   41




---



##### Table of Contents



Income Taxes
 Derivatives
 Hierarchy of GAAP
  42




---



##### Table of Contents



Intangible Assets
 Convertible Debt Instruments
 Instruments Indexed to Stock
 Conforming Changes to EITF 98-5
 Share Based Payments.
  43




---



##### Table of Contents



Postretirement Plans.
 Impairment.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4T. Controls and Procedures.
     44




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 6. Exhibits.
 ExhibitNo.
    
    Description2.10
    *
    
    Asset Purchase Agreement, dated April 1, 2008, by and among Nycon, Inc., Robert
Cruso, Frank Gencarelli, New Nycon, Inc. and Paul Bracegirdle (1)3.1
    
    
    Second Amended and Restated Certificate of Incorporation of Pure Earth, Inc. (2) (3)3.2
    
    
    Second Amended and Restated Bylaws of Pure Earth, Inc. (2) (3)10.6.5
    
    
    Fifth Amendment to Credit and Security Agreement, portions effective as of October
21, 2008 and March 13, 2009, by and among Pure Earth, Inc., each of its
subsidiaries, and Wells Fargo Bank, National Association (4)31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 193431.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 193432.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    The schedules to this agreement have been omitted in accordance with the rules of
the SEC. A list of omitted schedules has been included in this exhibit and will be
provided supplementally to the SEC upon request.(1)
    
    Previously filed as an exhibit to our registration statement on Form 10 (File No.
0-53287), as filed with the SEC on June 20, 2008.(2)
    
    Included is the revised version of this exhibit, redlined to show the new
amendments. The redlined version is being provided pursuant to SEC staff Compliance &
Disclosure Interpretation 246.01.(3)
    
    Previously filed as an exhibit to Pre-Effective Amendment No. 1 to our registration
statement on Form 10/A (File No. 0-53287), as filed with the SEC on August 8, 2008.(4)
    
    Previously filed as an exhibit to our Annual Report on Form 10-K (File No. 0-53287)
for the fiscal year ended December 31, 2008, as filed with the SEC on March 31, 2009. 
  45




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##### Table of Contents



SIGNATURES
  PURE EARTH, INC.Date: May 15, 2009
    By:
    /s/ Mark AlsentzerMark AlsentzerPresident and Chief Executive OfficerDate: May 15, 2009
    By:
    /s/ Brent KopenhaverBrent KopenhaverChairman, Executive Vice President, 
Chief Financial Officer and Treasurer  46




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description2.10
    *
    
    Asset Purchase Agreement, dated April 1, 2008, by and among Nycon, Inc., Robert
Cruso, Frank Gencarelli, New Nycon, Inc. and Paul Bracegirdle (1)3.1
    
    
    Second Amended and Restated Certificate of Incorporation of Pure Earth, Inc. (2) (3)3.2
    
    
    Second Amended and Restated Bylaws of Pure Earth, Inc. (2) (3)10.6.5
    
    
    Fifth Amendment to Credit and Security Agreement, portions effective as of October
21, 2008 and March 13, 2009, by and among Pure Earth, Inc., each of its
subsidiaries, and Wells Fargo Bank, National Association (4)31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 193431.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 193432.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    The schedules to this agreement have been omitted in accordance with the rules of
the SEC. A list of omitted schedules has been included in this exhibit and will be
provided supplementally to the SEC upon request.(1)
    
    Previously filed as an exhibit to our registration statement on Form 10 (File No.
0-53287), as filed with the SEC on June 20, 2008.(2)
    
    Included is the revised version of this exhibit, redlined to show the new
amendments. The redlined version is being provided pursuant to SEC staff Compliance &
Disclosure Interpretation 246.01.(3)
    
    Previously filed as an exhibit to Pre-Effective Amendment No. 1 to our registration
statement on Form 10/A (File No. 0-53287), as filed with the SEC on August 8, 2008.(4)
    
    Previously filed as an exhibit to our Annual Report on Form 10-K (File No. 0-53287)
for the fiscal year ended December 31, 2008, as filed with the SEC on March 31, 2009.