8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: April 30, 2004

Waste Services, Inc.

(Successor registrant of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)

Delaware
(State or other jurisdiction of
incorporation or organization) 000-25955
(Commission
File Number) 01-0780204
(I.R.S. Employer
Identification No.)

1122 International Blvd., Suite 601, Burlington, Ontario, Canada L7L 6Z8

(Address of principal executive offices and zip code)

(905) 319-1237

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

This Amendment on Form 8-K/A (“Amendment”) is being filed to amend Items 2 and 5 of the Forms 8-K of Waste Services, Inc. (the “Company”, “we”, “us”, or “our”), successor to Capital Environmental Resource Inc. now known as Waste Services (CA), Inc., filed with the Securities and Exchange Commission (the “SEC”) on May 10, 2004 and June 9, 2004 (the “Original Reports”), respectively. This Amendment does not reflect events occurring after the filing of the Original Reports and does not modify or update the disclosures therein in any way other than as required to reflect the restated financial statements.

Item 8.01 Other Events.

Acquisition of Florida Recycling Services, Inc. (“Florida Recycling”)

     In November 2003, we entered into a definitive agreement to acquire Florida Recycling from its stockholders. On April 30, 2004, we completed this acquisition for a purchase price of $98.5 million in cash, working capital of approximately $2.2 million subject to further adjustment and the issuance of 9,250,000 of our common shares. Florida Recycling’s operations are based in central Florida, primarily serving the Orlando, Daytona, Fort Myers and Tampa metropolitan areas.

     Following the acquisition, the performance of the operations of Florida Recycling was below our expectations and we conducted a review of Florida’s Recycling business in an effort to identify the factors contributing to the lower than expected level of performance. Based on the results of this review, it appeared that the 2003 financial statements of Florida Recycling, provided by the sellers, contained misstatements and could not be relied upon. As such, the historical financial statements of Florida Recycling have been restated. Based upon this restatement, we have revised the pro-forma financial statements using the restated Florida Recycling financial statements for the three months ended March 31, 2004 and for the year ended December 31, 2003.

     On September 24, 2004, we reached an agreement with the selling shareholders of Florida Recycling to adjust the purchase price paid for the shares of Florida Recycling whereby, the selling shareholders paid us $7.5 million in cash and returned 500,000 shares of our common stock. The cash and the shares received (valued at the quoted market price as of September 24, 2004), had a total value of approximately $8.6 million. In addition, we will receive title to a recycling and transfer facility in Orlando, Florida. The settlement is not reflected in this amendment of the Original Reports.

Item 9.01 Financial Statements, Pro Forma Financial Information and Exhibits.

(a) Financial Statements of Businesses Acquired

     The consolidated financial statements of Florida Recycling Services, Inc. and its subsidiary for the three months ended March 31, 2004 and 2003 (unaudited) and for the years ended December 31, 2003, 2002 and 2001 (as restated), are incorporated herein by reference from Exhibit 99.2 and 99.3 to this Current Report.

(b) Pro Forma Financial Information.

     The unaudited pro forma condensed consolidated financial statements of the Company as of and for the three months ended March 31, 2004 and for the twelve months ended December 31, 2003 (as revised) are incorporated herein by reference from Exhibit 99.1 to this Current Report.

(c) Exhibits.

23.1	Consent of Florida Recycling Services, Inc.’s Auditor – BDO Seidman, LLP
99.1	Unaudited pro forma condensed consolidated financial statements of Waste Services, Inc. as of and for the three months ended March 31, 2004 and unaudited pro forma Statement of Operations for the twelve months ended December 31, 2003 (as revised).
99.2	Consolidated financial statements of Florida Recycling Services, Inc. as of December 31, 2003 and 2002 and for each of the three years ended December 31, 2003, 2002 and 2001 (as restated).
99.3	Consolidated financial statements of Florida Recycling Services, Inc. as of March 31, 2004 (unaudited) and December 31, 2003 and for the three months ended March 31, 2004 and 2003 (unaudited) (as restated).

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SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: July 8, 2005	WASTE SERVICES, INC. (Registrant)
	By:	/s/ Mark A. Pytosh
		Name:	Mark A. Pytosh
		Title:	Executive Vice President, and Chief Financial Officer

EXHIBIT INDEX

23.1	Consent of Florida Recycling Services, Inc.’s Auditor — BDO Seidman, LLP
99.1	Unaudited pro forma condensed consolidated financial statements of Waste Services, Inc. as of and for the three months ended March 31, 2004 and unaudited pro forma Statement of Operations for the twelve months ended December 31, 2003 (as revised).
99.2	Consolidated financial statements of Florida Recycling Services, Inc. as of December 31, 2003 and 2002 and for each of the three years ended December 31, 2003, 2002 and 2001 (as restated).
99.3	Consolidated financial statements of Florida Recycling Services, Inc. as of March 31, 2004 (unaudited) and December 31, 2003 and for the three months ended March 31, 2004 and 2003 (unaudited) (as restated).

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EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

Waste Services, Inc.
Scottsdale, Arizona

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-116795) and Form S-8 (No. 333-117912) of Waste Services, Inc. of our report dated June 24, 2005, relating to the consolidated financial statements of Florida Recycling Services, Inc. which appear in this current report on Form 8-K/A.

BDO Seidman, LLP
Los Angeles, California

July 6, 2005

EX-99.1

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (as revised)

     These unaudited pro forma condensed consolidated financial statements as of and for the three months ended March 31, 2004 have been prepared from the March 31, 2004 interim unaudited condensed consolidated financial statements of Waste Services, Inc. (the “Company”), the unaudited March 31, 2004 combined financial statements of certain assets of Allied Waste Industries, Inc. located in the Jacksonville, Florida (the “Allied Jacksonville Assets”) and the unaudited March 31, 2004 condensed consolidated financial statements of Florida Recycling Services, Inc. (as restated) (“Florida Recycling”). The unaudited pro forma condensed consolidated statement of operations as of year ended December 31, 2003 have been prepared from the December 31, 2003 consolidated financial statements of the Company, the combined financial statements of the North Central District of Allied Waste as of December 31, 2003 (the “Allied Assets”) and consolidated financial statements of Florida Recycling.

     Following the acquisition of Florida Recycling, the performance of the operations were below our expectations and we conducted a review of Florida’s Recycling business in an effort to identify the factors contributing to the lower than expected level of performance. Based on the results of this review, it appeared that the 2003 financial statements of Florida Recycling, provided by the sellers, contained misstatements and could not be relied upon. As such, the historical financial statements of Florida Recycling have been restated. Based upon this restatement, we have revised these pro forma disclosures using the restated Florida Recycling financial statements as of and for the three months then ended March 31, 2004 and for the year ended December 31, 2003.

     The unaudited pro forma condensed consolidated financial statements have been prepared on a basis to reflect the following events as if each event occurred as of January 1, 2003 for the statements of operations and as of March 31, 2004 for the balance sheet:

• acquisition of the Allied Assets;

• acquisition of Florida Recycling;

• entering into the new Senior Secured Credit Facility;

• issuance of the 9¹/2% Senior Subordinated Notes;

• issuance and registration of 13,400,000 Common Shares of the Company and warrants to purchase 1,340,000 Common Shares of the Company; and

• tax effects of the foregoing events.

     You should read these unaudited pro forma condensed consolidated financial statements in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2003, the interim unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2004.

     The pro forma adjustments are based on preliminary estimates, available information and certain assumptions, and may be revised as additional information becomes available. The pro forma adjustments are more fully described in the notes to the unaudited pro forma condensed consolidated financial statements. These pro forma financial statements have been revised for the restated financial statements of Florida Recycling and the pro forma adjustments directly attributable to the historical accounts of Florida Recycling, and have otherwise not been updated for changes in estimates, management assumptions or information that became available after the date of the Original Reports.

     The unaudited pro forma condensed consolidated financial statements should not be considered indicative of actual results that would have been achieved had the acquisitions and the other transactions and events described been completed as of the dates or as of the beginning of the period indicated and do not purport to project the financial condition or results of operations and cash flows for any future date or period.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(In thousands, except per share amounts)

				Allied			Florida
				Jacksonville			Recycling
	Actual			Acquisition			(as restated)			Adjustments			Notes			Pro Forma
Revenue	$	50,317		$	7,782		$	20,038		$	—					$	78,137
Operating expenses:
Cost of operations		34,171			6,701			16,615			(149	)		(1	)		57,338
Selling, general and administrative		10,559			620			3,595			(666	)		(2	)		14,108
Depreciation, depletion and amortization		5,472			385			1,445			1,077			(3	)		8,434
											55			(1	)
Foreign exchange gain and other		(90	)		—			—			—						(90	)
Income from operations		205			76			(1,617	)		(317	)					(1,653	)
Interest income		—			(557	)		—			557			(4	)		—
Interest expense		6,316			—			427			(427	)		(4	)		5,374
											5,168			(5	)
											(6,110	)		(5	)
Cumulative mandatorily redeemable preferred stock dividends and amortization of issue costs		4,019			—			—			—						4,019
Income (loss) before income taxes		(10,130	)		633			(2,044	)		495						(11,046	)
Income tax provision (benefit)		829			253			—			(253	)		(6	)		829
Net income (loss) attributable to Common Shareholders before cumulative effect of change in accounting principle	$	(10,959	)	$	380		$	(2,044	)	$	748					$	(11,875	)
Basic and diluted loss per share before cumulative effect of change in accounting principle	$	(0.16	)													$	(0.13	)
Weighted average common shares outstanding — basic and diluted		70,583			—			—			21,650			(7	)		92,233

The accompanying notes are an integral part of these financial statements.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(in thousands except per share data)

							Florida
				Allied NCF			Recycling
	Actual			Acquisition			(as restated)			Adjustments			Notes			Pro Forma
Revenue	$	126,750		$	89,702		$	87,905		$	—					$	304,357
Operating expenses:
Cost of operations		79,992			65,657			69,513			(1,510	)		(1	)		213,652
Selling, general and administrative		35,117			8,000			15,473			(2,537	)		(2	)		56,053
Depreciation, depletion and amortization		14,927			4,804			7,789			6,723			(3	)		34,761
											518			(1	)
Goodwill impairment		—			31,333			—			(31,333	)		(12	)		—
Loss (recovery) related to US assets		(155	)		—			—			—						(155	)
Foreign exchange loss, gain on distribution to shareholder and other		1,915			—			(3,694	)		3,653			(13	)		1,874
Income from operations		(5,046	)		(20,092	)		(1,176	)		24,486						(1,828	)
Interest income		—			(5,245	)		—			5,245			(4	)		—
Interest expense		18,439			—			2,022			(2,022	)		(4	)		31,942
											20,795			(5	)
											(7,292	)		(5	)
Income (loss) before income taxes		(23,485	)		(14,847	)		(3,198	)		7,760						(33,770	)
Income tax provision (benefit)		(587	)		6,594			—			(6,594	)		(6	)		(587	)
Income (loss)		(22,898	)		(21,441	)		(3,198	)		14,354						(33,183	)
Deemed dividend on Series 1 Preferred Shares		(54,572	)		—			—			—						(54,572	)
Net income (loss) attributable to Common Shareholders	$	(77,470	)	$	(21,441	)	$	(3,198	)	$	14,354					$	(87,755	)
Basic and diluted loss per share before cumulative effect of change in accounting principle	$	(1.99	)													$	(1.43	)
Weighted average common shares outstanding — basic and diluted		38,782			—			—			22,549			(7	)		61,331

The accompanying notes are an integral part of these financial statements.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004
(In thousands)

												Florida			Florida
				Alllied		Allied						Recycling			Recycling						Financing
	Actual			Jacksonville		Adjustment			Notes			(as restated)			Adjustment			Notes			Adjustment			Notes			Pro Forma
ASSETS
Cash and cash equivalents	$	5,817		$	—	$	(27,289	)		(8	)	$	191		$	(97,950	)		(8	)	$	119,678			(11	)	$	447
Restricted cash		999			—		—									—						(999	)		(11	)		—
Accounts receivable		26,387			3,169		—						6,903			—						—						36,459
Prepaid expenses and other assets		29,553			320		—						2,070			(995	)		(9	)		—						30,948
Total current assets		62,756			3,489		(27,289	)					9,164			(98,945	)					118,679						67,854
Property and equipment, net		81,070			7,763		1,640			(9	)		15,820			—						—						106,293
Landfill sites, net		152,076			—		—						—			—						—						152,076
Deferred income taxes		2,507			—		—						—			—						—						2,507
Other assets		24,063			—		—						590			(9,957	)		(8	)		8,090			(11	)		22,786
Goodwill and other intangible assets		184,220					11,968			(10	)		174			(174	)		(9	)		—						344,777
							5,918			(10	)					27,156			(10	)		—
																115,515			(10	)
Due from affiliates		—			19,063		(19,063	)		(9	)		—			—						—						—
Total assets	$	506,692		$	30,315	$	(26,826	)				$	25,748		$	33,595					$	126,769					$	696,293
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	13,309		$	2,167	$	(2,167	)		(9	)	$	4,913		$	1,437			(10	)	$	—					$	19,659
Accrued expenses and other liabilities		26,145			1,617		(612	)		(9	)		7,321			—						—						34,471
Due to affiliates							2,484			(10	)		1,954			(1,954	)		(9	)		—						2,484
Current portion of long-term debt and short-term financing		6,158			—		—						32,180			(32,180	)		(9	)		1,000			(11	)		6,158
																						(1,000	)		(11	)
Total current liabilities		45,612			3,784		(295	)					46,368			(32,697	)											62,772
Long-term debt		186,215											—			—						259,000			(11	)		262,090
																						(183,125	)		(11	)
Accrued closure, post-closure and other obligations		6,075			—		—						—			—						—						6,075
Cumulative mandatorily redeemable Preferred Shares		52,039			—		—						—			—						—						52,039
Total liabilities		289,941			3,784		(295	)					46,368			(32,697	)					75,875						382,976
Common stock		245,133			—		—						100			(100	)		(8	)		48,360			(11	)		339,165
																45,672			(8	)
Other additional paid-in-capital		—			—		—						9,986			(9,986	)		(8	)		—						—
Investment by Parent		—			26,531		(26,531	)		(8	)		—			—						—						—
Options, warrants and deferred stock-based compensation		24,624			—		—						—			—						2,534			(11	)		27,158
Accumulated other comprehensive income		13,786			—		—						—			—						—						13,786
Accumulated deficit		(66,792	)				—						(30,706	)		30,706			(8	)		—						(66,792	)
Total shareholders’ equity		216,751			26,531		(26,531	)					(20,620	)		66,292						50,894						313,317
Total liabilities and shareholders’ equity	$	506,692		$	30,315	$	(26,826	)				$	25,748		$	33,595					$	126,769					$	696,293

The accompanying notes are an integral part of these financial statements.

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Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

     The following notes are a summary of the pro forma adjustments reflected in, and form an integral part of, the unaudited pro forma condensed consolidated financial statements.

(1) Reflects the removal of rent expense from cost of operations for trucks and containers leased from other subsidiaries of Allied Waste Industries, Inc. (“Allied”). These trucks and containers were acquired or are to be acquired as part of the acquisition of the Allied Jacksonville Assets. Rent expense being removed for the Allied Assets was $0.1 million and $1.5 million for the three months ended March 31, 2004 and year ended December 31, 2003, respectively. Depreciation relating to the assets being acquired was $0.1 million and $0.5 million for the three months ended March 31, 2004 and year ended December 31, 2003, respectively.

(2) Reflects the elimination of Florida Recycling management fees related to agreements not being assumed approximating $0.8 and $3.1 million for the three months ended March 31, 2004 and the year ended December 31, 2003, respectively, offset by new employment and consulting agreements approximating $0.1 and $0.5 million for the three months ended March 31, 2004 and year ended December 31, 2003, respectively.

(3) Reflects the amortization of intangible assets, based on an estimate of intangible asset values. These intangible assets include customer relationships and contracts and covenants not-to-compete and are amortized over the expected life of the benefit to be received by such intangibles, which ranges from 3 to 20 years. The estimated amortization for the Allied Assets and the Florida Recycling acquisition approximates $1.1 million and $6.7 million for the three months ended March 31, 2004 and year ended December 31, 2003, respectively.

(4) Reflects the elimination of interest income of $0.6 million and $5.2 million received on balances due from affiliates not being acquired as part of the Allied Assets acquisition as well as the elimination of Florida Recycling interest expense of $0.4 million and $2.0 million for the three months ended March 31, 2004 and year ended December 31, 2003, respectively, related to debt not assumed.

(5)

As of three months ended March 31, 2004 and year ended December 31, 2003, this adjustment reflects interest expense of approximately $1.3 million and $5.1 million, respectively, related to the $100.0 million of a term loan portion of our new Senior Secured Credit Facilities and $3.9 million and $15.7 million, respectively, related to the $160.0 million of the 91/2% Senior Subordinated Notes. Also reflected is the removal of $6.1 million and $7.3 million as of three months ended March 31, 2004 and year ended December 31, 2003, respectively, of interest expense on our previous credit facility that would have been avoided had the financing described above been in place as of January 1, 2003.

Separately, as of December 31, 2003, the Company entered into a $220.0 million credit facility, the proceeds of which were used to finance the initial acquisition of certain assets of Allied and to repay the Company’s previous senior credit facility. Excluded from the pro forma adjustments is approximately $5.9 million of estimated fees and expenses related to the $220.0 million credit facility that will fully amortize upon the refinancing.

(6) Reflects the elimination of U.S. income taxes otherwise payable as a result of the pro forma adjustments previously described. The Company has not assumed any additional benefit of the tax losses attributed to the pro forma adjustments because it does not expect to benefit from such losses at this time.

(7) Reflects the dilutive effect of the 9,250,000 Common Shares issued to the sellers of Florida Recycling in connection with the Florida Recycling acquisition less the effect of the original 1,000,000 Common Shares previously deposited and the private placements of 13,400,000 Common Shares.

(8) Reflects the payment of $27.3 million of cash purchase price as well as the elimination of the investment by the former owner of the Allied Jacksonville Assets of $26.5 million. Additionally reflected is the payment of cash purchase price for Florida Recycling of approximately $97.95 million, ($98.5 million purchase price less $3.75 million of advances previously made plus $1.0 million of transaction related fees and $2.2 million for a working capital adjustment), the issuance of 9,250,000 Common Shares of the Company, net of 1,000,000 Common Shares previously deposited, at a fair market value of $5.54 per share, the elimination of previous cash, warrants and Common Share deposits of approximately $10.0 million and the elimination of predecessor equity components.

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(9) Reflects the elimination of assets not acquired and liabilities not assumed as part of the acquisitions. The assets not being acquired primarily relate to predecessor entity goodwill and certain tax assets. The liabilities not assumed primarily relate to indebtedness of Florida Recycling. Also, refer to Note (10) for further details concerning the allocation of purchase price.

(10) Reflects the preliminary allocation of purchase price based upon a preliminary estimate of the fair value of assets being acquired and liabilities being assumed by us as follows:

	Allied
	Jacksonville			Florida
	Assets			Recycling			Total
Purchase price:
Cash	$	27,289		$	100,666		$	127,955
Common shares issued		—			51,256			51,256
Warrants issued		—			148			148
Transaction fees and other		—			1,509			1,509
Total purchase price		27,289			153,579			180,868
Allocated as follows:
Net book value of assets acquired/(liabilities) assumed		26,531			(20,620	)		5,911
Adjustments to net book value:
Trucks and containers acquired		1,640			—			1,640
Accounts payable and accrued expenses not assumed		2,779			—			2,779
Indebtedness not assumed		—			32,180			32,180
Due to (from) affiliate not assumed		(19,063	)		1,954			(17,109	)
Historical goodwill and intangible assets		—			(174	)		(174	)
Additional liability assumed		(2,484	)		(1,437	)		(3,921	)
Other assets not acquired		—			(995	)		(995	)
Adjusted net book value of assets/(liabilities)		9,403			10,908			20,311
Excess purchase price to be allocated	$	17,886		$	142,671		$	160,557
Allocated as follows:
Goodwill	$	11,968		$	115,515		$	127,483
Customer relationships and contracts and covenants not to compete		5,918			27,156			33,074
Total allocated	$	17,886		$	142,671		$	160,557

The allocation of purchase price is considered preliminary until the Company has acquired all necessary information to finalize the allocation of purchase price. Although the time required to obtain the necessary information will vary with the circumstances specific to an individual acquisition, the “allocation period” for finalizing purchase price allocations generally does not exceed one year from the date of consummation of an acquisition. Adjustments to the allocation of purchase price may decrease those amounts allocated to goodwill and, as such, may increase those amounts allocated to other tangible or intangible assets, which may result in higher depreciation or amortization expense in future periods.

(11)

Reflects the issuance of $160.0 million of 91/2% Senior Subordinated Notes and $100.0 million of our new Senior Secured Credit Facilities term loan. In connection with these issuances, we incurred approximately $8.1 million of debt issue costs. Also reflected is the issuance and registration of 13,400,000 Common Shares of the Company at $4.00 per share and warrants to purchase 1,340,000 Common Shares of the Company at $4.00 per share. The proceeds of the Common Shares and warrants were allocated based on the relative fair values of the Common Shares and warrants, resulting in an allocation of the net proceeds of $48.4 million to the Common Shares and $2.5 million to the warrants. Furthermore, the Company repaid its previously outstanding senior credit facility.

The Company entered into an agreement with the investors under the equity placement in which it agreed to file a registration statement with respect to the Common Shares and the Common Shares issuable upon exercise of the warrants and have that registration statement declared effective within 120 days from the date of original issuance of the Common Shares. If the Company does not comply with these registration requirements, it will be required to pay liquidated damages equal to 1.0% of the value, as defined in the agreement, of the unregistered Common Shares for each month until the Common Shares are

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registered. Because these damages would be payable in cash, until the Common Shares are registered, the proceeds from the financing will be classified outside of shareholders’ equity.

(12) Reflects the elimination of goodwill impairment losses recognized by Allied for the year ended December 31, 2003.

(13) Reflects the elimination of a gain recognized on a property distribution to owners approximating $3.6 million for the year ended December 31, 2003.

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EX-99.2

Exhibit 99.2

Annual Report
Florida Recycling Services, Inc.

As of December 31, 2003 and 2002 and for each of the three years ended December 31, 2003

Florida Recycling Services, Inc.
Table of Contents
December 31, 2003, 2002 and 2001

	Page
Independent Auditors’ Report		1
Consolidated Financial Statements
Consolidated Balance Sheets		2
Consolidated Statements of Operations		3
Consolidated Statements of Changes in Shareholders’ Deficit		4
Consolidated Statements of Cash Flows		5
Notes to the Financial Statements		6-17

Independent Auditors’ Report

Board of Directors
Florida Recycling Services, Inc.

We have audited the accompanying consolidated balance sheets of Florida Recycling Services, Inc. as of December 31, 2003 and 2002 and the related statements of operations, shareholder deficit, and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Florida Recycling Services, Inc. at December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

BDO Seidman, LLP
Los Angeles, California

June 24, 2005

1

Florida Recycling Services, Inc.
Consolidated Balance Sheets
December 31, 2003 and 2002 (amounts in thousands)

	2003			2002
	(Restated - See Note 1)
Assets
Current assets
Cash and cash equivalents	$	337		$	—
Trade accounts receivable, net of allowance for doubtful accounts		8,054			8,398
Due from affiliates		2,726			1,026
Supplies and materials		520			333
Prepaid expenses and other current assets		1,173			384
Total current assets		12,810			10,141
Property and equipment, net of accumulated depreciation		15,521			16,450
Other non-current assets
Deposits		17			18
Customer relationships, net of accumulated amortization of $81 in 2003 and $41 in 2002		326			366
Goodwill		174			174
Total non-current assets		517			558
Total assets	$	28,848		$	27,149
Liabilities and Shareholders’ Deficit
Current liabilities
Accounts payable	$	5,969		$	5,278
Checks issued in excess of bank balance		—			1,628
Accrued expenses		7,069			6,859
Due to affiliates		3,478			675
Note payable-bank		10,000			4,500
Shareholder loan		3,000			—
Current maturities of long-term debt		12,316			8,371
Total current liabilities		41,832			27,311
Long-term debt		9,849			14,885
Total liabilities		51,681			42,196
Commitments and contingencies (Note 14)
Shareholders’ deficit
Common stock, $1,000 par value, 1,000 shares authorized, 100 shares issued and outstanding		100			100
Additional paid-in capital		5,729			10,317
Accumulated deficit		(28,662	)		(25,464	)
Total shareholders’ deficit		(22,833	)		(15,047	)
Total liabilities and shareholders’ deficit	$	28,848		$	27,149

The accompanying notes are an integral part of these consolidated financial statements.

2

Florida Recycling Services, Inc.
Consolidated Statements of Operations
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

	2003			2002			2001
	(Restated - See Note 1)
Revenue	$	87,905		$	83,888		$	82,659
Cost of operations:
Disposal costs		32,966			31,588			30,236
Direct labor		23,951			22,106			23,337
Other operating costs		12,596			11,058			10,211
Selling, general and administrative expenses		15,473			13,434			12,528
Depreciation and amortization		7,789			8,752			10,526
(Gain) loss on distribution and disposal of property and equipment		(3,694	)		11			38
Total cost of operations		89,081			86,949			86,876
Operating loss		(1,176	)		(3,061	)		(4,217	)
Interest expense, net		2,022			2,070			2,627
Net loss	$	(3,198	)	$	(5,131	)	$	(6,844	)

The accompanying notes are an integral part of these consolidated financial statements.

3

Florida Recycling Services, Inc.
Consolidated Statements of Changes in Shareholders’ Deficit
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

			Additional						Total
	Common		Paid-In			Accumulated			Shareholders'
	Stock		Capital			Deficit			Deficit
			(Restated - See Note 1)
Balances as restated,
December 31, 2000		100		5,334			(13,489	)		(8,055	)
Net loss as restated		—		—			(6,844	)		(6,844	)
Shareholder contribution		—		29			—			29
Balances as restated,
December 31, 2001		100		5,363			(20,333	)		(14,870	)
Net loss as restated		—		—			(5,131	)		(5,131	)
Shareholder contribution		—		4,954			—			4,954
Balances as restated,
December 31, 2002		100		10,317			(25,464	)		(15,047	)
Net loss as restated		—		—			(3,198	)		(3,198	)
Shareholder distribution as restated				(4,588	)		—			(4,588	)
Balances as restated,
December 31, 2003		100	$	5,729			(28,662	)		(22,833	)

The accompanying notes are an integral part of these consolidated financial statements.

4

Florida Recycling Services, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

	2003			2002			2001
	(Restated - See Note 1)
Cash flows from operating activities
Net loss	$	(3,198	)	$	(5,131	)	$	(6,844	)
Depreciation and amortization		7,789			8,752			10,526
(Gain) loss on distribution and disposal of property and equipment		(3,694	)		11			38
Changes in operating assets and liabilities:
Trade accounts receivable		344			995			(4	)
Supplies and materials		(187	)		(73	)		(101	)
Prepaid expenses and deposits		(789	)		(88	)		537
Accounts payable		691			2,153			(3,416	)
Accrued expenses		210			1,614			(1,431	)
Net change in due to/(from) affiliates		1,103			(1,551	)		(9	)
Net cash provided (used in) by operating activities		2,269			6,682			(704	)
Cash flows from investing activities
Proceeds from sale of property and equipment		74			117			1,579
Purchase of property and equipment		(7,279	)		(4,346	)		(5,048	)
Net cash used in investing activities		(7,205	)		(4,229	)		(3,469	)
Cash flows from financing activities
Checks issued in excess of bank balance		(1,628	)		193			845
Repayment of loan to related party		—			—			(314	)
Proceeds from shareholder loan		3,000			—			—
Proceeds from note payable-bank		5,500			1,300			(450	)
Proceeds from long-term debt		7,967			1,590			11,283
Payments on long-term debt		(9,058	)		(7,636	)		(7,191	)
Contribution from shareholder		—			2,100			—
Distributions to shareholder		(508	)		—			—
Net cash provided by (used in) financing activities		5,273			(2,453	)		4,173
Increase in cash and cash equivalents		337			—			—
Cash and cash equivalents
Beginning of year		—			—			—
End of year	$	337		$	—		$	—
Supplemental cash flow disclosures
Cash paid for interest expense	$	1,905		$	1,988		$	2,450

The accompanying notes are an integral part of these consolidated financial statements.

5

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 1 Organization of Business and Basis of Presentation

Florida Recycling Services, Inc. (FRS, a subchapter S corporation) and its subsidiary, Florida Recycling Services, Inc. of Delaware (FRS of Delaware) (collectively “FRS”, “Florida Recycling” or “the Company”) operate waste disposal and recycling services throughout central Florida.

The accompanying consolidated financial statements include the accounts of FRS and its subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation.

On April 30, 2004, Waste Services, Inc. (“Waste”) completed the acquisition of all of the issued and outstanding shares of Florida Recycling. Following the acquisition, the results of operations of FRS were below Waste’s expectations and Waste conducted a review of FRS’s business in an effort to identify the factors contributing to the lower than expected level of performance. Based on the results of this review, it appeared that the 2003 financial statements of FRS, provided by the sellers, contained misstatements and could not be relied upon. As such, FRS completed a restatement of its historical consolidated financial statements as of December 31, 2003, 2002 and 2001 and for the years then ended.

These restatement adjustments primarily related to:

          (a) Adjustments for revenue recognition;

          (b) Adjustments for accruals of disposal costs;

          (c) Adjustments for changes in provisions for doubtful accounts;

          (d) Adjustments related to capitalization of certain assets and period costs; and

          (e) Adjustments to reclassify amounts due to/from affiliates.

The following tables set forth the net effect of the restatements and reclassifications on specific amounts presented in the Company’s consolidated balance sheets, consolidated statements of operations and condensed consolidated statements of cash flows:

6

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 1 Organization of Business and Basis of Presentation, Continued

Consolidated Balance Sheets

	December 31, 2003							December 31, 2002
	Previously							Previously
	Reported		Adjustments			Restated		Reported		Adjustments			Restated
Assets
Current assets
Cash and cash equivalents	$	670	$	(333	)	$	337	$	69	$	(69	)	$	—
Trade accounts receivable, net of allowance for doubtful accounts		16,156		(8,102	)		8,054		10,692		(2,294	)		8,398
Due from affiliates		855		1,871			2,726		510		516			1,026
Supplies and materials		963		(443	)		520		488		(155	)		333
Prepaid expenses and other current assets		1,646		(473	)		1,173		503		(119	)		384
		20,290		(7,480	)		12,810		12,262		(2,121	)		10,141
Property and equipment, net of accumulated depreciation		18,039		(2,518	)		15,521		17,946		(1,496	)		16,450
Other non-current assets
Deposits		18		(1	)		17		18		—			18
Customer relationships, net of accumulated amortization		454		(128	)		326		364		2			366
Goodwill		174		—			174		174		—			174
Deferred income tax asset		601		(601	)		—		636		(636	)		—
		1,247		(730	)		517		1,192		(634	)		558
	$	39,576	$	(10,728	)	$	28,848	$	31,400	$	(4,251	)	$	27,149

7

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 1 Organization of Business and Basis of Presentation, Continued

Consolidated Balance Sheets, Continued

	December 31, 2003									December 31, 2002
	Previously									Previously
	Reported			Adjustments			Restated			Reported			Adjustments			Restated
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	6,555		$	(586	)	$	5,969		$	5,369		$	(91	)	$	5,278
Checks issued in excess of bank balance		—			—			—			—			1,628			1,628
Accrued expenses		2,656			4,413			7,069			2,698			4,161			6,859
Due to affiliates		—			3,478			3,478			—			675			675
Note payable-bank		10,000			—			10,000			4,500			—			4,500
Shareholder loan		—			3,000			3,000			—			—			—
Current maturities of long-term debt		12,928			(612	)		12,316			8,199			172			8,371
		32,139			9,693			41,832			20,766			6,545			27,311
Long-term debt		12,060			(2,211	)		9,849			15,052			(167	)		14,885
Shareholders’ deficit
Common stock		100			—			100			100			—			100
Additional paid-in capital		11,670			(5,941	)		5,729			11,670			(1,353	)		10,317
Accumulated deficit		(16,393	)		(12,269	)		(28,662	)		(16,188	)		(9,276	)		(25,464	)
		(4,623	)		(18,210	)		(22,833	)		(4,418	)		(10,629	)		(15,047	)
	$	39,576		$	(10,728	)	$	28,848		$	31,400		$	(4,251	)	$	27,149

8

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 1 Organization of Business and Basis of Presentation, Continued

Consolidated Statements of Operations

	December 31, 2003									December 31, 2002									December 31, 2001
	Previously									Previously									Previously
	Reported			Adjustments			Restated			Reported			Adjustments			Restated			Reported			Adjustments			Restated
Revenue	$	90,519		$	(2,614	)	$	87,905		$	84,784		$	(896	)	$	83,888		$	81,722		$	937		$	82,659
Cost of operations:
Disposal costs		30,349			2,617			32,966			28,517			3,071			31,588			30,123			113			30,236
Direct labor		23,844			107			23,951			22,269			(163	)		22,106			23,188			149			23,337
Other operating costs		10,051			2,545			12,596			9,562			1,496			11,058			9,938			273			10,211
Selling, general and administrative expenses		14,910			563			15,473			13,666			(232	)		13,434			12,498			30			12,528
Depreciation and amortization		8,709			(920	)		7,789			9,216			(464	)		8,752			10,646			(120	)		10,526
(Gain) loss on distribution and disposal of property and equipment		(41	)		(3,653	)		(3,694	)		11			—			11			38			—			38
Total cost of operations		87,822			1,259			89,081			83,241			3,708			86,949			86,431			445			86,876
Operating income (loss)		2,697			(3,873	)		(1,176	)		1,543			(4,604	)		(3,061	)		(4,709	)		492			(4,217	)
Interest expense, net		1,931			91			2,022			2,093			(23	)		2,070			2,627			—			2,627
Income (loss) before income taxes		766			(3,964	)		(3,198	)		(550	)		(4,581	)		(5,131	)		(7,336	)		492			(6,844	)
Income tax expense (benefit)		35			(35	)		—			—			—			—			(150	)		150			—
Net income (loss)	$	731		$	(3,929	)	$	(3,198	)	$	(550	)	$	(4,581	)	$	(5,131	)	$	(7,186	)	$	342		$	(6,844	)

9

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 1 Organization of Business and Basis of Presentation, Continued

Condensed Consolidated
Statements of Cash Flows

	December 31, 2003									December 31, 2002									December 31, 2001
	Previously									Previously									Previously
	Reported			Adjustments			Restated			Reported			Adjustments			Restated			Reported			Adjustments			Restated
Cash flows from operating activities	$	3,493		$	(1,224	)	$	2,269		$	8,053		$	(1,371	)	$	6,682		$	365		$	(1,069	)	$	(704	)
Cash flows from investing activities		(9,622	)		2,417			(7,205	)		(6,230	)		2,001			(4,229	)		(3,649	)		180			(3,469	)
Cash flows from financing activities		6,729			(1,456	)		5,273			(2,651	)		198			(2,453	)		3,327			846			4,173

10

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 2 Summary of Significant Accounting Policies

Use of Estimates—The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for doubtful accounts, intangible assets, goodwill and liabilities for potential litigation.

Cash and Cash Equivalents—The Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents.

Concentration of Credit Risk—Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents with high credit quality financial institutions located in Florida and Illinois. The total cash balances are insured by the F.D.I.C. up to $100 per bank. At December 31, 2003 and 2002, the Company had cash balances on deposit with one bank that exceeded the balance insured by the F.D.I.C. in the amounts of $237 and $1,093, respectively. Customers are primarily municipalities and residential customers located in the State of Florida, with no one customer making up more than 10% of total revenue.

Revenue Recognition—The Company recognizes revenue when hauling services are rendered. Amounts billed to customers, prior to providing the related services, are reflected as deferred revenue and reported as revenue in the period in which the services are rendered.

Accounts Receivable—Trade receivables are uncollateralized customer obligations due 30 days from the invoice date.

Trade receivables are stated at the amount billed to the customer. The carrying amount of trade receivables is reduced by an allowance for doubtful accounts that reflects management’s estimate of the amounts that will not be collected. Management reviews individual receivable balances and the Company’s average write-offs to estimate the allowance for doubtful accounts. At December 31, 2003 and 2002, an allowance of $2,230 and $2,237, respectively, was considered necessary.

Supplies and Materials—Supplies and materials consist of new and used waste hauling vehicle parts, as well as new spare tire inventory. Supplies and materials are valued primarily at cost.

Property and Equipment—Property and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance, repairs and minor renewals are charged to expense as incurred. Expenditures for improvements, replacements and major renewals which extend the life of the asset are capitalized and depreciated over the useful life of the asset to which they relate. Gains and losses resulting from property and equipment retirements or disposals are credited or charged to earnings in the year of the disposal.

Depreciation is provided principally by accelerated methods over estimated useful lives as follows:

Buildings and building improvements	39 years
Containers, compactors and recycling equipment	5 years
Waste hauling vehicles	5 years
Furniture, fixtures and other office equipment	5 years

In January 2003, the Company outsourced the refurbishing of its containers to a related party. Costs associated with the betterments, totaling approximately $1,032, have been capitalized to containers, compactors and recycling equipment and depreciated over the useful life of the asset to which they relate. In prior years, the repair and refurbishing was done internally. No amounts were capitalized in previous years since there was no objective basis to measure the betterments.

11

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 2 Summary of Significant Accounting Policies, Continued

Goodwill and Customer Relationships—The Company accounts for goodwill in accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” In general, goodwill is tested for impairment on an annual basis. In testing for impairment, the Company uses the two-step impairment test prescribed by SFAS No. 142. The first step of the goodwill impairment test compares the fair value of a reporting unit with its carrying amount including goodwill. If the fair value exceeds the carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test is unnecessary. The second step, if necessary, compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined by deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the purchase price were being initially allocated. If the implied fair value is less than the carrying value, an impairment charge is recorded to earnings. The Company did not recognize any impairment losses for the years ended December 31, 2003, 2002 or 2001.

In addition, the Company evaluates a reporting unit for impairment if events or circumstances change between annual tests, indicating a possible impairment. Examples of such events or circumstances include: (i) a significant adverse change in legal factors or in the business climate; (ii) an adverse action or assessment by a regulator; (iii) a more likely than not expectation that a reporting unit or a significant portion thereof will be sold; or (iv) the testing for recoverability under SFAS No. 144 of a significant asset group within the reporting unit.

Customer relationships are recorded at their cost, less accumulated amortization and are amortized over the expected benefit to be received by such intangibles. The Company periodically evaluates the carrying value and remaining estimated useful life of its customer relationships subject to amortization in accordance with the provisions of SFAS No. 144. Amortization expense will approximate $40 per year through December 31, 2008.

Impairment of Long-Lived Assets—In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” property and equipment and amortizable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable from estimated future undiscounted cash flows, excluding interest charges. Impairment losses are measured as the amount by which the carrying amount of the assets exceed their fair value. The Company did not recognize any impairment losses for the years ended December 31, 2003, 2002 or 2001, respectively.

Fair Value of Financial Instruments—SFAS No. 107, “Disclosures About Fair Values of Financial Instruments,” requires disclosures about the fair value for all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about fair value of financial instruments are based on pertinent information available to management as of December 31, 2003, 2002 and 2001. Accordingly, the estimates presented in these statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments.

Management estimates the fair value of (i) receivables, advances to related parties, accounts payable, accrued expenses and notes payable — bank to approximate carrying value due to the relatively short maturity of these instruments; and (ii) borrowings under long-term debt to approximate carrying value because the most significant portion of these borrowings accrues interest at a floating interest rate based on the market.

The Company’s remaining assets and liabilities, which are not considered financial instruments, have been valued under customary methods in accordance with generally accepted accounting principles.

12

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 2 Summary of Significant Accounting Policies, Continued

Income Taxes—The Company has elected to be treated as an S-corporation, under the applicable provisions of the Internal Revenue Code, pursuant to which the Company is not subject to federal income taxes and the profits and losses of the Company are allocated to the stockholder to be reflected in his personal income tax return. Accordingly, no provision or benefit for federal income taxes is required in the accompanying financial statements, nor are any deferred taxes provided for temporary differences between tax and financing reporting. However, upon the acquisition by Waste in 2004, the Company ceased its S-Corporation status and reverted to C-Corporation status. Due to operating losses, the Company would not have recognized any deferred tax assets for its net operating loss carryforwards.

Advertising—Advertising costs are expensed when incurred. Advertising expense for the years ended December 31, 2003, 2002 and 2001 was $79, $73 and $42, respectively.

Note 3 Property and Equipment

Property and equipment at December 31, 2003 and 2002 consist of:

	2003			2002
Land	$	98		$	413
Buildings and building improvements		608			700
Containers, compactors and recycling equipment		18,777			14,812
Waste hauling vehicles		34,684			33,607
Furniture, fixtures and other office equipment		200			164
		54,367			49,696
Accumulated depreciation		(38,846	)		(33,246	)
Property and equipment, net	$	15,521		$	16,450

Included in property and equipment at December 31, 2003 are waste hauling vehicles held under a capital lease with a cost of approximately $320. The vehicles were acquired during 2003.

Note 4 Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets at December 31, 2003 and 2002 consist of:

	2003		2002
Prepaid licenses and taxes	$	322	$	310
Prepaid insurance		795		—
Other prepaids		56		74
	$	1,173	$	384

13

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 5 Accrued Expenses

Accrued expenses at December 31, 2003 and 2002 consist of:

	2003		2002
Accrued disposal costs	$	3,234	$	3,312
Deferred revenue		2,917		2,762
Accrued interest		574		457
Accrued expenses, other		344		328
	$	7,069	$	6,859

Note 6 Note Payable — Bank

The Company has a $12,000 revolving line of credit facility of which $10,000 and $4,500 is drawn at December 31, 2003 and 2002, respectively. The note, which is due on demand, bears interest at a rate of 25 basis points below the bank’s prime rate (effective rate of 3.8% in 2003 and 5.0% in 2002). Interest is payable monthly. The note is collateralized by waste containers and vehicles, and is personally guaranteed by the Company’s shareholder. The note was subsequently repaid on April 30, 2004.

Note 7 Long-Term Debt

Long-term debt at December 31, 2003 and 2002 consists of:

	2003		2002
Notes payable — Principal and interest payments are payable monthly (aggregating approximately $374 per month) at interest rates ranging from LIBOR plus 2% to 8.16% with final maturity dates through July 2009. Notes are collateralized by equipment and the personal guarantee of the Company’s shareholder.	$	10,747	$	15,121
Notes payable — Principal and interest payments are payable monthly (aggregating approximately $374 per month) at interest rates ranging from 2.9% to 9.25%, with final maturity dates through October 2009. Notes are collateralized by trucks, vehicles, and the personal guarantee of the Company’s shareholder.		6,001		2,559
Notes payable — Principal and interest payments are payable monthly (aggregating approximately $96 per month) at rates ranging from 8.1% to 9.5% interest, with final maturity dates through November 2006. Notes are collateralized by vehicles, other equipment and the personal guarantee of the Company’s shareholder.		2,791		2,245
Note payable — Principal and interest payments are payable monthly (approximately $63 per month) at 7.15% interest with a final maturity date of May 2005. Note is collateralized by waste containers and the personal guarantee of the Company’s shareholder.		1,226		1,931
Note payable — Interest is 8.5% and is payable upon maturity in April 2004, along with the principal. The note is uncollateralized.		1,400		1,400
		22,165		23,256
Less, current maturities		12,316		8,371
Long-term debt	$	9,849	$	14,885

14

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 7 Long-Term Debt, Continued

Maturities of long-term debt in the five years subsequent to 2003 are:

2004	$	12,316
2005		5,695
2006		2,822
2007		925
2008		407
	$	22,165

As indicated in Note 1, the Company was purchased by Waste in April 2004 at which time the Company repaid all of its outstanding debt.

Note 8 Shareholder Loan

On January 24, 2003, the Company’s shareholder borrowed $3,000 from a bank. The note was executed between FRS, the shareholder and the shareholder’s wife (collectively the “borrowers”), and the bank. The note is secured by the shareholder’s personal residence with interest payable monthly at the Wall Street Journal Prime Rate or the bank’s reference prime rate (4.0% at December 31, 2003). On January 22, 2004, the note was extended to mature January 22, 2009 with principal payments of $50 to be made monthly. The proceeds from this note were used for working capital purposes and the note was subsequently repaid on April 30, 2004.

Note 9 Retirement Plan

The Company participates in a qualified multi-employer plan under Section 401(k) of the Internal Revenue Code. Under the plan, employees who meet minimum eligibility requirements may elect to defer a portion of their salary, subject to Internal Revenue Service limits. Employer contributions are discretionary. The Company made no matching contributions to the plan for the years ended 2003, 2002 or 2001.

Note 10 Leases

The Company leases a warehouse under the terms of an operating lease. The lease, which expires in September 2005, provides for minimum rentals aggregating approximately $3 per month plus operating expenses. In addition, the Company rents office space for approximately $9 per month under a month-to-month lease. The Company also has an agreement with a related entity in which it leases equipment for approximately $2 per month. Minimum future lease commitments under these leases are:

2004	$	60
2005		29
	$	89

Rent expense for the years ended December 31, 2003, 2002 and 2001 was $305, $226 and $355, respectively.

15

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 11 Related-Party Transactions

The Company had transactions with related parties as follows:

	2003		2002		2001
Management fee expense	$	3,215	$	2,720	$	2,972
Waste disposal costs		6,346		6,123		1,124
Insurance expense		1,172		2,244		1,951
Capitalized container refurbishing		1,032		—		—
Container repair expense		292		—		—
Truck and truck parts		1,270		861		587
	$	13,327	$	11,948	$	6,634

Note 12 Surety Bonds and Letters of Credit

Municipal solid waste service contracts require permits and licenses to operate transfer stations, and landfills and recycling facilities may require performance or surety bonds, letters of credit or other means of financial assurance to secure contractual performance. As of December 31, 2003 and 2002, the Company provided customers and various regulatory authorities with letters of credit approximating $2.0 million, and performance or surety bonds of approximately $22.5 million to collateralize its performance obligations on an individual contract basis. Should the Company fail to perform an obligation under certain contracts, there would be a potential obligation of the Company for the portion of the contract that is secured by the Company’s letter of credit (i.e. $2.0 million). The Company incurred no such non-performance claims for the years ended December 31, 2003, 2002 and 2001 respectively.

Note 13 Cash Flow Information

Additional information regarding non-cash investing and financing activities for the years ended December 31, includes:

During 2003, the Company distributed land and building with a net book value of $427 (and fair market value of $4,080) to a shareholder. This distribution, which is reflected at fair market value within the Company’s financial statements, combined with the cash distribution of $508 resulted in total shareholder distributions of $4,588 in 2003. APB No. 29, “Accounting for Nonmonetary Transactions”, requires that non-reciprocal transfers to owners be recorded at the fair value of the asset distributed. As such, the Company recognized a gain on the property distribution approximating $3.6 million.

During the year ended December 31, 2003 the Company entered into capital leases for certain waste hauling vehicles with a cost of approximately $320.

During 2002, the Company distributed land and building (subject to the related debt) to its sole shareholder as partial payment on the note payable to the shareholder. Since the book value of the land and building approximated fair value, no gain (loss) on distribution was recognized. The Company’s shareholder contributed the remaining balance on the shareholder note payable to additional paid-in capital of Florida Recycling. No additional shares were issued to the shareholder for the capital contribution. The additional paid-in capital contributed by the shareholder is as follows:

Loan payable to shareholder	$	3,163
Less property distributions:
Building, net of accumulated depreciation		705
Land		83
Debt assumed		(479	)
Loan contributed to additional paid-in capital		2,854
Shareholder cash contributions		2,100
	$	4,954

16

Florida Recycling Services, Inc.
Notes to Financial Statements
Years Ended December 31, 2003, 2002 and 2001 (amounts in thousands)

Note 13 Cash Flow Information, Continued

In 2001, the shareholder contributed equipment containers valued at $29 to additional paid-in capital of FRS.

Note 14 Commitments and Contingencies

Environmental Risks

The Company is subject to liability for environmental damage that its truck storage facilities may cause, including damage to neighboring landowners or residents, particularly as a result of the contamination of soil, groundwater or surface water, including damage resulting from conditions existing prior to the Company’s acquisition of such facilities. Pollutants or hazardous substances whose transportation was arranged by Florida Recycling, may also subject the Company to liability for any off-site environmental contamination caused by these pollutants or hazardous substances.

Any substantial liability for environmental damage incurred by the Company could have a material adverse effect on the FRS financial condition, results of operations or cash flows. As of the date of these consolidated financial statements, the Company estimates the range of reasonably possible losses related to environmental matters to be insignificant and is not aware of any such environmental liabilities that would be material to its operations or financial condition.

Legal Proceedings

In the normal course of business and as a result of the extensive governmental regulation of the solid waste industry, the Company may periodically become subject to various judicial and administrative proceedings involving federal, state or local agencies. In these proceedings, an agency may seek to impose fines on the Company or revoke or deny renewal of an operating permit or license held by the Company. From time to time, the Company may also be subject to actions brought by citizens’ groups, adjacent landowners or residents in connection with the permitting and licensing of hauling operations or allegations related to environmental damage or violations of the permits and licenses pursuant to which the Company operates.

17

EX-99.3

Exhibit 99.3

Quarter Report
Florida Recycling Services, Inc.

As of March 31, 2004 and December 31, 2003 and for the three months ended
March 31, 2004 and 2003

Florida Recycling Services, Inc.
Table of Contents
As of March 31, 2004 and December 31, 2003 and
for the three months ended March 31, 2004 and 2003

	Page
Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2004 (Unaudited) and December 31, 2003		1
Consolidated Statements of Operations for the three months ended March 31, 2004 and 2003 (Unaudited)		2
Consolidated Statements of Changes in Shareholders’ Deficit for the three months ended March 31, 2004 (Unaudited)		3
Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003 (Unaudited)		4
Notes to Consolidated Financial Statements (Unaudited)		5-11

Florida Recycling Services, Inc.
Consolidated Balance Sheets
March 31, 2004 (unaudited) and December 31, 2003 (amounts in thousands)

	March 31,			December 31,
	2004			2003
	(Restated – See Note 1)
Assets
Current assets
Cash and cash equivalents	$	191		$	337
Trade accounts receivable, net of allowance for doubtful accounts		6,903			8,054
Due from affiliates		995			2,726
Supplies and materials		506			520
Prepaid expenses and other current assets		569			1,173
Total current assets		9,164			12,810
Property and equipment, net of accumulated depreciation		15,820			15,521
Other non-current assets
Deposits		17			17
Note receivable		258			—
Customer relationships, net of accumulated amortization of $92 at March 31, 2004 and $81 at December 31, 2003		315			326
Goodwill		174			174
Total non-current assets		764			517
Total assets	$	25,748		$	28,848
Liabilities and Shareholders’ Deficit
Current liabilities
Accounts payable	$	4,913		$	5,969
Accrued expenses		7,321			7,069
Due to affiliates		1,954			3,478
Note payable-bank		9,610			10,000
Shareholder loan		2,950			3,000
Current maturities of long-term debt		19,620			12,316
Total current liabilities		46,368			41,832
Long-term debt		—			9,849
Total liabilities		46,368			51,681
Commitments and contingencies (Note 8)
Shareholders’ deficit
Common stock, $1,000 par value, 1,000 shares authorized, 100 shares issued and outstanding		100			100
Additional paid-in capital		9,986			5,729
Accumulated deficit		(30,706	)		(28,662	)
Total shareholders’ deficit		(20,620	)		(22,833	)
Total liabilities and shareholders’ deficit	$	25,748		$	28,848

The accompanying notes are an integral part of these consolidated financial statements.

1

Florida Recycling Services, Inc.
Consolidated Statements of Operations (Unaudited)
For the three months ended March 31, 2004 and 2003 (amounts in thousands)

	2004			2003
	(Restated - See Note 1)
Revenue	$	20,038		$	21,143
Cost of operations:
Disposal costs		6,543			8,092
Direct labor		5,793			5,266
Other operating costs		4,279			3,416
Selling, general and administrative expenses		3,595			4,092
Depreciation and amortization		1,445			1,977
Gain on distribution and disposal of property and equipment		—			(3,704	)
Total cost of operations		21,655			19,139
Operating income (loss)		(1,617	)		2,004
Interest expense, net		427			566
Net income (loss)	$	(2,044	)	$	1,438

The accompanying notes are an integral part of these consolidated financial statements.

2

Florida Recycling Services, Inc.
Consolidated Statements of Changes in Shareholders’ Deficit (Unaudited)
For the three months ended March 31, 2004 (amounts in thousands)

			Additional					Total
	Common		Paid-In		Accumulated			Shareholders'
	Stock		Capital		Deficit			Deficit
			(Restated - See Note 1)
Balances as restated, December 31, 2003	$	100	$	5,729	$	(28,662	)	$	(22,833	)
Net loss as restated		—		—		(2,044	)		(2,044	)
Shareholder contribution as restated		—		4,257		—			4,257
Balances as restated, March 31, 2004	$	100	$	9,986	$	(30,706	)	$	(20,620	)

The accompanying notes are an integral part of these consolidated financial statements.

3

Florida Recycling Services, Inc.
Consolidated Statements of Cash Flows (Unaudited)
For the three months ended March 31, 2004 and 2003 (amounts in thousands)

	2004			2003
	(Restated - See Note 1)
Cash flows from operating activities
Net income (loss)	$	(2,044	)	$	1,438
Depreciation and amortization		1,445			1,977
Gain on distribution and disposal of property and equipment		—			(3,704	)
Changes in operating assets and liabilities:
Trade accounts receivable		893			40
Supplies and materials		14			(17	)
Prepaid expenses and deposits		604			(85	)
Accounts payable		(1,056	)		(446	)
Accrued expenses		252			171
Net changes in due to/(from) affiliate		207			545
Net cash provided by (used in) operating activities		315			(81	)
Cash flows from investing activities
Purchase of property and equipment		(1,733	)		(1,741	)
Proceeds from sale of property and equipment		—			72
Net cash used in investing activities		(1,733	)		(1,669	)
Cash flows from financing activities
Checks issued in excess of bank balance		—			(380	)
Proceeds from shareholder loan		—			3,000
Payments on shareholder loan		(50	)		—
Proceeds from note payable-bank		—			1,200
Payments on note payable-bank		(390	)		—
Payments on long-term debt, net		(2,545	)		(2,061	)
Contribution from shareholder		4,257			—
Distributions to shareholder		—			(9	)
Net cash provided by financing activities		1,272			1,750
Decrease in cash and cash equivalents		(146	)		—
Cash and cash equivalents
Beginning of period		337			—
End of period	$	191		$	—
Supplemental cash flow disclosures
Cash paid for interest expense	$	352		$	491

The accompanying notes are an integral part of these consolidated financial statements.

4

Florida Recycling Services, Inc.
Notes to the Financial Statements (Unaudited)

Note 1 Organization of Business and Basis of Presentation

Florida Recycling Services, Inc. (FRS of Illinois, a subchapter S corporation) and its subsidiary Florida Recycling Services, Inc. of Delaware (FRS of Delaware) (collectively “FRS”, “Florida Recycling” or “the Company”) operate waste disposal and recycling services throughout central Florida.

The accompanying consolidated financial statements include the accounts of FRS and its subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation. Certain information related to the organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accounting policies followed in the preparation of these interim consolidated financial statements are consistent with those followed in the Company’s annual consolidated financial statements for the year ended December 31, 2003 (as restated). In the opinion of management, these unaudited consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to fairly state the Company’s financial position, results of operations and cash flows for the periods presented.

The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for doubtful accounts, intangible assets, goodwill and liabilities for potential litigation.

Trade receivables are uncollateralized customer obligations due 30 days from the invoice date. Trade receivables are stated at the amount billed to the customer. The carrying amount of trade receivables is reduced by an allowance for doubtful accounts that reflects management’s estimate of the amounts that will not be collected. Management reviews individual receivable balances and the Company’s average write-offs to estimate the allowance for doubtful accounts. At March 31, 2004 and December 31, 2003, an allowance of $1,842 and $2,230 was considered necessary, respectively.

On April 30, 2004, Waste Services, Inc. (“Waste”) completed the acquisition of all of the issued and outstanding shares of Florida Recycling. Following the acquisition, the results of operations of FRS were below Waste’s expectations and Waste conducted a review of FRS’s business in an effort to identify the factors contributing to the lower than expected level of performance. Based on the results of this review, it appeared that the 2003 financial statements of FRS, provided by the sellers, contained misstatements and could not be relied upon. As such, FRS completed a restatement of its historical consolidated financial statements as of March 31, 2004 and 2003 and for the quarters then ended.

These restatement adjustments primarily related to:

     (a) Adjustments for revenue recognition;

     (b) Adjustments for accruals of disposal costs;

     (c) Adjustments for changes in provisions for doubtful accounts;

     (d) Adjustments related to capitalization of certain assets and period costs; and

     (e) Adjustments to reclassify amounts due to/from affiliates.

The following tables set forth the net effect of the restatements and reclassifications on specific amounts presented in the Company’s consolidated balance sheets, consolidated statements of operations and condensed consolidated statements of cash flows:

5

Florida Recycling Services, Inc.
Notes to the Financial Statements (Unaudited)

Note 1 Organization of Business and Basis of Presentation, Continued

Consolidated Balance Sheet-March 31, 2004 (Unaudited)
and December 31, 2003

	March 31, 2004							December 31, 2003
	Previously							Previously
	Reported		Adjustments			Restated		Reported		Adjustments			Restated
Assets
Current assets
Cash and cash equivalents	$	955	$	(764	)	$	191	$	670	$	(333	)	$	337
Trade accounts receivable, net of allowance for doubtful accounts		11,582		(4,679	)		6,903		16,156		(8,102	)		8,054
Due from affiliates		875		120			995		855		1,871			2,726
Supplies and materials		950		(444	)		506		963		(443	)		520
Prepaid expenses and other current assets		1,037		(468	)		569		1,646		(473	)		1,173
		15,399		(6,235	)		9,164		20,290		(7,480	)		12,810
Property and equipment, net of accumulated depreciation		23,425		(7,605	)		15,820		18,039		(2,518	)		15,521
Other non-current assets
Deposits		18		(1	)		17		18		(1	)		17
Note receivable		—		258			258		—		—			—
Customer relationships, net of accumulated amortization		435		(120	)		315		454		(128	)		326
Goodwill		174		—			174		174		—			174
Deferred income tax asset		584		(584	)		—		601		(601	)		—
		1,211		(447	)		764		1,247		(730	)		517
	$	40,035	$	(14,287	)	$	25,748	$	39,576	$	(10,728	)	$	28,848

6

Florida Recycling Services, Inc.
Notes to the Financial Statements (Unaudited)

Note 1 Organization of Business and Basis of Presentation, Continued

Consolidated Balance Sheets-March 31, 2004 (Unaudited)
and December 31, 2003, Continued

	March 31, 2004									December 31, 2003
	Previously									Previously
	Reported			Adjustments			Restated			Reported			Adjustments			Restated
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	4,710		$	203		$	4,913		$	6,555		$	(586	)	$	5,969
Accrued expenses		2,794			4,527			7,321			2,656			4,413			7,069
Due to affiliates		—			1,954			1,954			—			3,478			3,478
Note payable-bank		9,610			—			9,610			10,000			—			10,000
Shareholder loan		—			2,950			2,950			—			3,000			3,000
Current maturities of long-term debt		27,163			(7,543	)		19,620			12,928			(612	)		12,316
		44,277			2,091			46,368			32,139			9,693			41,832
Long-term debt		—			—			—			12,060			(2,211	)		9,849
Shareholders’ deficit
Common stock		100			—			100			100			—			100
Additional paid-in capital		11,670			(1,684	)		9,986			11,670			(5,941	)		5,729
Accumulated deficit		(16,012	)		(14,694	)		(30,706	)		(16,393	)		(12,269	)		(28,662	)
		(4,242	)		(16,378	)		(20,620	)		(4,623	)		(18,210	)		(22,833	)
	$	40,035		$	(14,287	)	$	25,748		$	39,576		$	(10,728	)	$	28,848

7

Florida Recycling Services, Inc.
Notes to the Financial Statements (Unaudited)

Note 1 Organization of Business and Basis of Presentation, Continued

Consolidated Statements of
Operations (Unaudited)

	March 31, 2004								March 31, 2003
	Previously								Previously
	Reported		Adjustments			Restated			Reported		Adjustments			Restated
Revenue	$	22,987	$	(2,949	)	$	20,038		$	22,177	$	(1,034	)	$	21,143
Cost of operations:
Disposal costs		7,500		(957	)		6,543			7,178		914			8,092
Direct labor		5,751		42			5,793			5,160		106			5,266
Other operating costs		3,420		859			4,279			2,881		535			3,416
Selling, general and administrative expenses		3,710		(115	)		3,595			3,742		350			4,092
Depreciation and amortization		1,713		(268	)		1,445			2,156		(179	)		1,977
Gain on distributions and disposal of property and equipment		—		—			—			—		(3,704	)		(3,704	)
Total cost of operations		22,094		(439	)		21,655			21,117		(1,978	)		19,139
Operating income (loss)		893		(2,510	)		(1,617	)		1,060		944			2,004
Interest expense, net		496		(69	)		427			540		26			566
Income (loss) before income taxes		397		(2,441	)		(2,044	)		520		918			1,438
Income tax expense		17		(17	)		—			19		(19	)		—
Net income (loss)	$	380	$	(2,424	)	$	(2,044	)	$	501	$	937		$	1,438

Condensed Consolidated
Statements of Cash Flows (Unaudited)

	March 31, 2004									March 31, 2003
	Previously									Previously
	Reported			Adjustments			Restated			Reported			Adjustments			Restated
Cash flows from operating activities	$	5,601		$	(5,286	)	$	315		$	155		$	(236	)	$	(81	)
Cash flows from investing activities		(7,100	)		5,367			(1,733	)		(2,032	)		363			(1,669	)
Cash flows from financing activities		1,784			(512	)		1,272			1,991			(241	)		1,750

8

Florida Recycling Services, Inc.
Notes to the Financial Statements (Unaudited)

Note 2 Note Payable — Bank

The Company has a $12,000 revolving line of credit facility of which $9,610 is drawn at March 31, 2004. The note, which is due on demand, bears interest at a rate of 25 basis points below the bank’s prime rate (approximate effective rate of 3.8% in 2004 and 2003). Interest is payable monthly. The note is collateralized by waste containers and vehicles, and is personally guaranteed by the Company’s shareholder. This note was subsequently repaid on April 30, 2004.

Note 3 Long-Term Debt

Long-term debt at March 31, 2004 and December 31, 2003 consists of:

	2004		2003
	(Unaudited)
Notes payable — Principal and interest payments are payable monthly (aggregating approximately $374 per month) at interest rates ranging from LIBOR plus 2% to 8.16% with final maturity dates through July 2009. Notes are collateralized by equipment and the personal guarantee of the Company’s shareholder.	$	9,238	$	10,747
Notes payable — Principal and interest payments are payable monthly (aggregating approximately $374 per month) at interest rates ranging from 2.9% to 9.25%, with final maturity dates through October 2009. Notes are collateralized by trucks, vehicles, and the personal guarantee of the Company’s shareholder.		5,465		6,001
Notes payable — Principal and interest payments are payable monthly (aggregating approximately $96 per month) at rates ranging from 8.1% to 9.5% interest, with final maturity dates through November 2006. Notes are collateralized by vehicles, and other equipment and the personal guarantee of the Company’s shareholder.		2,476		2,791
Note payable — Principal and interest payments are payable monthly (approximately $63 per month) at 7.15% interest with a final maturity date of May 2005. Note is collateralized by waste containers and the personal guarantee of the Company’s shareholder.		1,041		1,226
Note payable — Interest is 8.5% and is payable upon maturity in April 2004, along with the principal. The note is uncollateralized.		1,400		1,400
		19,620		22,165
Less current maturities		19,620		12,316
Long-term debt	$	—	$	9,849

As indicated in Note 1, the Company was purchased by Waste in April 2004, and all of the outstanding debt was repaid. Due to change of control provisions in the debt arrangements, all of the outstanding amounts have been classified as current.

Note 4 Shareholder loan

On January 24, 2003, the Company’s shareholder borrowed $3,000 from a bank. The note was executed between FRS, the shareholder and the shareholder’s wife (collectively the “borrowers”) and the bank. The note is secured by the shareholder’s personal residence with interest payable monthly at the Wall Street Journal Prime Rate or the bank’s reference prime rate (4.0% at March 31, 2004). On January 22, 2004, the note was extended to mature January 22, 2009 with principal payments of $50 to be made monthly. The proceeds from this note were used for working capital purposes and the note was subsequently repaid on April 30, 2004.

9

Florida Recycling Services, Inc.
Notes to the Financial Statements (Unaudited)

Note 5 Related-Party Transactions

     The Company had transactions with related parties for the three months ended March 31 as follows (unaudited):

	2004		2003
Management fee expense	$	1,233	$	674
Waste disposal costs		1,856		2,337
Insurance expense		49		786
Capitalized container refurbishing		1,032		—
Container repair expense		—		66
Truck and truck parts		574		211
	$	4,744	$	4,074

Note 6 Surety Bonds and Letters of Credit

Municipal solid waste services contracts require permits and licenses to operate transfer stations, and landfills and recycling facilities may require performance or surety bonds, letters of credit or other means of financial assurance to secure contractual performance. As of March 31, 2004, the Company provided customers and various regulatory authorities with letters of credit approximating $2.0 million, and performance or surety bonds of approximately $22.5 million to collateralize its performance obligations on an individual contract basis. Should the Company fail to perform its obligation under certain contracts, there would be a potential obligation of the Company for the portion of the contract that is secured by the Company’s letter of credit (i.e. $2.0 million). The Company incurred no such non-performance claims for the periods ended March 31, 2004 and 2003, respectively.

Note 7 Cash Flow Information

Additional information regarding non-cash investing and financing activities for the three month period ended March 31 include:

During 2003, the Company distributed land and building with a net book value of $427 (and fair market value of approximately $4,080) to a shareholder. This distribution, which is reflected at fair market value within the Company’s financial statements, combined with the cash distribution of $9 resulted in total shareholder distributions of $4,089 in 2003. APB No. 29, “Accounting for Nonmonetary Transactions”, requires that non-reciprocal transfers to owners be recorded at the fair value of the asset distributed. As such, the Company recognized a gain on the property distribution approximating $3.6 million.

During 2004, the Company converted $258 in trade receivables to a long-term customer note.

During 2003, the Company entered into capital leases for certain waste hauling vehicles with a cost of approximately $320.

Note 8 Commitments and Contingencies

Environmental Risks

The Company is subject to liability for environmental damage that its truck storage facilities may cause, including damage to neighboring landowners or residents, particularly as a result of the contamination of soil, groundwater or surface water, including damage resulting from conditions existing prior to the Company’s acquisition of such facilities. Pollutants or hazardous substances whose transportation was arranged by Florida Recycling, may also subject the Company to liability for any off-site environmental contamination caused by these pollutants or hazardous substances.

Any substantial liability for environmental damage incurred by the Company could have a material adverse effect on FRS’s financial condition, results of operations or cash flows. As of the date of these consolidated financial statements, the Company estimates the range of reasonably possible losses related to environmental matters to be insignificant and is not aware of any such environmental liabilities that would be material to its operations or financial condition.

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Florida Recycling Services, Inc.
Notes to the Financial Statements (Unaudited)

Legal Proceedings

     In the normal course of business and as a result of the extensive governmental regulation of the solid waste industry, the Company may periodically become subject to various judicial and administrative proceedings involving federal, state or local agencies. In these proceedings, an agency may seek to impose fines on the Company or revoke or deny renewal of an operating permit or license held by the Company. From time to time, the Company may also be subject to actions brought by citizens’ groups, adjacent landowners or residents in connection with the permitting and licensing of hauling operations or allegations related to environmental damage or violations of the permits and licenses pursuant to which the Company operates.

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